What is the Make or Buy Decision? The make or buy decision analysis is an evaluation of manufacturing something in-house versus buying that product from another seller. What is the definition of make-or-buy decision? The make vs buy decision traditionally relates to parts in a manufacturing process.
Ben Chams The make-or-buy decision is the act of making a strategic choice between producing an item internally in-house or buying it externally from an outside supplier.
The buy side of the decision also is referred to as outsourcing.
Make-or-buy decisions usually arise when a firm that has developed a product or part—or significantly modified a product or part—is having trouble with current suppliers, or has diminishing capacity or changing demand.
Make-or-buy analysis is conducted at the strategic and operational level. Obviously, the strategic level is the more long-range of the two. Variables considered at the strategic level include analysis of the future, as well as the current environment.
Issues like government regulation, competing firms, and market trends all have a strategic impact on the make-or-buy decision.
Of course, firms should make items that reinforce or are in-line with their core competencies. These are areas in which the firm is strongest and which give the firm a competitive advantage.
The increased existence of firms that utilize the concept of lean manufacturing has prompted an increase in outsourcing.
Manufacturers are tending to purchase subassemblies rather than piece parts, and are outsourcing activities ranging from logistics to administrative services.
It prescribes that a firm outsource all items that do not fit one of the following three categories: Items that fit under one of these three categories are considered strategic in nature and should be produced internally if at all possible.
Make-or-buy decisions also occur at the operational level. Keong Leong, and Keah-Choon Tan, suggest these considerations that favor making a part in-house: Lack of expertise Suppliers' research and specialized know-how exceeds that of the buyer cost considerations less expensive to buy the item Small-volume requirements Limited production facilities or insufficient capacity Desire to maintain a multiple-source policy Indirect managerial control considerations Brand preference Item not essential to the firm's strategy The two most important factors to consider in a make-or-buy decision are cost and the availability of production capacity.
Burt, Dobler, and Starling warn that "no other factor is subject to more varied interpretation and to greater misunderstanding" Cost considerations should include all relevant costs and be long-term in nature. Obviously, the buying firm will compare production and purchase costs.
Burt, Dobler, and Starling provide the major elements included in this comparison. Elements of the "make" analysis include:What's New in Make Electronics - 2nd Edition 'While there are some things that have barely changed at all', says author Charles Platt, others are significantly different in this edition.
Sign in to your Avon Representative page or register to join our online community. Sell Avon to create your own hours and become your own boss! The make or buy decision involves whether to manufacture a product in-house or to purchase it from a third party.
The outcome of this analysis should be a decision that maximizes the long-term financial outcome for a company.
4 Strategy& Executie summary The decision to make or buy extends beyond manufacturing, encompassing human resources, information technology, maintenance, and other fundamental business functions. The make-or-buy decision is the action of deciding between manufacturing an item internally (or in-house) or buying it from an external supplier (also known as outsourcing).
Such decisions are typically taken when a firm that has manufactured. The Talent Focus Decision, otherwise known as the Make/Buy decision, deals with the question of whether you should rely primarily on the use of internal development (Make) or external replacement (Buy) to strengthen your leadership bench.
While all organizations make some use of both approaches, the.