Question

In: Accounting

what are sone of the qualitative factors to be considered in a make or buy decision?...

what are sone of the qualitative factors to be considered in a make or buy decision? what factors (explained) can support the buy decisions?

Solutions

Expert Solution

When a company has to make the “make or buy” decision, the following qualitative factors must be considered:

1) The living and life style of the employees who would be let go and search some other job.

2) if the product is outsourced, the time constraints which is involved in providing the product to the demand point.

3) The specified standards of the products which are outsourced are tallying to the company’s requirements. The product would be of correct dimensions and size.

4) The reliability of the suppliers should be there, any lack of supply and quality defect will reduce the profits or put the company in lose.

5) Confidentiality of the products and its specifications will restrict the company to outsource the product and carry on the making or manufacturing of the same.

The factors which will support the buy decisions are:

a) Assured quality: The assurance of the quality from the supplier will be the added advantage to have buying decision.

b) Alternative use of the facilities: If the company’s facilities are having some profitable alternative use will favor the buying decision.

c) Cheaper product : The product is available from the suppliers at the lower price than the costs of manufacturing, will let the product to buy from outside.

d) Part outsourcing only: If the company is outsourcing a part of the whole product would put the buying decision on the safer side if the supply is assured.


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