Compare the quality of the purchased item and the quality that the company could have achieved, had it made it on its own. If there is no possibility of a very wide variation, quality considerations do not weigh heavily in making a make or buy decision.
If there is a possibility of very wide variations between the two alternatives, qu9ality actor becomes crucial in making one decide either in favor of make or buy. If a better quality could result when the company produces the item on its own, and therefore takes to making it rather than buying, should probe the matter further. How is it that no supplier has taken to making the desired quality soon after a temporary period of shortages? Is the company competent to undertake the production of desired quality in its own plant?
Absence of quality desired for in the market may indicate a situation where suppliers have not thought it worthwhile to make it considering the meager, non-recurring demand for it. So economic viability of producing the desired item should also be considered by the manufacturer who takes a make decision
If the specifications of the engineering department regarding quality are more fastidious than necessary for the proper operation, or expected life for commercial standards of the item, there is room for relaxation in the specifications so that the purchase of the item as available from outside becomes possible. However, this is a matter of expert review involving value analysis.
An item for a new product is bound to be in short supply initially. But the situation is temporary. And so make or buy decision should be taken in this light, or else heavy financial commitment to making the item that results after taking make decision out of temporary shortage would be reversed after much loss.
The concern’s own production facilities should be taken into account when any make decision is taken. Are we technically competent to produce a better quality that can be bought? There must be some technical hitch, when the specialist suppliers fail to meet the desired quality standards. Is it possible for the concern to do better by overcoming the technical difficulties which even the specialist suppliers could not overcome?
Make decisions are also the outcome of a legitimate apprehension that an outsider, having no financial stake in the finished product may compromise with the quality of his supplies. When outside suppliers are chosen for supplying the components of a product there should be procedure of quality control, rigid enough to eliminate substandard components. The concern should also come forward to provide technical know how to smaller ancillary units to produce the component to desired standards. If the outside suppliers are defective, it would jeopardize sale ability of an otherwise good finished product.
Unpatented designs or processes are generally not entrusted with outsiders to protect business interests by preventing others copying them for a prolonged period of time.
Buying from outside have several reasons:
1) To take advantage of specialized activity of the buyer
2) To take advantage of quality resulting from patents or production methods that the supplier controls.
3) To introduce flexibility with respect to quality of the part being purchased.
Quality and quantity considerations differ with reference to one important issue – Quality is fair whereas it is not so with quantity. Quantity is always in a state of flux and it is related with time element. The correct quantity under given condition at a given time may not be valid at another time under changed circumstances. How much to buy – quantity is a variable whereas, what to buy assortment is not.
Considering upon the basis of quantity, the make decision is taken when the supplies are likely to be too small to interest an outsider. However, it should be considered whether the order can be large enough to interest outsiders or a corresponding large inventory can be maintained to meet production needs. It is also seen if sundry small use items can be ordered with common specifications.
It is also worthwhile to consider the economics of making a small use item on one’s own when the outsider has not thought it unprofitable to venture production on such a small scale.
Based on quantity, another decision of making rather than purchasing is the possibility of closer co-ordination between quantity produced and quantity required. PPC thus becomes an easy activity.
Quantity required may be so high that either a decision is taken to make it or to split the requirement among several suppliers. However, when the product is made with the help of dies or patterns, split purchases are ruled out completely. Each supplier in such a case cannot be given dies or patterns. Its costs are very heavy. Thus a large quantity requirement often has a slant towards make decisions.
On the contrary, an exceptionally large quantity may hamper production of the regular product line. It then becomes advisable to buy from a supplier rather than to make the item.