Have you ever been involved in a lease-or-buy decision at work? In your personal life? Please...

Have you ever been involved in a lease-or-buy decision at work? In your personal life?

Please describe this situation and be sure to include the following information:

How did you approach making this decision? Did you use a formal process or an informal process?

What factors went into making the decision to lease or to buy?

In hindsight, do you think that you made the right decision? Do you think that you made the cost effective decision?

Solutions

Expert Solution

MAKE OR BUY DECISION

The make or buy decision involves whetherto manufacture a product inhouse or to purchase it from a third party.the outcome of the analysis should be a decision that maximises the long term financial outcome for a company or for us.

eg : a machinery for our company,products,warehouse etc.......

factors affecting make or buy decision

cost - The cost of making and buying should be compared. The cost means the direct cost of makung the product.ie costs that directly attributable to that product when it makes.general fixed costs are not considered.any fixed cost directly atributed to that product should be considered.The making cost compared with the the quoted price of the supplier and lowest will be the decision
capacity - Will the company have sufficientcapacity to produce the the product in house?alternatively, is the supplier reliable enough to be able to produce the product sufficient quantities and in a timely manner?
expertise - does the company have sufficient expertise to make the goods in house?in some cases a business has experienced such a high rate of product failure that it has no choice but to outsourse tje work to a supplier.
invested funds - Does the company have enough cash to purchase the equipment needed for the inhouse production?if the equipment is already on site,could outsourcing the work allow the equipment to be sold, so that the cash cash can be used elsewhere? this is a major concern for startup company , which have little excess cash available to invest in facilities.

make or buy is a formal process. i made the right decision in make or buy of my machinery for the production .because of comparing the cost i undersood that making is coslty than puchasing it from ouside.so i make cost effective decision on it.

jeff jeffy answered 1 year ago

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