Make or buy strategy decision making in supply quality chain The increasing number of competitors both in local and international market forces the organisations to develop various market strategies especially in creating and capturing customer’s loyalty. One of way is through improvement of supply chain. Consequently, to reduce cost and improve service levels, effective supply chain strategies must take into account the interactions at the various levels in the supply chain. ‘Make’ or ‘Buy’ decision can be seen in supplier selection process. In journal studies the effective strategy ‘Make’ or ‘Buy’ should be adapt to minimize the total costs of supply chain. ‘Make’ decision refers to the condition in that supply chain aims at integrating plant and supplier operations, controlling supplier quality, considering lead time, transportation, and warehousing costs. ‘Buy’ decision refers to condition in that lack of insourcing dexterity can be seen. The author generated two different cases that follow different strategic decisions two-echelon supply chain design and supplier selection strategic and solved with few examples respectively. A special model is separately formulated for each case. The difference among the models is in their supply strategy of supply chain Computational experiments carried out show the efficiency of the proposed models for making decision about selecting the best strategy. In this paper, two different cases are defined and modelled by considering ‘Make’ or ‘Buy’ strategy, which deals with strategic decisions of making or buying. First case the outsourcing suppliers are chosen for providing all raw materials, Buy decision. Second case the insourcing suppliers are chosen for providing all raw materials, Make decision. A supply chain has a three manufacturing plants that produces a product, which is composed of three raw materials. These three raw materials are supplied by six potential suppliers of whom only two suppliers are chosen. The manufacturing plants deliver their products to 5 customers. The supply chain aims at obtaining the optimal values of decision variables in a time horizon of three periods. Sample of criteria as supply chain costs, data about raw materials, plant capacities, the purchasing costs of different raw material, the shipment costs between the suppliers and the plants, the shipment costs between the plants and the customers, customer demands, the defective rate of raw material (in Buy decision), the minimum suppliers’ cost of quality (in Make decision) and The failure rate of raw material (in Make-decision) are calculated using GAMS optimization software and tabulated.
The results showing selecting second and third supplier in ‘Make’ decision generates lower costs than selecting second and sixth supplier in ‘Buy’ decision on supply chain. Registered failure rate of raw materials can be reduced if prevention and appraisal cost taken into consideration. This result indicates the cost in outsourcing will be higher than cost associated with insourcing supplier. This can be conclude in a assumption of failure rate of raw materials are same for both outsourcing and insourcing suppliers.
Seyedhosseini, S. M., Mohammadipour, F., & Ashtiani, M. G. (2012). Make or buy strategy decision making in supply quality chain International of Industrial Engineering Computations 3(3), 413-422.
Make or Buy: A comparative assessment of organizations that develop software internally versus those that purchase software
In this technological era, most of the organization approaches major software investments. Many organizations prefer to buy the software than create it internally. There is still few organizations stick to their customized software and maintain their heritage of developing software. This study differentiate the characteristic of organizations that favours ‘make’ than those favours ‘buy’ software. This study also investigates the practice of outsourcing and its effect on...
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