Page 162 - DMGT525_MATERIALS_MANAGEMENT

Unit 11: Purchasing Research

usually means a single-source situation, with all the attendant risks in case of a breakdown or Notes
strike. This is why some firms have turned the make-or-buy decision into a make-and-buy
decision, enjoying the best of two worlds by combining the advantages of both approaches.
In any event, buying often involves several sources.

Did u know? Factors that are to be carefully analyzed in arriving at make or buy decision
includes following:

 quality requirement
 quantity requirements

 cost aspects.
Other factors potentially influencing the make-or-buy choice include capability (know-how and
equipment), available capacity, cost per unit, reliability of supply, need to maintain secrecy,
continuity of employment and investment required. Depending on its magnitude and relative
importance, any of these factors could support either outcome. And because these factors change
over time, make-or-buy decisions should be reviewed periodically.

Task Make a presentation on make or buy decision.

Self Assessment

Fill in the blanks:
10. Make-or-buy decisions are particularly important in the development of new products,
affecting the …………………… of the offering as well as the ability of the firm to supply its
market.
11. A trigger for make-or-buy deliberations could be dissatisfaction with a current
…………………… performance.

12. If demand …………………… markedly, the firm must compensate for inadequate facilities
by supplementing its own production with purchases from outside sources.
13. If the sales increase is judged to be permanent, a/an …………………… of the firm’s own
capacity may be in order.
14. …………………… and scheduling control are easier to exercise internally than externally.
15. A make decision usually means a …………………… situation, with all the attendant risks
in case of a breakdown or strike.



Case Study Forward Buying for Profit Maximization

orward buying is a term that refers to acquiring materials well in advance of the
time when the material may actually be needed. This kind of purchase can be made
Ffor a number of reasons, such as pending price increase, a potential supply shortage
or unusual manufacturing logistics. Many factors influence the extent to which forward
buying can be practiced. The stability (perishability) of the purchased material is probably
Contd...

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