Make Or Buy Decision Case Study

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Make or buy decision is one of the most crucial decisions that always been faced by construction companies in whether producing a product in-house or purchasing a product from an external supplier. There are a number of suppliers in every producing company that produce components which is necessary ranging from directly used for production to different services. The organization needs all goods and services to function effectively and to produce the output. For the production of intermediate products and services, the construction company can either make or buy the necessary components and services.

In the process of making decision, the construction company should organize the whole production process by itself, it must build new factories, …show more content…

However, with the right considerations, the decision may become easier to calculate and quantify. In this paper, I will discuss about the factors that affecting the construction company in make or buy decision and the advantages of make or buy decision.

2.0 FACTORS THAT AFFECTING THE MAKE OR BUY DECISION

The decision of whether to make or buy a product is based on both tangible and intangible factors, which may shift over time. The factors that make or buy decision include both quantitative and qualitative …show more content…

The volume of product for construction company requirements will affect the decision of whether to make or buy the items. The make decision should be taken when the volume of product too small and that cannot get to interest outsiders. However, sometime the construction company buys from vendor due to large demand of products that cannot make in house. If the business uses tens of thousands of boxes to package products, then it is often cost-effective to contract to a company that can make them to a custom size.

On the other hand, the higher volume uncertainty may causes stock outs or the excess of inventory for the buyers and unexpected production costs for the suppliers. In this situation, the transaction costs for outsourcing are higher and the in-house production tends to be more efficient. (Gordon & David , 1984) In make or buy decisions, volume uncertainty leads to making a product rather than outsource from

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