What Factors Must a Firm Consider While Addressing the...

Q: 3 (A) What factors must a firm consider while addressing the make or buy decision? Ans: International Operations management and corporate strategy: Operations management of an International business needs to be integrated with the firm’s corporate strategy. The central role of operations management is to create the potential for achieving superior value for the firm. If operations management takes Rs. 100 worth of inputs and brings out product worth Rs. 150, it has crated considerable value for the firm. However, if it requires Rs. 140 worth of inputs to obtain the same output, value creation does take place, but is very little. Therefore, the way in which the firm structures and manages its operations management function both†¦show more content†¦The arguments that support vertical integration and the risks associated with outsourcing. The risks of outsourcing are incidentally the supportive arguments for any decisions to make. Reasons for Outsourcing: 1. Strategic flexibility-switching orders between suppliers as circumstances dictate 2. Cost reduction 3. Focus on core competencies 4. Minimize inventory, materials handling, and other non-value-added costs. 5. Reduce development and production cycle times 6. Improve efficiency 7. Possibility of obtaining orders from the country where suppliers are located. Risks of Outsourcing 1. Loss of control 2. Conversion costs 3. Possibility of being tied to obsolete technology 4. Exposure to supplier risks; financial strength, loss of commitment to outsourcing, slow implementation, promised features not available, lack of responsiveness poor quality 5. Loss of protection over proprietary technology 6. Denial of the possibility of specialized investments Trade-offs is always involved in make or buys decisions. The benefits of manufacturing components in house seem to be very strong when highly specialized assets are involved, when firm is simply more efficient than external suppliers at performing a particular activity. When these conditions are not present, the risks of strategic inflexibility and organizational problems suggest that it may be better contract out manufacturing components to independent suppliers. Since issues of strategic flexibilityShow MoreRelatedSupply Mgmt Case Studies1781 Words   |  8 PagesCase Study #1 - Sunspot, Inc 1. What are the most likely benefits of forming strategic supply alliances with Sunspot’s key suppliers? A strategic alliance between Sunspot and its key suppliers will result in a relationship based on trust. It’s key for both parties to develop and manage this â€Å"institutional† trust or the alliance will fail. Trust will facilitate communication which will lead to less errors and higher quality, faster development times, and lower costs. 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