Strategy
This document identifies the importance of make or buy decisions for the manufacturing industry, and positions the question as central to manufacturing strategy. The key importance of technology assessment in formulating a make or buy strategy is examined, together with some practical techniques for making this assessment. Finally the issues of managing the technology base of a business are reviewed, and current research aimed at facilitating this task is described. The significance of make or buy issues for manufacturing industry
Although it is often not realized by the managers involved, make or buy decisions have a defining impact on the scope of a manufacturing business. Over a period of time their cumulative effect is to establish the boundaries of the firm, determining the level of vertical integration at which the business will operate. The span of processes and operations between raw material extraction and delivery of end product to the customer will be shaped by individual make or buy decisions whenever they arise.
For this reason make or buy is central to the manufacturing strategy of a firm, and is considered one of the principal structural decision areas1. In practice, difficulty often arises when managers are confronted with the realities and consequences of make or buy choices, (coping with business cycles, restructuring the supply base, limited investment capital, etc), in the absence of an established approach to arriving at consistent decisions. A survey carried out by the Cambridge Manufacturing Group indicated that although large UK manufacturing companies appreciated the significant of the issue, only half had defined policies and procedures, and only a third had committed resources. Further, half of the companies were taking less than a one year view when making such choices. This time scale might be considered too short for decisions with such long term consequences. However a large majority of companies,...
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