The document discusses options for ABC to either make or buy the material Kettoxin from external suppliers. Making would involve acquiring another company (OPG) or setting up new production, while buying would mean purchasing from an existing supplier like Barnes. Both options have pros and cons related to costs, quality control, capacity, and innovation. The document recommends that ABC buy from Barnes in the short term due to lower costs, but consider making internally in the long term for reliability and independence from suppliers. It identifies several factors that need further investigation and analysis to make the optimal sourcing decision.
The document discusses options for ABC to either make or buy the material Kettoxin from external suppliers. Making would involve acquiring another company (OPG) or setting up new production, while buying would mean purchasing from an existing supplier like Barnes. Both options have pros and cons related to costs, quality control, capacity, and innovation. The document recommends that ABC buy from Barnes in the short term due to lower costs, but consider making internally in the long term for reliability and independence from suppliers. It identifies several factors that need further investigation and analysis to make the optimal sourcing decision.
The document discusses options for ABC to either make or buy the material Kettoxin from external suppliers. Making would involve acquiring another company (OPG) or setting up new production, while buying would mean purchasing from an existing supplier like Barnes. Both options have pros and cons related to costs, quality control, capacity, and innovation. The document recommends that ABC buy from Barnes in the short term due to lower costs, but consider making internally in the long term for reliability and independence from suppliers. It identifies several factors that need further investigation and analysis to make the optimal sourcing decision.
The document discusses options for ABC to either make or buy the material Kettoxin from external suppliers. Making would involve acquiring another company (OPG) or setting up new production, while buying would mean purchasing from an existing supplier like Barnes. Both options have pros and cons related to costs, quality control, capacity, and innovation. The document recommends that ABC buy from Barnes in the short term due to lower costs, but consider making internally in the long term for reliability and independence from suppliers. It identifies several factors that need further investigation and analysis to make the optimal sourcing decision.
Group 6: Margarida TENENTE, Michaela NOVOTNA, Patricia GUHT, Pranav GOYAL
Options in front of ABC MAKE Produce Kettoxin Green-field Acquire OPG Weak financial position of OPG Lower Valuation
BUY Purchase Kettoxin from another supplier: BARNES Volume capacity does not meet the demand of ABC Other suppliers must be considered as well
Strategic decision making:
Decide on most efficient use of resources Optimize purchasing activities considering production, cost and risk constraints Long-term decision
1 Criteria Make Buy Cost Initial investment + ROI Price of the material Sourcing risk (reliability and flexibility of the supplier) Production directly at the production site Transportation cost and time Quality Meets the needs of ABC Difficult quality control Innovation Requires further investments Covered by the supplier Volume capacity Flexible Based on contract Competitive advantage Integration of activities, economies of scale Negotiation with suppliers Control Control over quality, innovation and volume, Environmental, work safety and social standards Limited control Criteria Used for the Evaluation 2 Decision to Make PROS (+) CONS (-) Independence from suppliers reduction of sourcing risk and direct control over the product
Reduction of transportation cost
Volume flexibility directly fits the ABCs demand
Quality control over the production
Innovation can lead to new competitive advantage Initial investment to acquire OPG and investment into new technology
Lack of knowledge in the production of Kettoxyne
Decision to BUY - Contract with Barnes PROS (+) CONS (-) Lower cost possible cost savings and no initial investment
Offer of new technology without further investments into innovation
Possibility of creating a strategic partnership
Supplier not exclusive for ABC might result in lack of reliability or/and flexibility of the supplier
Maximum volume capacity of Barnes, does not cover the demand of ABC
No protection of know-how intellectual property concerns Recommendations for ABC SHORT-TERM: LONG-TERM BUY from BARNES
Improved contract conditions Financially most attractive Capacity is smaller than ABCs demand
MAKE
With current traditional process: Independence Reliability of supply
3 Quality of the product Financial Figures (prices, transportation costs, cost of acquiring OPG etc.) to estimate profitability - considering financials it would be possible to estimate whether all 3 facilities are necessary; Barnes reputation and competitors; Future capacity; Market research (innovation, materials, processes)
Elements for further investigation 4 Costs it would help to make the decision whether to buy or make comparing the prices
Uncertainty: Market & know how Quality control Innovations Production capacity Future demand forecast
Common problems to come to conclusion 5 Purchasing Role 6 High Material Costs
Cost Savings through efficient buying
High financial stakes
Market Expertise Technical Expertise Negotiation Skills Supplier Management Legal Expertise Successful Implementation 7 GOAL !! Quality Control Involve Purchasing Department Relations with Barnes and other Suppliers Capacity Control