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  • MAF551 STDM - MAKE or BUY

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    NURSYAHIRA NABILA FAZALI
    12 views6 pages
    This document discusses the make or buy decision process for determining whether to produce a good or service internally or purchase it from an external supplier. It notes that factors to consider include avoidable versus unavoidable costs and opportunity costs from using internal capacity. Qualitative factors are also important, such as supplier quality, delivery, capabilities, labor relations, financial stability, and confidentiality. Outsourcing is described as contracting a process normally done internally, requiring a long-term perspective due to difficulty and costs to reverse.

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    This document discusses the make or buy decision process for determining whether to produce a good or service internally or purchase it from an external supplier. It notes that factors to consider include avoidable versus unavoidable costs and opportunity costs from using internal capacity. Qualitative factors are also important, such as supplier quality, delivery, capabilities, labor relations, financial stability, and confidentiality. Outsourcing is described as contracting a process normally done internally, requiring a long-term perspective due to difficulty and costs to reverse.

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    © All Rights Reserved
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    12 views6 pages

    MAF551 STDM - MAKE or BUY

    Uploaded by

    NURSYAHIRA NABILA FAZALI
    This document discusses the make or buy decision process for determining whether to produce a good or service internally or purchase it from an external supplier. It notes that factors to consider include avoidable versus unavoidable costs and opportunity costs from using internal capacity. Qualitative factors are also important, such as supplier quality, delivery, capabilities, labor relations, financial stability, and confidentiality. Outsourcing is described as contracting a process normally done internally, requiring a long-term perspective due to difficulty and costs to reverse.

    Copyright:

    © All Rights Reserved
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    of 6

    SHORT TERM DECISION

    MAKING
    MAKE OR BUY DECISION
    Make or buy a product
    • Whether to produce particular goods or
    services, or purchase them from an
    external supplier
    • Consider avoidable costs versus
    unavoidable costs
    • Opportunity costs are often relevant
    – Loss profits from using capacity to make the
    product
    Make or buy a product
    • Qualitative and strategic issues
    – Quality of the product
    – Delivery responsiveness of supplier
    – Technical capabilities of the supplier
    – Labour relations at the supplier
    – Financial stability of the supplier
    – Ability of the supplier to respect confidential
    information
    Outsourcing decisions
    • Part of a manufacturing process, or
    another function normally undertaken
    within an organisation, is contracted to an
    outside business
    • More a long-term decision than a make or
    buy decision
    • Difficult and costly to reverse

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