According to the CPIM Exam Content Manual, a make-or-buy decision is a strategic decision that involves choosing between manufacturing a product or service internally or purchasing it from an external supplier1. A make-or-buy decision is based on a cost-benefit analysis that considers various factors, such as quality, cost, capacity, lead time, technology, and competitive advantage2.
Some of the potential reasons to make instead of buy a product may include:
Maintain quality: Making a product internally may allow the firm to control and ensure the quality standards of the product, which may affect customer satisfaction and loyalty. Buyinga product from an external supplier may involve quality risks or uncertainties, especially if the supplier is located in a different country or has different quality systems3.
Reduce cost: Making a product internally may reduce the total cost of ownership of the product, which includes not only the purchase price, but also the costs of transportation, inventory, inspection, warranty, and maintenance. Buying a product from an external supplier may incur higher total costs due to these factors.
Keep confidential processes within the firm: Making a product internally may protect the firm’s proprietary or confidential processes that give it a competitive edge in the market. Buying a product from an external supplier may expose the firm’s processes to potential imitation or leakage.
Therefore, the correct answer is C. maintain quality, reduce cost, and keep confidential processes within the firm.
References:
CPIM Exam Content Manual
Make-or-Buy Decision Explained: How to Make Outsourcing Decisions
Make or Buy Decision - What Is It, Examples, Factors, Advantages
Make-or-Buy Decision - Overview, How It Works, Triggers
Make or Buy Decision - Definition & Examples | Marketing Tutor
