Purchase and buy decision , Other Management

Purchase and Buy Decision 

The project manager or the production manager of a project has to decide whether to buy or make a part, so that it is available at the right schedule to ensure continuity in manufacturing/work process, as all these activities are highly time bound. Any delays in schedules will cause a cascading effect on overall project resulting in cost overruns. There are no universal rules applicable across projects. It varies widely from project to project. 

For a manufacturing project, the factors favouring in house manufacture are as follows: 

  •   In house cost less than supplier cost 
  •   Capacity utilisation in house in terms of machine hours and man-hours. 
  •   To retain process confidentiality. 
  •   To retain high level of quality. 
  •   To keep up schedules particularly if long process cycles are involved post this part. 

The factors favouring buy out are as follows: 

  •   Elimination of capital expenditure. 
  •   Utilisation of specialist facility. 
  •   Lesser buy out costs than in house cost. 
  •   Focus on one?s own area of specialisation.  
Posted Date: 9/28/2012 1:05:55 AM | Location : United States

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