Make or Buy?
Abstract
There has always been a dilemma for the companies regards to either making the product in-house facility or buying the necessary products from the suppliers. Production costs, extra labor costs, monitoring costs, storage requirement costs, waste product disposal costs should be considered in-house production. On the other hand, product purchase price, sales tax charge, shipping costs, inventory holding costs, ordering costs should be considered while buying the products from the suppliers (1).
The decision is crucial for the companies regards to time and profit. Therefore, all the constraints and requirements should be analyzed step by step, then the decision can be given regards to ease and profit. The decision process can be divided into 4 stages such as planning, evaluation, analyzing, and selecting (2) (Bajec & Jakomin, 2010). After the decision has been made, there are different types of contracts that should be preferred and negotiated with the suppliers.
In this article, I will slightly introduce the importance of the make and buy decisions for the company and crucial points that need to be considered and then the focus will be managing the steps regarding to make or buy decisions. Different types of contracts with the suppliers are also going to be examined at the end of the article.
References
1) T1 - I. Jakomin: A Make-or-Buy Decision Process for Outsourcing A MAKE-OR-BUY DECISION PROCESS FOR OUTSOURCING
