Solving Storage and Logistics Problems
Make-or-buy decisions often lead manufacturers to arrange for ongoing shipments from a reliable supplier rather than deal with the logistics and costs of creating a particular part themselves.
When to use make-or-buy decision?
Make-or-buy decisions usually arise when a firm that has developed a product or part —or significantly modified a product or part—is having trouble with current suppliers, or has diminishing capacity or changing demand. Make-or-buy analysis is conducted at the strategic and operational level.
Why is it important to decide if the company will make-or-buy certain products?
The decision as to whether to make vs. buy a product is based on a variety of factors , including the cost of either option, whether the product is available from other vendors, the expertise and resources your business has when it comes to manufacturing, and whether you have enough cash in place to make a purchase.
What is the first step to making a make-or-buy decision?
They proposed a make-or-buy decision process methodology through the following stages: planning, evaluation, internal costs , and performance analysis. ... Companies can perform their freight distribution in three different ways.
What is an example of a make-or-buy decision?
Examples of the qualitative factors in make-or-buy decision are: control over quality of the component, reliability of suppliers, impact of the decision on suppliers and customers , etc. The quantitative factors are actually the incremental costs resulting from making or buying the component.
When should the make-or-buy decision be made Mcq?
Solution(By Examveda Team)
In ‘make or buy’ decision, it is profitable to buy from outside only when the supplier’s price is below the firm’s own Variable Cost . A variable cost is a corporate expense that changes in proportion to production output.
What are the factors that affect the make-or-buy decision?
- Volume of Production: ...
- Cost Analysis: ...
- Utilization of Production Capacity: ...
- Integration of Production System: ...
- Availability of Manpower: ...
- Secrecy or Protection of Patent Right: ...
- Fixed Cost: ...
- Availability of competent suppliers or vendors.
When a large company is considering a make-or-buy decision the focus should be?
– Price discrimination enables companies to sell products to customers who may not otherwise purchase them. Which of the following is NOT a short-run pricing decision? Sanders, inc. makes two products.
What are the disadvantages of make-or-buy decision?
- Not satisfying quality of the goods.
- Level of costs.
- Too little space to expand company activity.
- Unstable demand and sales fluctuations.
- Disappointing cooperation with suppliers.
- Widening the range of products offered.
Should we make-or-buy this component?
If the internal cost exceeds the external price, it is better to buy . If the internal cost exceeds the external price, it is better to buy. If the external price exceeds the internal cost, it is better to make. Production priority is given on the basis of incremental cost per limiting factor.
What are the criteria for buy decision?
- Finished product can be made cheaply by the firm than that by the outside suppliers.
- Finished product only is manufactured by limited number of outside firms, which are unable to meet the demand.
- The part has an importance for the firm, and requires extremely close quality control.
What is make buy analysis?
The make or buy decision involves whether to manufacture a product in-house or to purchase it from a third party . The outcome of this analysis should be a decision that maximizes the long-term financial outcome for a company.
What is a buy decision?
1. A typical decision-making process, when consumers become aware of products/brands, search for information, compare offers, and perform a cost-benefit analysis before actually buying the desired product .
What qualitative considerations should be relevant when making a make-or-buy decision?
Examples of qualitative factors include the reputation and reliability of the suppliers , the long-term outlook regarding production or purchasing the product, and the possibility of changing or altering the decision in the future and the likelihood of changing or reversing the decision at a future date.
How is the problem of make-or-buy resolved?
The decision is based on both financial and non-financial factors. In general proposed purchased price is compared with the marginal cost of production. If marginal cost of the production are more than the price offered by the outside supplier then clearly buying goods in finished form is a better option.
How does opportunity cost enter into the make-or-buy decision?
Opportunity Cost enters into your decision-making criteria when you have several options to consider, including spending the money on several choices of investment . ... It refers to the value forgone in order to make one particular investment instead of another. For example, you own a storage space in a shopping mall.
Which cost helps in taking make-or-buy decision Mcq?
In make or buy decision, marginal costs as well as additional fixed costs are the factors to be considered.
What are the three pillars of make-or-buy decision?
This report explores the dynamics of make-or-buy decisions and presents a framework to help companies make the right decisions. The framework is built on three key pillars — business strategy, risks, and economic factors .
When making decisions managers should consider all relevant costs which include?
When making business decisions, organizations should only consider relevant costs, which include future costs —such as decisions about inventory purchase costs or product pricing—that still need to be incurred. The relevant costs are contrasted with the potential revenue of one choice compared to another.
What is the role of marginal costing in the decision of make-or-buy?
Marginal costing helps management to decide whether the firm should itself manufacture a component part or buy it from an outside firm . ... Decision making essentially involves a choice between various alternatives and marginal costing assists in choosing the best alternative by furnishing all possible facts.
What do you know about decision making?
Decision making is the process of making choices by identifying a decision, gathering information, and assessing alternative resolutions . ... This approach increases the chances that you will choose the most satisfying alternative possible.
When a firm makes a make decision when analyzing?
There are seven steps in the Strategic Sourcing Methodology. When a firm makes a “make” decision when analyzing whether to “make or buy”, they may still have to purchase some types of inputs from outside suppliers . The first step in managing sourcing and procurement is to determine the type of purchase.
