You are a manager for a pet supplies manufacturer. This responsibility requires
ID: 2601680 • Letter: Y
Question
You are a manager for a pet supplies manufacturer. This responsibility requires you to create budgets, make pricing decisions, and analyze the results of operations to determine if changes need to be made to make the company more efficient. Using the workbooks and budget variance report you created for you will make recommendations about possible changes. You will look at the possibility of making some components of one product instead of buying them, and you will determine how to evaluate the company as a whole and managers in particular. You will create a budget analysis detailing your findings.
b) “Make” or “Buy”: Suppose you were to consider buying a particular component of one of your products or making the product in-house.
1. What factors would you consider in such a “make” or “buy” decision? 2. What are the ethical considerations of your decision? What implications could this decision have?
2. For each option (i.e., to “make” or to “buy”), how will this impact the efficiencies of your operation? c) Nonfinancial Performance Measures
3. What suggestions would you make for nonfinancial per formance measures that the company should adopt? What are the pros and cons of each suggestion ?
4. What are the ethical considerations of your suggestions? Explain the significance of each.
Explanation / Answer
Make or buy decision is a choice between either to make a product internally or buy it from outside. These decisions usually arrive when a firm has produced a part or product, having troubles with suppliers, or due to changing demands.
Make or buy decisions are made at strategic and operational levels of organization.
Ethical considerations would include :
1. Spare capacity exists or not : If the capacity of the equipments and the labor is underutilized then the company can go for making the product but if it's running on full capacity then putting more pressure on the resources won't be ethical.
2. Social factor: will outsourcing results in lay off of employees on a major scale? Redundancy costs should be considered.
3. Legal: will outsourcing effects contractual obligations with employees or suppliers?
4. Confidentiality: There is a risk of confidentiality if the external suppliers produces for rival companies also.
5. Specialist skills: The supplier would have done special skill that would be left unused if the product is produced in house. There is another consequence also when the in house skills and competitiveness is left underdeveloped by the use of outsourcing.
6. Alternative use of resources: outsourcing frees up resources which can then be used for more profitable business.
7. Customer reaction: Do customers differently value the in house products?
The implications of make are:
1. It would develop expertise in house.
2. Less reliance on external suppliers if they are creating troubles by interrupted supply.
3. Better customer satisfaction as the quality of the product can be customized on an economical basis.
4. This would also put extra strain on resources, and more clerical work including return filing and corporate taxation matters.
5. More Hassel in terms of management.
Implications of buy are:
1. Reliance on external suppliers.
2. Underdeveloped in house expertise and competitiveness.
3. Outsourcing would lead to lay off in workforces, redundancy costs.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.