1-16.2 Operating Considerations

The following considerations can help the purchase/SCM team consider relevant tactical factors affecting the make vs. buy decision:

Considerations that favor a “make decision” include:

• Cost considerations (less expensive to make).
• Desire to integrate plant operations.
• Productive use of excess plant capacity to help absorb fixed overhead.
• Need to exert direct control over production and ensure supply continuity.
• Need to exert direct control over quality.
• Design secrecy required.
• Unreliable suppliers.
• Desire to maintain a stable workforce (in periods of declining sales).

Considerations that favor a “buy decision” include:

• Limited production facilities.
• Limited internal labor/resources.
• Cost concerns (less expensive to buy).
• Small volume requirements.
• Suppliers’ research and specialized know how.
• Desire to maintain a stable workforce (in periods of rising sales).
• Desire to maintain a multiple-source policy.
• Indirect managerial control considerations.
• Purchasing and inventory considerations.