Make vs Buy

In: Business and Management

Submitted By rashmijha85
Words 3530
Pages 15
Make vs. Buy Revisited
Reassessing your company’s manufacturing strategy

M

ake or buy? The classic manufacturing question still has no easy answer. Amid signs of demand recovery, but with capital still limited and resources thinned by restructuring, top executives today are revisiting the issue. To come to the right make-or-buy decision, leading companies resist the temptation to “feed the beast.”
Instead of focusing only on short-term gains, these leaders keep their long-term strategy and corresponding core competencies in mind. They adopt a clearly defined manufacturing strategy, and then adopt the right tactics that can lead to smart decisions and a competitive advantage.
The trade-offs between making a product inhouse and buying it externally are well known to most senior executives. The “buy” approach— a manufacturer purchasing a necessary part from an outside source—frees up resources, reduces capital demands, increases flexibility and improves returns on capital employed, but in a tough market companies may seek to avoid potential quality concerns and supply risks. On the other hand, a “make” approach—developing and building that same necessary part internally—enables the company to utilize available internal capacity, absorb fixed costs and protect intellectual property, but it can lead to unnecessary complexity and divert time and attention away from highervalue activities.
Choosing “make” simply because the capacity already exists, or “buy” to avoid investment in a time of limited capital, may work 90 percent of the time, but that 10 percent when it’s wrong can have dramatic, long-lasting consequences.
Considering this, we have developed a comprehensive framework that helps our clients answer the make-or-buy question by reassessing their

manufacturing strategies, and then using the right tactics to implement them. By…...

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