INFORMATION CHANGE THE WORLD

International Journal of Education and Management Engineering(IJEME)

ISSN: 2305-3623 (Print), ISSN: 2305-8463 (Online)

Published By: MECS Press

IJEME Vol.12, No.1, Feb. 2022

An Empirical Study on Make-or-buy Decision Making

Full Text (PDF, 573KB), PP.19-28


Views:4   Downloads:0

Author(s)

Monika Arora, Anand Kumar

Index Terms

Inhouse, Outsource, Enterprise, profitability, make-buy

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

Cite This Paper

Monika Arora, Anand Kumar, "An Empirical Study on Make-or-buy Decision Making", International Journal of Education and Management Engineering (IJEME), Vol.12, No.1, pp. 19-28, 2022. DOI: 10.5815/ijeme.2022.01.03

Reference

[1]Veugelers, R., & Cassiman, B. (1999). Make and buy in innovation strategies: evidence from Belgian manufacturing firms. Research policy, 28(1), 63-80.

[2]Arnold, U. (2000). New dimensions of outsourcing: a combination of transaction cost economics and the core competencies concept. European journal of purchasing & supply management, 6(1), 23-29.

[3]Azevedo, A. L., & Sousa, J. P. (2000). Order planning for networked make-to-order enterprises—a case study. Journal of the Operational Research Society, 51(10), 1116-1127.

[4]Tayles, M., & Drury, C. (2001). Moving from make/buy to strategic sourcing: the outsource decision process. Long range planning, 34(5), 605-622.

[5]Anderson Jr, E. G., & Parker, G. G. (2002). The effect of learning on the make/buy decision. Production and Operations Management, 11(3), 313-339.

[6]Lammers, M. (2004). Make, buy or share. Wirtschaftsinformatik, 46(3), 204-212.

[7]Weidenbaum, M. (2005). Outsourcing: Pros and cons. Business horizons, 48(4), 311-315.

[8]Gilbert, S. M., Xia, Y., & Yu, G. (2006). Strategic outsourcing for competing OEMs that face cost reduction opportunities. IIE transactions, 38(11), 903-915.

[9]Ruffo, M., Tuck, C., & Hague, R. (2007). Make or buy analysis for rapid manufacturing. Rapid Prototyping Journal.

[10]Arya, A., Mittendorf, B., & Sappington, D. E. (2008). The make-or-buy decision in the presence of a rival: strategic outsourcing to a common supplier. Management Science, 54(10), 1747-1758.

[11]McIvor, R., Humphreys, P., McKittrick, A., & Wall, T. (2009). Performance management and the outsourcing process. International Journal of Operations & Production Management.

[12]Ekelund, M., & Pettersson, E. (2010). Make or buy?: Developing a generic framework for make-or-buy decisions at Cardo AB.

[13]Mudambi, S. M., & Tallman, S. (2010). Make, buy or ally? Theoretical perspectives on knowledge process outsourcing through alliances. Journal of management studies, 47(8), 1434-1456.

[14]Dekkers, R. (2011). Impact of strategic decision making for outsourcing on managing manufacturing. International Journal of Operations & Production Management.

[15]Martens, B., & Teuteberg, F. (2012). Decision-making in cloud computing environments: A cost and risk based approach. Information Systems Frontiers, 14(4), 871-893.

[16]Danese, P. (2013). Supplier integration and company performance: A configurational view. Omega, 41(6), 1029-1041.

[17]Bianchi, M., Frattini, F., Lejarraga, J., & Di Minin, A. (2014). Technology exploitation paths: Combining technological and complementary resources in new product development and licensing. Journal of Product Innovation Management, 31, 146-169.

[18]Mensen, A., & Atan, Z. (2014). Effective adjustments on the production plan as a response to short term demand fluctuations.

[19]Hübner, A., Holzapfel, A., & Kuhn, H. (2015). Operations management in multi-channel retailing: an exploratory study. Operations Management Research, 8(3), 84-100.

