There are many advantages and disadvantages of make or buy decision which you may not have any idea that you know. In order to keep the floor tidy, it is essential that you go through this lead and then have your cup filled to the brim. The make or buy decision is however part of what is known as the art of decision making.
The truth is, when it comes to making decision, the decision-making culture is the most prevalent method of making judgments by seeing the issue, obtaining facts on possible arrangements, and concluding the best other option. Instinct is a suitable decision-making technique; nevertheless, it is frequently more appropriate when the decision is basic, individual, or must be decided quickly.
More complex judgments frequently need a more formal, organized technique that incorporates instinct and clear thought. It is critical to avoid impulsive reactions or instincts in such situations, particularly while making commercial judgments.
This cycle is aided by natural or coherent interaction or a combination of the two. Instinct is associated with applying intuition to hold strong on the possible approach. Surprisingly, a coherent cycle uses raw statistics to make experimentally valid decisions.
Definitively, the make or buy decision boldly refers to a decision made to either manufacture a product or service in house or buy it from outside suppliers (which is also identified as outsourcing) based on cost-benefit analysis.
Usually, the decision is made using quantitative or qualitative research and most of the time, the results of quantitative analysis (cost-benefit analysis) are enough to decide on whether to make the product in-house or buy (outsource) from outside suppliers. In this content, we shall be highlighting some of the advantages and disadvantages of make or buy decision:
Advantages
-
Finding Expert Manufacturers
One of the biggest advantages of the buy strategy is being able to find a manufacturer that has expertise in a particular type of product. This manufacturer may even have been creating these products for years, allowing for all of the bugs to be worked out in the early days. You’ll also benefit from the facility and employees the manufacturer already has in place, which will give you the advantage of having those resources without having to pay ongoing costs for them.
-
Changing to Meet New Demand
Another issue that many growing businesses face is growing demand for their products. This demand may outstrip what the company can currently produce with its labor force, and there may be no easy way to grow fast enough to meet ongoing orders. In this case, the company may outsource the creation of certain products to other businesses to focus on the products that need to be made in-house.
Read Also: Importance of Decision Making Skills
-
Creativity or The Ability to Create
Often, the decision to make your products comes naturally, based on the product your business is selling. If, for instance, you’ve invented an item that doesn’t exist anywhere else, you’ll have no choice but to make it yourself. This is one of the biggest benefits of the make strategy – you can create a product that can’t be bought anywhere else.
-
Exposure to Details
Another benefits to the make strategy is that you’ll be able to expose everyone in your organization to the details of producing your product, from start to finish. This is a benefit you wouldn’t have if a third party made the items, especially if your team never even gets to tour the manufacturing facilities.
-
Adapting to Changing Markets
It’s a good idea for manufacturers to consider the make-or-buy decision periodically, as markets and related costs can shift over time. As the notes, corporations have found that while a “buy” decision may not save enough money during strong economic times, when financial situations grow more difficult, purchasing from suppliers may become a viable strategy. In other words, the best choice can differ depending on current circumstances.
Disadvantages
-
Quality Control Problem
Quality control may be an issue when working with an external supplier. There may be language barriers or cultural differences that make it difficult to communicate expectations and ensure that products meet the required standards.
-
Deadline Issue
There is always the risk that the supplier may not be able to meet deadlines or may experience other issues that disrupt the production process. This can lead to delays and additional costs and damage the company’s reputation if products are not delivered on time.
-
Financial Risk
There is a financial risk involved in outsourcing production, as the cost of materials and labor may fluctuate. This can lead to unexpected expenses and make it difficult to budget production costs.
-
Expansion Contingency Problem
There is the risk that the supplier may not be able to meet future demand if the company’s product is successful. This could lead to shortages and frustrated customers.
