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• *Process of gathering and organizing data about product requirements and analyzing them against available alternatives including the purchase or internal manufacture of the product.
• Analysis should include: ◦ Both indirect and direct costs ◦ Prospective as well as the immediate needs of the performing organization.
For example:
• Whether a capital goods item can be used for other current or future projects of the organization (ongoing need of the item) • Additional capacity is available for use within the organization • Proprietary or business critical activity, which is core business for the company (e.g., designing of chips in a chip manufacturing company)
• Available contract types should also be considered during the buy analysis.
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International trainer ENG . Hassan Shalaby
Act of making a strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier).The most important factors to consider are part of quantitative analysis, such as the associated costs of production and whether the business has the capacity to produce at required levels.
The make or buy decision is the very first assessment mad in the purchasing process and often, the most important decision made by the company.
At first glance, it seems like a pretty straightforward decision, but think about this a minute. Whether you do something yourself, or hire someone to do it for you, actually defines your company and how it will operate.
answer
A) is purchasing goods (buy)
B) is manufacturing goods (make)
When you are manufacturing a product, you will need several components. The components could be manufactured in-house or could be outsourced.
In such a case an analysis is made based on costing (direct as well as indirect), skill, expertise, delivery schedule of final product in order to decide which components are to made in-house and which components to be outsourced
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