Supply Chain Management

Report on

Make Or Buy Supply chain

Presented By Kamran Ali (13875)

Presented To Dr: Masood Sabzwari

INTRODUCTION
The Most Important Decision About Manufacturing.

Manufacturing Decision Are Made By Top Level Management.

Basic Objective To Reduce Future Ambiguity. R&D Helps To Make Decision. Industrial Factor Are Also Important Factor. Reduction Of Cost & Improvement Of Quality Goods.

MAKE OR BUY DECESION

The Make-or-buy Decision Is The Act Of Making A Strategic Choice Between Producing An Item Internally (In-house) Or Buying It Externally (From An Outside Supplier). Make-or-buy Analysis Is Conducted At The Strategic And Operational Level.

CONSIDERATIONS THAT FAVOR MAKING A PART IN-HOUSE

Cost Considerations (Less Expensive To Make The Part) Desire To Integrate Plant Operations Productive Use Of Excess Plant Capacity To Help Absorb Fixed Overhead (Using Existing Idle Capacity)

Need To Exert Direct Control Over Production And/Or Quality

Better Quality Control Design Secrecy Is Required To Protect Proprietary Technology Unreliable Suppliers No Competent Suppliers

Desire To Maintain A Stable Workforce (In Periods Of Declining Sales) Quantity Too Small To Interest A Supplier

Control Of Lead Time, Transportation, And Warehousing Costs

Greater Assurance Of Continual Supply Provision Of A Second Source Political, Social Or Environmental Reasons (Union Pressure) Emotion (E.G., Pride)

FACTORS THAT MAY INFLUENCE FIRMS TO BUY A PART EXTERNALLY INCLUDE

Lack Of Expertise Suppliers' Research And Specialized Know-how Exceeds That Of The Buyer Cost Considerations (Less Expensive To Buy The Item) Small-volume Requirements Limited Production Facilities Or Insufficient Capacity Desire To Maintain A Multiple-source Policy Indirect Managerial Control Considerations

Procurement And Inventory Considerations

Brand Preference Item Not Essential To The Firm's Strategy

IMPORTANCE OF PURCHASE MANAGEMENT

The Purchase Decisions Commit A Very Large Portion Of Financial Resource Personnel Deal With Large Number Of External Agencies While Performing Their Functions

They Represent Companys Reputation In The Outside World

They Negotiate And Finalize Deals

SELECTION OF VENDER
1. The Production Capabilities Of The Vendor i. ii. iii. Capacity To Manufacture The Required Product In Desired Quantities. Possibility Of Future Expansion In Capacity. The Understanding Or The Knowledge Of The Vendor Regarding The Buying Company And Its Need. 2.The Financial Soundness Of The Company i. ii. The Vendor Companys Capital Structure. Whether It Belongs To A Larger Group Of Companies; Whether It Is A Private Limited Or A Public Limited Company. iii. iv. The Profitability Record Of The Company In The Past. Expansion Plans Of The Company In The Future.

Technical Capabilities
i. Whether The Available Machines Are Capable Of The Required Quality Of Materials? What Are The Future Plans Of The Vendor? ii. Whether There Are Enough Technical Skills Available With The Vendor?

iii. Whether There Is Proper Research, Design And Development Facility Available With The Vendor? iv. What Is The Record Of The Vendor In Filling The Orders Of Other Buying Companies In The Same Business? v. What Has Been The Consistency In The Quality Produced By The Vendor? vi. Whether The Vendor Has Appropriate Storage And Warehouse Facilities

To Retain The Quality Of The Product Produced?

vii. Whether Proper Quality Control Procedures Are Being Followed In The Vendor Company?

Other considerations

i.

What Are The Working Conditions In The Vendor Company?

ii.
iii.

How Are The Industrial Relations In The Vendor Company?

Whether There Is Any Possibility Of Disruption Of The Supply Of Materials In Terms Of Quantity And/or Quality Due To Human Relations Problem In The Vendor Company?

THE MAKE OR BUY FRAMEWORK

CASES WHICH HELPS MAKE OR BUY

I. Shortage Of Quantity II. Right Goods III. Right Place

IV. Right Time

V. Right Condition VI. Right Cost VII. According To Manufacturing Categories a) Primary Sector (Extractive Sector): b) Secondary Sector (Manufacturing Sector): c) Tertiary Sector (Service Sector)

VIII.To Create Strategic Advantage

IX. Productivity Advantage

X. Organizational Structure XI. Information Technology

XII. Knowledge Transfer Problem

XIII.14 Problem Of Bottleneck XIV.In Case Of Wrong Predication & Forecasting XV. Demand Patterns XVI.Strikes & Lockout XVII.To Reduce Extra Cost XVIII.Break-up With 3pl & 4pl Partners

XIX.Transportation Cost
XX. Warehousing Cost

XXI.Concentrate On Core Competency XXII.Improved Customer Service XXIII.Quick Entry in Markets XXIV.Management change XXV. Repair XXVI.Bullwhip Effect

STRATIGIC DECESION ON CORE COMPETENCIES

What is core competency you dont need to outsource second circle essential but not core is that part of production In third circle you should also need to analyze, But at that type your decision your secession is more related to outsource

MAE BUY EVALUTION PROCESS

Preparation: Team creation and appointment of the team leader Identifying the product requirements and analysis Team briefing and aspect/area destitution 2. Data Collection Collecting information on various aspects of make-or-buy decision Workshops on weightings, ratings, and cost for both make-or-buy

3. Data Analysis Analysis of data gathered

4. Feedback Feedback on the decision made By following the above structured process, the organization can make an informed decision on make-or-buy. Although this is a standard process for making the make-or-buy decision, the organizations can have their own varieties.

OUT SOURCE YES/NOT

Flexibility Dependency Strategy Organization Product characteristics

Financial