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  • Economics - Supply N Demand

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    cpsharma15
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    This document outlines a decision tree for manufacturing gas detection devices. It considers whether components are standardized or complex and whether it is cheaper to outsource or produce them in-house. For standardized components with no competitive advantage, it is best to outsource through contracts to lower costs. For complex components that provide unique features, it is better to vertically integrate production to ensure timely manufacturing. The document provides frameworks for assessing short or long term contracting strategies based on the component types.

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    supply

    Original Title

    Economics _ supply n demand

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    This document outlines a decision tree for manufacturing gas detection devices. It considers whether components are standardized or complex and whether it is cheaper to outsource or produce them in-house. For standardized components with no competitive advantage, it is best to outsource through contracts to lower costs. For complex components that provide unique features, it is better to vertically integrate production to ensure timely manufacturing. The document provides frameworks for assessing short or long term contracting strategies based on the component types.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    20 views5 pages

    Economics - Supply N Demand

    Uploaded by

    cpsharma15
    This document outlines a decision tree for manufacturing gas detection devices. It considers whether components are standardized or complex and whether it is cheaper to outsource or produce them in-house. For standardized components with no competitive advantage, it is best to outsource through contracts to lower costs. For complex components that provide unique features, it is better to vertically integrate production to ensure timely manufacturing. The document provides frameworks for assessing short or long term contracting strategies based on the component types.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 5

    $

    $
    MC2

    MC1

    MB2
    MB1

    L1

    Contract duration

    Graph1: Short term contract

    L2

    Graph 2: Long term contract

    Contract duration

    Manufacturing of gas detection device

    Complex
    component
    (printed board)

    Standardized
    components

    Cost to
    outsourced
    << cost to
    product

    Standardized
    material, no
    competition
    edge, in bulk

    Contracts (with suppliers)

    Cost to
    make <<
    to buy ,
    low
    maintena
    nce cost

    Speedy
    manufact
    uring of
    unit as
    per
    requireme
    nt

    Vertical integration

    Productio
    n of
    specialize
    d product
    (competit
    ion edge)

    Manufacturing of gas detection device

    Standardized Components

    Complex Components (printed


    board assembly)

    Cost to buy
    <<<
    Cost to make

    YES

    Contracts(with
    supplier/outsourced
    )

    Standardized
    components(lower
    value)
    Standardized
    material, no
    competition
    edge, in bulk

    Vertical
    integration
    NO

    Unique
    feature/com
    petition edge

    Manufacture
    of
    component
    as per
    required time

    NO

    Contracts(with
    supplier/outsourced
    )

    Complex/specialized
    component(printed
    board)
    Cost to buy
    >>>
    Cost to make

    YES

    Vertical
    integration
    Pricing of
    product

    YES

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