Make Or Buy Decision
A make or buy problem arises when an organization needs to make a decision about whether it should make a product or carry out an activity with its own internal resources or whether it should pay another organization to make the product or carry out the activity eg sub contract.
Make or Buy Decision where There is no limiting factor
Where no limiting factor is involved, the company will normally sub contract the making of product that will result in saving money and make internally those that would lead to extra costs if sub contracted.
Make or Buy Decision where There is a limiting factor (ie Scarce Resource)
Where a limiting factor or scarce resource is involved a different approach is adopted in the handling the computations.
From the figures computed using make or buy technique, a profit maximizing make or buy schedule can be prepared
Make or Buy Decision where There are more than one limiting factor
Where more than one scarce resource are involved, it might be possible to use linear programming to reach a decision.