[20]Moschuris, S. J. (2015). Decision-making criteria in tactical make-or-buy issues: an empirical analysis. EuroMed Journal of Business.

[21]Sillanpää, I., Shahzad, K., & Sillanpää, E. (2015). Supplier development and buyer-supplier relationship strategies–a literature review. International Journal of Procurement Management, 8(1-2), 227-250.

[22]Cheng, Y. S., Fung, K. Y., Ng, K. M., & Wibowo, C. (2016). Economic analysis in product design—A case study of a TCM dietary supplement. Chinese journal of chemical engineering, 24(1), 202-214.

[23]Sardar, S., Lee, Y. H., & Memon, M. S. (2016). A sustainable outsourcing strategy regarding cost, capacity flexibility, and risk in a textile supply chain. Sustainability, 8(3), 234.

[24]Tomasiello, P. (2016). Success in an omni-channel world. MHD Supply Chain Solutions, 46(2), 24-27.

[25]Pratama, M. A., & Rosyidi, C. N. (2017, November). Make or buy decision model with multi-stage manufacturing process and supplier imperfect quality. In AIP Conference Proceedings (Vol. 1902, No. 1, p. 020026). AIP Publishing LLC.

[26]Kim, Y., & Choi, T. Y. (2018). Tie strength and value creation in the buyer-supplier context: A U-shaped relation moderated by dependence asymmetry. Journal of Management, 44(3), 1029-1064.

[27]Meng, X., Yao, Z., Nie, J., & Zhao, Y. (2018). Make or buy? It is the question: A study in the presence of carbon tax. International Journal of Production Economics, 195, 328-337.

[28]Zhang, X., Zhang, L., Fung, K. Y., & Ng, K. M. (2019). Product design: Incorporating make-or-buy analysis and supplier selection. Chemical Engineering Science, 202, 357-372.

[29]Rosyidi CN 2020 Make or Buy Decision with Price and Quality Dependent Demand Lecture Notes in Mechanical Engineering

[30]Rosyidi, C. N. (2021, March). A Framework of Integrated Sustainable Make or Buy Decision Model. In IOP Conference Series: Materials Science and Engineering (Vol. 1096, No. 1, p. 012004). IOP Publishing.

[31]Shang, M. Z., & McEwan, K. (2021). The make‐or‐buy decision of feed on livestock farms: Evidence from Ontario swine farms. Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie.

[32]Barthe΄lemy, J., 2003. The seven deadly sins of outsourcing. Academy of Management Executive 17(2), 87–98.

[33]Quelin, B. V., Duhamel, F., 2003. Bringing together strategic outsourcing and corporate strategy: outsourcing motives and risks. European Management Journal 21(5), 647–661.

[34]N. M. Tahir, Adam N. Ausat, Usman I. Bature, Kamal A. Abubakar, Ibrahim Gambo, "Off-line Handwritten Signature Verification System: Artificial Neural Network Approach", International Journal of Intelligent Systems and Applications(IJISA), Vol.13, No.1, pp.45-57, 2021. DOI: 10.5815/ijisa.2021.01.04

[35]Anozie Onyezewe, Armand F. Kana, Fatimah B. Abdullahi, Aminu O. Abdulsalami, "An Enhanced Adaptive k-Nearest Neighbor Classifier Using Simulated Annealing", International Journal of Intelligent Systems and Applications(IJISA), Vol.13, No.1, pp.34-44, 2021. DOI: 10.5815/ijisa.2021.01.03

[36]Hossein Mohammadinejad, Fateme Mohammadhoseini, "Privacy Protection in Smart Cities by a Personal Data Management Protocol in Blockchain", International Journal of Computer Network and Information Security(IJCNIS), Vol.12, No.3, pp.44-52, 2020. DOI: 10.5815/ijcnis.2020.03.05

[37]Platts, K. W., & Song, N. (2010). Overseas sourcing decisions–the total cost of sourcing from China. Supply chain management: An international journal.