make or buy

Question 1

The make or buy decision is influenced by many factors

Answer 1

Strategic impact; 
 Competitive threat based on supply, demand and price; 
 Quality considerations
 Economic forecasts, raw materials availability, electricity supply and water conditions;
 Choice of technology; 
 Machine capabilities;
 Impact on current vendor relation; 
 Capacity utilization; 
 Plant efficiency and engineering features; 
 Compatibility with existing system; 
 Nature of demand; 
 Maintenance and spare requirements; 
 Replacement decisions; 
 Current capacity utilization; 
 Break-down analysis; and 
 Lead time for producing the products.
 Physical life-span; 
 Purchase costs;

Question 2

Advantages of Make or Buy Strategy

Answer 2

Cost Factor: advantageous to make for the companies specially having exposure of production

Quality Control:
Make or buy decisions benefit your company by giving you control over the materials that go into the products you provide for your customers
dissatisfied with the quality,

Requirements of Materials: Small scale business houses need very limited quantities of materials. So, outsourcing of the materials is the right decision

Question 3

Reasons for ‘Make’ instead of ‘Buy

Answer 3

Desired Quality

Technical Advantage

To Gain Production Advantage

Use of Surplus Production Capacity: depression / recession or off season, the idle equipment and labour can be utilized to manufacturing

Cheaper to Manufacture

Question 4

Risks involved in Decision ‘to make’

Answer 4

Dispose off Problem: produced items can become surplus

Difficult to Reverse: cannot go back or reverse the decision without suffering losses

Question 5

Reasons for ‘Buy’ instead of ‘Make’

Answer 5

Lack of Production Exposure:

Problem of Small Companies:
Small companies have small volume requirement of components
patent rights are required to start production and usually it requires heavy payments in terms of royalty