When making a make-or-buy decision, several factors must be considered beyond costs and proprietary knowledge. The option to "make" implies manufacturing the product in-house, while "buy" means outsourcing the production. Key considerations include:
Costs: Both fixed and variable costs associated with in-house production versus purchasing from a supplier.
Proprietary Knowledge: The importance of keeping certain knowledge and technologies within the company for competitive advantage.
Available Capacity: Whether the company has the necessary production capacity to manufacture the product without affecting other operations. This involves assessing current production capabilities and future scalability.
Quality Control: The ability to maintain the desired level of quality in-house versus the quality assurance capabilities of potential suppliers.
Flexibility and Lead Time: The ability to respond quickly to market changes and customer demands.
Strategic Importance: How critical the component or product is to the company's core business and strategic goals.
Among the given options, "available capacity" is the most relevant factor, as it directly influences the decision of whether to allocate internal resources to production or to outsource.
References:
Chopra, S., & Meindl, P. (2016). Supply Chain Management: Strategy, Planning, and Operation. Pearson.
Slack, N., & Lewis, M. (2017). Operations Strategy. Pearson.
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