In general, the forces of competition are imposing a need for more effective decision making at all levels in organizations. Progressive Approach to Modeling:
Ben Chams 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—or significantly modified a product or part—is having trouble with current suppliers, or has diminishing capacity or changing demand.
Make-or-buy analysis is conducted at the strategic and operational level. Obviously, the strategic level is the more long-range of the two. Variables considered at the strategic level include analysis of the future, as well as the current environment.
Issues like government regulation, competing firms, and market trends all have a strategic impact on the make-or-buy decision. Of course, firms should make items that reinforce or are in-line with their core competencies.
These are areas in which the firm is strongest and which give the firm a competitive advantage. The increased existence of firms that utilize the concept of lean manufacturing has prompted an increase in outsourcing.
Manufacturers are tending to purchase subassemblies rather than piece parts, and are outsourcing activities ranging from logistics to administrative services. It prescribes that a firm outsource all items that do not fit one of the following three categories: Items that fit under one of these three categories are considered strategic in nature and should be produced internally if at all possible.
Make-or-buy decisions also occur at the operational level. Keong Leong, and Keah-Choon Tan, suggest these considerations that favor making a part in-house: Burt, Dobler, and Starling warn that "no other factor is subject to more varied interpretation and to greater misunderstanding" Cost considerations should include all relevant costs and be long-term in nature.
Obviously, the buying firm will compare production and purchase costs. Burt, Dobler, and Starling provide the major elements included in this comparison.
Elements of the "make" analysis include:The DecisionTools Suite Make Decisions with Confidence Complete Risk & Decision Analysis Toolkit for Microsoft Excel & Project. Foundations of Decision Analysis [Ronald A. Howard, Ali E. Abbas] on rutadeltambor.com *FREE* shipping on qualifying offers.
For courses in Decision Making and Engineering. The Fundamentals of Analyzing and Making Decisions Foundations of Decision Analysis is a groundbreaking text that explores the art of decision making. Introduction and Summary "Somewhere along the line of development we discover what we really are, and then we make our real decision for which we are responsible.
Analysis paralysis or paralysis by analysis is the state of over-analyzing (or over-thinking) a situation so that a decision or action is never taken, in effect paralyzing the outcome. A decision can be treated as over-complicated, with too many detailed options, so that a choice is never made, rather than try something and change if a major .
The DecisionTools Suite Make Decisions with Confidence Complete Risk & Decision Analysis Toolkit for Microsoft Excel & Project. EXAMPLE. Here is a hypothetical example for coming to a make-or-buy decision.
A reputable skateboard company is now manufacturing the heavy duty bearing that is utilized in its most liked line of skateboards.