Procurement Management Make-or-Buy Analysis
Assignment 1: Make-or-Buy Decision Analysis
Jacqueline M. Oxendine
PMAN 641 – Project Procurement Management
Professor Randall Napier
University of Maryland University College
February 13, 2011
Table of Contents Introduction 3 Methods of Make-or-Buy Decision Analysis 3 Hurdles to Overcome in the Make-or-Buy Decision-Making Process 9 Conclusion 11 References 12
Assignment #1: Make-or-Buy Decision Analysis All projects involve the need to determine whether the project work will be done in-house, external to the organization (outsourced), or a combination of the two. This is called “make-or-buy analysis” and is an essential part of project planning, as well as a tool/technique integral to procurement planning (Project Management Institute, 2008). A “make-or-buy” decision must be made for all major segments of projects work before the project plan can be completed (these can be refined later in more depth in the initial stages of the project).
This paper examines various decision analysis methods that can be used to determine whether to make or buy an item, whether it is a tangible good or service. Factors that can impact the ability to make a timely and accurate decision will also be analyzed.
Methods of Analysis Used in Make-or-Buy Decision Analysis
Prior to doing any analyses, all of the choices or alternatives for that segment of project work should be determined, that is, the organization should lay out the (a) various ways the work could be “made” internally, (b) options (sources and methods) for external procurement, or (c) hybrids of the two. There are several broad categories of analysis that should be performed in order to arrive at a make-or-buy decision.
Cost Analysis
There are a number of different types of cost analysis an organization may wish to employ to contribute to the make-or-buy decision. The type of analysis used will depend on the buyer and/or sellers objectives and concerns. In addition, there are also
Jacqueline M. Oxendine
PMAN 641 – Project Procurement Management
Professor Randall Napier
University of Maryland University College
February 13, 2011
Table of Contents Introduction 3 Methods of Make-or-Buy Decision Analysis 3 Hurdles to Overcome in the Make-or-Buy Decision-Making Process 9 Conclusion 11 References 12
Assignment #1: Make-or-Buy Decision Analysis All projects involve the need to determine whether the project work will be done in-house, external to the organization (outsourced), or a combination of the two. This is called “make-or-buy analysis” and is an essential part of project planning, as well as a tool/technique integral to procurement planning (Project Management Institute, 2008). A “make-or-buy” decision must be made for all major segments of projects work before the project plan can be completed (these can be refined later in more depth in the initial stages of the project).
This paper examines various decision analysis methods that can be used to determine whether to make or buy an item, whether it is a tangible good or service. Factors that can impact the ability to make a timely and accurate decision will also be analyzed.
Methods of Analysis Used in Make-or-Buy Decision Analysis
Prior to doing any analyses, all of the choices or alternatives for that segment of project work should be determined, that is, the organization should lay out the (a) various ways the work could be “made” internally, (b) options (sources and methods) for external procurement, or (c) hybrids of the two. There are several broad categories of analysis that should be performed in order to arrive at a make-or-buy decision.
Cost Analysis
There are a number of different types of cost analysis an organization may wish to employ to contribute to the make-or-buy decision. The type of analysis used will depend on the buyer and/or sellers objectives and concerns. In addition, there are also
References: Burt, D., Dobler, D., & Starling, S. (2003). World Class Supply Management. McGraw-Hill. Cost-benefit analysis. (2011, January). Retrieved February 13, 2011, from Wikipedia: http://en.wikipedia.org/w/index.php?title=Cost-benefit_analysis&action=history Cost-effectiveness analysis Economic impact analysis. (2011, February). Retrieved February 13, 2011, from Wikipedia: http://en.wikipedia.org/w/index.php?title=Economic_impact_analysis&action=history Fleming, Q HUBZone program faces economic uncertainties. (2011, January 31). Retrieved February 13, 2011, from Georgia Tech Procurement Assistance Center: http://gtpac.org/tag/hubzone/ HUBZone Program Overview Inman, R. A. (n.d.). Make-or-buy analysis. Retrieved February 12, 2011, from Encyclopedia of Management: http://www.enotes.com/management-encyclopedia/make-buy-decisions Mulcahy, R Project Management Institute. (2008). A Guide to the Project Management Body of Knowledge (4th ed.). Newtwon Square, PA: Project Management Institute, Inc. Understanding the HUBZone Program. (n.d.). Retrieved February 13, 2011, from SBA.gov U.S. Small Business Administration: http://www.sba.gov/content/understanding-hubzone-program White, J