Question

what quantitative factors should a manager consider before deciding to make a product or component in-house or buy it from outside? What is the decision rule to follow?

Answer 1

A business organization, in order to be successful needs to take up decisions that will be beneficial for the organization and that can actually be very critical. A manager needs to be efficient and effective while making a decision in this aspect and there are certain factors that they need to consider while deciding to make the component in house or buy it from outisem Firstly, the managers needs to understand that if the organization is capable enough to produce the product that is required and if it will be the first time for the organization then it would be better to take it from outside. Secondly, the cost that the company will incur while producing themselves and if they buy it from outside. Thirdly, the time that the organization themselves will take and the time that will be taken by the external organization. Lastly, the profit factor associated with the product needs to be analyzed and based on that the decision needs to be taken.