What matters should you consider when deciding whether to make a product or to buy a product

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What matters should you consider when deciding whether to make a product or to buy a product

The make decision is always demands an investment in plant, machineries and equipment. The investments can be categorized in to fixed cost and variable cost. The buy decision is associated with only variable cost. Expressing all factors in to money terms carries out a thorough and comparative analysis.

Then the decision is to be taken based on which one is more economical, to make or to buy. The make or buy decision is influenced by: The marketing aspects have the influence on make or buy decision.

When there is a fierce competition, an organization tries to enhance the quality and cut down the costs. The make decision assures the quality and reliability of the parts.

Under the situation of increasing market share and a good future sales potential company can have an additional investment potential and hence can opt for make decision. When there is a doubt about the market potential, the company should opt for buy decision.

The large organizations pay greater attention to quality which favors the make decision to maintain quality and reliability of items. The decision is influenced by: The availability of items or components in sufficient quantities b.

What matters should you consider when deciding whether to make a product or to buy a product

The delivery commitments must be reliably met. The acceptable quality and price level of the product d. Economy in transportation from the source to the organization e. Competence and reliability of vendors. Any decision that is to be taken including make or buy decision should be taken with due consideration to overall objective of the organization.

Due importance should be given to the economy, secrecy and flexibility in taking decision regarding make or buy. Intangible aspects like environmental factors, labour union acceptance, goodwill, support to ancilliariasation and growth of SSI units, technical assistance to vendors also influences the make or buy decision.

Decisions regarding whether to make or buy the components involve both economic and non economic factors. Economically, an item or component is a candidate for in house production, if the company has sufficient capacity and if the components value is high enough to cover the variable costs of production and make some contribution towards the fixed cost.Then ultimately the decision on whether to build a new business versus buying another company comes down to whether you want to get into a new geography or product line right now.

BREAKING DOWN 'Make-or-Buy Decision'

If so, making an. In a make-or-buy decision, the most important factors to consider are part of quantitative analysis, such as the associated costs of production and whether the business can produce at required levels. Make or buy decision Definition of 'Make-Or-Buy Decision' The act of choosing between manufacturing a product in-house or purchasing it from an external supplier.

In a make -or- buy decision, the two most important factors to consider are cost and availability of production capacity.

Logistics Of Delivering The Product

A make-or-buy decision is the act of choosing between manufacturing a product in-house or purchasing it from an external supplier. The firm should also consider whether the supplier can offer.

Make or Buy Decisions of a Product: Introduction, Factors and Functional Aspects! The make or buy decision refers to the problem encountered by an organization when deciding whether a product or service should be purchased from outside sources or manufactured internally.

Theoretically, every item. Sep 25,  · 5 Things to Consider when Pricing Your Product. By QuickBooks. If so, you should consider adding a tiered pricing structure.

You should consider if you need the product. If you need it, you should consider if a high quality value is required for this product. If you need quality, a brand name is probably essential. In a make-or-buy decision, the most important factors to consider are part of quantitative analysis, such as the associated costs of production and whether the business can produce at required levels. The decision as to whether a business should make or buy a product is based on both tangible and intangible factors, which may shift over time.

Tiered pricing appeals to customers because it allows them to choose the price level that best fits their budget. If your product(s) can be differentiated through additional features, price them at points /5(22).

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