Professional Documents
Culture Documents
MakevBuy Teachpoint FINAL
MakevBuy Teachpoint FINAL
Make v Buy
Objectives & Principles
Safety: Higher risk processes can be removed and given to specialists providing a safer
environment for staff e.g. chemical processes such as plating
Quality: Improved product quality by focusing on core capabilities and using experts for non-core
products and services
Delivery: Can alleviate poor service of existing supplier by making in-house, or conversely be a
support when bottlenecks exist through Buying
Cost: The outsource of non-core product or services can result in lower costs for the customer
than making in house
People: Provides access to skills not available in-house, enables concentration of core capability
skill set development
FEW CAPABLE
SUPPLIERS Is the competency
critical for business
SUPPLY CHAIN CAPABILITY success?
MANY CAPABLE
SUPPLIERS
NON-CORE DIFFERENTIATOR
CORE COMPETENCY
(CORE)
How?
Qualitative Factors
CORE COMPETENCY
TECHNICAL DIFFERENTIATION No technical differentiation Some differentiation in some areas of High technical differentiation providing high
cost and performance benefits to performance
Customer views competency as very Customer views that some competitors Customer reviews those with such competency
CUSTOMER PERCEPTION
common have this competency as market leaders
INTELLECTUAL PROPERTY – THREAT IP requires no protection or has little impact IP requires some protection or has IP is highly sensitive and critical to growth
TO EXISTING COMPETENCIES to future growth some impact to future growth
CRITICALLY TO END PRODUCTS OR Not critical to end product Somewhat critical impact to end Highly critical to end product performance
MARKETING EFFORTS product performance
REGULATORY REQUIREMENTS AND No regulations to acquire competence and Significant regulation and investment High regulatory environment and several years
ENTRY BARRIERS little time and investment to acquire and up to 3 years to acquire competence of investment required to acquire competence
competence
SUPPORTS WIDER BUSINESS No impact to wider business efficiency Some impact to business efficiency High impact to business efficiency
EFFICIENY
SYNERGIES WITH EXISTING No synergy with existing competencies Some synergy with existing High synergy with existing competencies
COMPETENCIES competencies
ADDED VALUE PROPORTION Minimal added value proportion <1% Significant added value proportion High added value proportion >40%
OPPORTUNITY >10%
NUMBER OF AVAILABLE SOURCES High number of approved sources available Some sources Very few or no alternative sources of supply
to supply
Very low internal and external costs to Significant internal and external transfer Very high internal and external transfer and
SUPPLIER TRANSFER COSTS
transfer costs investment costs
COST REDUCTION OPPORTUNITY High opportunity for cost reduction due to Some opportunity due to supplier cost Little opportunity for cost reduction due to
technology access and rapidly reducing cost base reducing through efficiency static cost base
base improvements
SUPPLIER PROXIMITY Supply base is mostly locally located Some local and European suppliers Supply base are all based in intercontinental
available location
SUPPLY MARKET RISKS Risk is low within supply market Some risk with supply disruption High risk and chance of supply disruption
somewhat likely
SUPPLY CHAIN COMPETITIVENESS Supplier’s cost base is more highly Supply base as competitive as internal Internally cost advantaged, cost base much
competitive compared to internally costs higher in supply base
How?
FEW CAPABLE
SUPPLIERS
Conduct at individual
SUPPLY CHAIN CAPABILITY
product level
MANY CAPABLE
SUPPLIERS
Can be triggered by a specific event e.g. high risk of supply disruption, or high
internal capacity overload.
How?
Quantitative Factors
OPERATIONAL MvB
STRATEGIC CORE Competency is listed as non-core in MvB Competency is listed as core in MvB
COMPETENCY strategy strategy
BUSINESS CASE No financial business case for producing Cost Neutral No financial business case for procuring
product in-house product
COST REDUCTION High opportunity for cost reduction by Cost Neutral High opportunity for cost reduction by in-
OPPORTUNITY outsourcing house
RISK OF SUPPLY DISRUPTION Low risk of supply disruption Medium risk High risk of supply disruption
AVAILABLE
MANUFACTURING CAPACITY No available manufacturing capacity Available manufacturing capacity Excess internal manufacturing capacity
Through quantitative analysis draw a comparison of the costs and advantages of producing
in-house versus buying through a cost benefit analysis:
Arrive at a final make or buy decision after considering both quantitative and qualitative factors to ensure
profitability is maximised.
TIVE
QUALITA
c or e ’
Strategic ‘ ATIVE
competency
? QUANTIT
osts
k Transfer c
support ris
Customer
costs
‘In-house’
on risk?
Supp ly disrupti
rocure
Costs to p
capacity &
Available
resources
N
BUY DECISIO
MAKE V
Who?