Challenges faced with Make-or-Buy decisions

Almost all manufacturing firms are faced with difficult challenges while attempting to improve efficiency and increase profits. One of the largest challenges faced is the Make-or-Buy decision, pertaining to manufacturing of a product. The analysts and decision makers must weigh the benefits of keeping a product entirely in-house for production. Additionally, a decision can be made to purchase parts of an overall product, over making the parts in-house. These decisions can drastically impact the profitability of a project or product, which in turn can affect the margin of the end good.
The make-or-buy decision is a difficult decision to make for most companies. The make-or-buy decision is often made solely on a cost basis, without real justification to processing technique changes, technology improvements, or strategic implications (Canez, Platts & Probert, 2000). Companies must make this decision due to the limited amount of resources, technology, and manufacturing techniques that are available to the company at the time of evaluation. Often, a company will decide to purchase a product if it does not meet one of the evaluation criteria, such as not having adequate staffing resources, as long as the cost structure is attractive (Canez, Platts & Probert, 2000). Although cost is a large factor, it is often impractical for a company to make such decisions based upon only a few factors. The overall decision must be made with adequate research and diligence.
Another challenge of the make-or-buy decision is the amount of knowledge required to address the needs of the organization. An organization must define all possible alternatives and any tradeoffs that may occur from making the decision (Moses & Pär Åhlström, 2008). To as...

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... framework is in place to achieve the necessary information, management can make an educated decision to make-or-buy a product part or service section. These decisions are crucial for organizations to remain competitive in today’s market.

Works Cited

Canez, L. E., Platts, K. W., & Probert, D. R. (2000). Developing a framework for make-or-buy decisions. International Journal of Operations & Production Management, 20(11), 1313-1330. doi: http://dx.doi.org/10.1108/01443570010348271
Moses, A., & Pär Åhlström. (2008). Dimensions of change in make or buy decision processes. Strategic Outsourcing: An International Journal, 1(3), 230-251. doi:http://dx.doi.org/10.1108/17538290810915290
Nikolarakos, C., & Georgopoulos, N. (2001). Sourcing: Issues to be considered for the make-or-buy decisions. Operational Research, 1(2), 161-179. doi:http://dx.doi.org/10.1007/BF02936292