Developing a framework for make-or-buy decisions

The make-or-buy question represents a fundamental dilemma faced by many companies. Companies have finite resources and cannot always afford to have all manufacturing technologies in-house. This has resulted in an increasing awareness of the importance of make-or-buy decisions. This paper reports on the development of a make-or-buy framework to address the make-or-buy decision for either a specific individual part or family of parts. Firstly, a literature review of the principal make-or-buy approaches is discussed. Secondly, the development of a make-or-buy framework is described and the framework is explained and illustrated using case studies. Thirdly, the operationalisation of the framework is outlined. The paper concludes with a discussion of its contribution to both the academic understanding of the subject, and the improvement of industrial practice.

Make-buy decisions in the face of technological change: does industry clockspeed matter?

Some evidence in the area of make-buy decisions for new technologies suggests that it is a good idea for a company to pursue a fairly rigorous ''make'' policy in the early days of a potentially disruptive innovation. Other studies prescribe exactly the opposite, promoting instead a ''buy'' strategy. This paper seeks to bridge the gap between these perspectives by suggesting that both strategies are valid, but that they are most successfully applied in different market environments. The ''make'' prescription may be more suited to either extremely fast or extremely slow rates of technological change, while a ''buy'' strategy might be more appropriate in market sectors where technologies evolve at a medium pace. This paper highlights the importance of industry clockspeed and supplier relationships in make-buy decisions for new technologies, and puts forward two new hypotheses that require empirical testing.

Make or buy decision in the context of manufacturing strategy

This paper describes an approach to structuring the make or buy decision process, basing it firmly in the context of an overall manufacturing strategy. The work has been carried out jointly by the University of Cambridge Manufacturing Engineering Group and Lucas Industries. A review of the current state of ideas surrounding the linked issues of vertical integration and make or buy decisions is presented. Important features of the approach include identification of core manufacturing capabilities, assessment of the role of technology in manufacturing, the development of a cost model to support make or buy decisions and a review of the strategic implications of varying degrees of vertical integration.

Farmers' purchase agreement for deep well pumps /

Mode of access: Internet.

Make-Buy Decisions in the Face of Radical Innovations

Make-buy decisions are an important aspect of the overall strategic plans for most firms, and the introduction of a new and potentially radical technology into an industry should therefore be a cue for managers to review their make-buy policies. Should a company make in-house the components and processes underpinning the technology, or should it buy them from an outside supplier? Earlier attempts to answer this question may have failed to agree on a single verdict because they have overlooked two important market forces: supplier relations and industry clockspeed. Based on an intensive three-year study at the University of Cambridge which analyzed supply chain management practices from a broad range of manufacturers around the world, this book helps to resolve this classic technology outsourcing dilemma and gives managers the tools they will need to determine if they should make or buy the components and processes that go into a potentially radical innovation.

What the hare can teach the tortoise about make-buy strategies for radical innovations

Purpose of this paper – The purpose of this investigation is to help establish: whether or not strong relationships between suppliers and customers improve performance; and if prescriptive frameworks on outsourcing radical innovations are dependent on industry clockspeed. Design/methodology/approach – A survey of UK-based manufacturers, followed by a statistical analysis. Findings – Long-term supplier links seem not to play a role in the development of radical innovations. Moreover, industry clockspeed has no significant bearing on the success or failure of any outsourcing strategy for radically new technologies. Research limitations/implications – Literature about outsourcing in the face of radical innovation can be more confidently applied to industries of all clockspeeds. Practical implications – Prescriptions for fast clockspeed industries should be applied more broadly: all industries should maintain a high degree of vertical integration in the early days of a radical innovation. Originality/value – Prior papers had explored whether or not a company should outsource radical innovations, but none had determined if this is equally true for slow industries and fast ones. Therein lies the original contribution of this paper.