Make verses buy agenda. Building a supply chain: make or buy ? Traditional make vs. buy SCM make vs. Buy core competencies elements of total costs purchasing’s role for make products The gray zone. Make vs Buy - case.
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1) Is the input critical to the success of the product ?
2) Is the number of available suppliers extremely limited (if they exist at all) ?
3) Does the process make use of one or more of our core competencies ?
Time / speed
Relationship to other products
changes in structure
hire / fire/ re-train
Cathy Lee is exploiting childrenTotal costs of make buy
Why we perform a process decision?
use excess capacity and absorb overhead *
need to understand strategy
Costs to make
production and QC
costs of capital
opportunity costsGetting specific: making
Why we buy decision?
we don’t have capacity
especially short term
atlas tool and die
maintain multiple sources
Costs to buy
incoming inspection ?
quality, service, delivery, etc.Getting specific buying
fixed are higher
variable are generally lower (otherwise why make ?)
Major benefit - control
Drawback - loss of flexibility
what others can make at a lower total cost
what we do not have the capacity or capability to make
Costs: all variable
Major benefit -flexibility
long term hollowingMake buy conclusions