GOOD

MORNING!
GROUP 5
MAKE-OR-BUY
DECISION
“FIX ME”
GSOORTUNCI
U
OUTSOURCING
A K E M- R O - U B Y
ONCII EDSC
MAKE-OR-BUY
DECISION
LEERNAXT
PLIPRESU

EXTERNAL
SUPPLIER
 NI-SOEHU
OITPDUNORC

IN-HOUSE
PRODUCTION
CANSUPHIGR

PURCHASING
 What is Make-or-Buy
Decision?
A make or buy decision is an act
of choosing between
manufacturing a product in house
or purchasing it from an external
supplier.
“MAKE” Decision
● Untrustworthy suppliers
● Quality concerns
● Cost concerns
● The finished product are manufactured by
limited firms
 Cost for “MAKE” Analysis
● Direct labor expenses
● Incremental inventory-carrying expenses
● Incremental capital expenses
● Incremental purchasing expenses
● Incremental factory operating expenses
● Incremental managerial expenses
● Delivered purchased material expense
● Any follow-on expenses resulting from quality and
associated problems
“BUY” Decision
● Lack of skills
● Lack of facilities
● Financial Considerations
● Preferences to certain brands
● Low demand quantity
Cost factors for the “BUY” Analysis
● Transportation expenses
● Purchase price of the part
● Incremental purchasing expenses
● Receiving and inspection expenses
● Any follow-on expenses associated with service
or quality
THAT’S ALL
AND
THANK YOU!