An Empirical Study on Make-or-buy Decision Making

Abstract

Every enterprise will be based on the other enterprise to manufacture, product items/parts, for make or buy. The make-buy decision is based on the assessment whether it should be manufactured or buy it from an outside supplier to produce a component internally or to buy it from the outside. It depends on cost and profitability. The cost for both the alternatives may be calculated and the alternative with less cost is to be chosen. The aim of any enterprise is to improve its performance that is measured in terms of profitability. There is some research that has been carried out to make the decision based on profitability of the enterprise for make or buy decision.  The strategy is based on cost, flexibility and responsiveness of work to be carried out. However, some of the research is required to maintain the relationship between profitability and make or buy decision.

The reports of this paper attempt made on how buying decision influences the performances of an enterprise. The different sectors were chosen for the study such as Manufacturing, Automobile, Food, Textile and Hospitality. The focus of the study was based on three theories such as operational control, performance management and decision. The paper reveals the current trends and make or buy decision of the components and its relationship in taking decisions. It also discusses the two techniques break even analysis and economic analysis for decision making in make or buy decision. The study discusses the advantage of outsourcing and discusses the four theories in the study for make and buys decision