Make or Buy Decision

“Make” or to “Buy” will influence the efficiencies of operation in a positive manner. The main reason behind it is that, the make or buy decisions are helpful to sustain business practices, and to improve efficiency in operations in an effective manner.

As for external factors one of the external factors would be perhaps a new law that is given and affects directly or indirectly the business and that business needs to make some changes.

Klein, in “The Discarded Factory,” provides many examples to show that corporations are much less concerned about production and much more about their brand name. The statement he uses to help explain the reason behind why they are doing this is, "The difference between products and brands is fundamental. A product is something that is made in a factory; a brand is something that is bought by a customer,” (Peter Schweitzer). Many companies believe that while their products and factories are temporary and require upkeep, respectively, their brand will live on for much longer. Because of this, they shift towards outsourcing their production to keep costs as low as possible. The companies then use this extra money to help build their brand using sponsorships and marketing campaigns. In addition to sponsorships and marketing campaigns, companies will also improve their packaging, distribution, and retail channels, and they will expand. A quote once said by Nike’s

We should consider this trade-off from ECCO case, between in-house production and outsourcing when faced with cost uncertainty and competition with a rival manufacturer in a differentiated goods market. When the management decides on selecting organizational forms, technological uncertainty on production activities often ensues. Thus, a manufacturer faces uncertainty when choosing between in-house production and outsourcing. Moreover, because almost all modern firms are in a competitive position, they have to choose organizational forms and take the

According to my analysis above, Scotts should choose the option to outsource their production to contract manufacturers in China. It is mostly based on the two factors below.

VF also uses a “package sourcing” model in production where a single supplier is responsible for the entire garment, from raw material procurement to packaging and shipping finished goods to the market. “Package sourcing” has the benefit of low cost, as companies can choose between various suppliers all over the globe based on economic factors, such as labor and transportation costs, and trade quota or tariff considerations to get the cheapest price for finished goods. It also allows VF

Strengths: Minimal delay in production. Avoid lead-level requirements. Safter products for customers, thereby increasing customer satisfaction. Avoid legal issues from foreign and domestic governments. Contract abrogation with supplier if process failure due to supplier. Socially responsible

Read "Why Manufacturing Matters" (pg. 14) and submit written responses to Questions 1 & 2.

The internal factors are inclusive of the marketing mix of the organization and the organizational goals. The product itself is a huge

Chang and Ive (2000) examine the “make or buy” decision in mathematical way in the illustration below. The research shows that in order to make decision or vertical integration over “make or buy decision” the firm should identify average TC considering the market price to produce such goods and service, then decide which organizational form is the best addressing the issue.

A Make-or-Buy Decision at Baxter Manufacturing Company Scenario Summary Baxter Manufacturing Company (BMC) is a leader in deep-drawn stampings. It has been in business since 1978 as a privately held company. The process for making these stampings is very involved and complex. BMC developed methods for efficiently producing large volumes of stampings while keeping their quality very high. BMC uses state of the art machines to make the stampings and they make all the tooling necessary for those machines. In the years since their founding, many changes have impacted the industry – especially when it comes to computer networks and software. In the 1980s many of BMC's customers went to Just In Time

After considering the requirements of the business the technology should be acquired, In-House or outsourced that depends on cost cutting strategies from B2B or from the interaction of the stakeholder’s decisions.

The make-or-buy decision is the act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier). The buy side of the decision also is referred to as outsourcing. Make-or-buy decisions usually arise when a firm that has developed a product or part is having trouble with current suppliers.

The aim of any effective manager is to manage the organization scarce resources effectively and efficiently, reduce cost and eliminate waste. Money and financial assets are very important resources in any types of organizations whether private, public, profit, non-profit or charitable organization, and all types of organizations need money to operate effectively and smoothly. In this case, buying the DD11 devices from outside source will save money and reduce operational load for Jetta Electronics Ltd. In order to produce the DD11 devices in house, Jetta Electronics Ltd needs $190,000 comprising $45,000 of direct materials, $ 60,000 of direct labor, $ 30,000 of variable factory overhead, and $55,000 of fixed manufacturing cost. And the total manufacturing cost per unit for producing the DD11 in house is $38, or $190,000/$5,000. Even though, technically speaking, fixed manufacturing cost will remain constant whether Jetta Electronics Ltd manufactures the DD11 devices in house or purchase them from outside manufacturer, outsourcing the manufacturing of DD11 devices will save large amount of money for the company. For example, buying DD11 devices from outside supplier will eliminate all the raw materials and direct labor costs total of $ 105,000 eighty percent of factory variable overhead manufacturing costs total of $24,000, and $2,000 from the selling of equipment used to manufacture DD11 devices So in this situation, I highly recommend Jetta Electronics Ltd

Many complex and more diverse decisions confront supply chain managers on a regular basis: what would be more efficient to manufacture in-house or to outsource; what new channels to implement that it would benefit their customers and suppliers, or how all new technologies, platforms, and practices have to be aligned to enable real-time supply chains. Current information technology reduced outsourcing transaction costs drastically, enabled companies to an increased supervision and control over offsite work, and outsourcing services can deliver faster and more convenient, but technology alone is not the solution. If a company decides to embrace changes in business processes and business culture, those changes can support a long way toward delivering a better product for less money. Complex sphere of activities in many countries is not relevant anymore because a massive number of activities outsourced became commonplace, a new normal.