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How Make-Or-Buy Analysis Can Be Most Effectively Used?

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1) Describe how make-or-buy analysis can be most effectively used?

A make or buy analysis is a general management technique used to determine whether particular work can be accomplished by the project team or must be purchased from outside sources. Sometimes capability may exist within the project organization, but may be committed to working on other projects, in which case the project may need to source such effort from outside the organization in order to meet its schedule commitments. Budget constant may also influence make or buy decisions. If a buy decision is to be made, then a further decision of whether to purchase or leas is also made. A make or buy analysis should consider all related costs; both direct costs as well as indirect support costs ("PMBOK Guide," 2008, p. 321).

There are always options in the way the end item can be obtained. Feasible procurement alternatives include make or buy, leaser buy, buy or rent, and lease or rent. Buying domestic or international is also of critical importance, especially to the United Auto Workers Union. According to Kerzner (2009), factors involving the make or buy analysis are shown below:

The make Decision: 1) Less costly ( but not always!) 2) Easy integration of operations 3) Utilizing existing capacity that is idle 4) maintain direct control 5) Maintain design/production secrecy 6) Avoid unreliable supplier base 7) Stabilize existing workforce

The buy decision: 1) Less costly (but not always!!) 2) Utilize skills of suppliers 3) Small volume requirement (not cost effective to produce) 4) Having limited capacity or capability 5) Augment existing labor force 6) Maintain motile sources (qualified vendor list) 7) Indirect control . (p. 844).



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