Make-or-buy decisions, Business Law and Ethics

Make-or-Buy Decisions 

Make or buy decision is a strategic decision that any organisation has to make, between producing an item internally and buying it externally. 

With the changes in the approaches of contracts, the issues related to make or buy decisions have also started increasing. Make or buy decision is a fundamental issue to be addressed by any company. The competition is increasing globally; as a result the manufacturing companies are re-evaluating their existing processes, technologies, manufactured parts and services in order to focus on strategic activities.  

There are finite resources in the company which makes the company incapable of affording all the activities in house. In the PMBoK, make-or-buy  decision is an output of the plan procurement process which is then used as an input to the conduct procurement process. So the organisation must decide to make or buy the product or service which are cost effective. The decision can be made at the individual resource level, or for an entire deliverable or for the project itself. The last option is decided right at the conception stage of the project.  

The cost evaluation technique used for the make or buy decision should be based on both direct and indirect costs. Direct costs include goods, materials, equipment, facilities and employee salaries. Indirect costs (some of which tend to get missed in the evaluation) include training costs, management costs, administrative overheads, and on going maintenance costs. 

Even though cost evaluation is the fundamental issue, there are other considerations in make or buy decision which include: 

  • Capacity: Can the company take on a product or service of this scale? 
  • Skill level:  Do the persons involved in the project posses the  skills required or do they need any additional training based on the project? 
  • Trade secrets:  The company should maintain the secrets of a magic formula for a product or service but if this is not disclosed, then the product or service cannot be outsourced.  
  • Staff availability and existing workload:  If the staffs engaged in the project are already working on another priority project, then they cannot be available for this project.   
Posted Date: 9/27/2012 2:48:40 AM | Location : United States







Related Discussions:- Make-or-buy decisions, Assignment Help, Ask Question on Make-or-buy decisions, Get Answer, Expert's Help, Make-or-buy decisions Discussions

Write discussion on Make-or-buy decisions
Your posts are moderated
Related Questions
Implied Powers:                                     The statement of Lord Cairns in 1875 in Ashbury Rail Co Ltd v Riche (22) to the effect that a contract beyond the objects o

PREFERENTIAL DEBTS: These unsecured debts which rank ahead of a floating charge and non-preferential debts are: (a) one year's taxes, i.e. corporation tax, PAYE income tax de

Explain the Causation, Remoteness and Contributory Negligence in short. Causation: When the accident was going to occur anyway then causation is not proved, which is a third

What is Legislative Lobbying Lobbying, if comes after elections, may take place either by contribution (to be used in future) or by inducting some strategic information to affe

Describe about the Policy Agenda Setting Agenda setting under direct democracy. Agenda setting concerns to the rules on the grounds of which policy proposals come up for a vote

Question 1: a. Social responsibility is the duty to do what is best for the good of society. Critically analyze the ethical obligations of a business are toward the society.

Frank, a student at Anne Arundel Community College, is on his way to class one day. He enjoys his class very much and is looking forward to this particular class on tort law, but d

Power to dispense with the word "Limited":                             Although s.5 provides that the last word of the name of a limited company must be "limited" this would n

What are the advantages of doctrine of judicial precedent? Advantages of doctrine of judicial precedent: a. Makes it more clearly in terms of chances of winning case should

QUESTION 1 You are given the task to make a Code of Ethics for your organization (a) Describe a Code of Ethics (b) What are the different aspects/issues that you might in