高頓名師解析2013年ACCA考試F5業(yè)績管理知識(shí)點(diǎn)
Qualitative factors of Make –or-buy decision
- Relevant to paper F5
Make or buy decision is one of the most critical decision an organisation are often facing with in modern business environment. Hence, having a sound understanding of make or buy decision from F5 is crucial. Make-or-Buy decision (also called the outsourcing decision) is a judgment made by management whether to make a component internally or buy it from the market. 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.
While making the decision, both qualitative and quantitative factors must be considered.
2. Make-or-buy analysis is conducted at the operational level
At the operational level the factors in favor of making a part in-house.
· Cost considerations (less expensive to make the part)
· Desire to integrate plant operations
· Productive use of excess plant capacity to help absorb fixed overhead (using existing idle capacity)
· Need to exert direct control over production and/or quality
· Better quality control
· Design secrecy is required to protect proprietary technology
· Unreliable suppliers
· No competent suppliers
· Desire to maintain a stable workforce (in periods of declining sales)
· Quantity too small to interest a supplier
· Control of lead time, transportation, and warehousing costs
· Greater assurance of continual supply
· Provision of a second source
· Political, social or environmental reasons (union pressure)
· Emotion (e.g., pride)
Factors that may influence firms to buy a part externally include:
· Lack of expertise
· Suppliers' research and specialized know-how exceeds that of the buyer
· cost considerations (less expensive to buy the item)
· Small-volume requirements
· Limited production facilities or insufficient capacity
· Desire to maintain a multiple-source policy
· Indirect managerial control considerations
· Procurement and inventory considerations
· Brand preference
· Item not essential to the firm's strategy
This article has discussed the qualitative factors at the both strategic and operational level while making the decision of make-or-buy. The quantitative factors will be discussed later.
Prepared by Golden ACCA R&D Center
February 2013
