Make or Buy Decision Definition:
Make or buy decision is a decision as to whether an
item should be produced internally or purchased from an outside
supplier. Explanation of the Term "Make or Buy Decision":
Business decision that compares the costs and
benefits of manufacturing a product or product component against purchasing
it is called make or buy decision. If the
purchase price is higher than what it would cost the manufacturer to make
it, or if the manufacturer has excess capacity that could be used for that
product, or the manufacturer's suppliers are unreliable, then the
manufacturer may choose to make the product. Manufacturers may also consider
to make rather than buying because some wastes may become the raw materials
of product under consideration. This assumes the manufacturer has the skills
and equipment necessary, access to raw materials, and the ability to meet
its own product standards. A company who chooses to make rather than buy is
at risk of losing alternative sources, design flexibility, and access to
technological innovations. |
