Strategic Make or Buy Decision Methodology for Achieving Competitive Advantage

Abstract

Make or Buy decision is becoming increasingly important as firms are globalized with branch plants around the world. In most cases, the decision making mainly depends on the cost analysis in terms that how we can make the products cheaper. However, for gaining company’s future compatibility, it is needed to con-sider not only cost aspect but also technology aspect and product operation ability from a company view. In this sense, previous researches mentioned importance and factors of the technological and operational aspect theoretically, but they are insufficient to apply the Make or Buy decision process in practice. Therefore, this paper describes a systematic methodology for Make or Buy decision to achieve company’s competitive advantage. The proposed methodology consists of three perspectives: technological, financial, and operational perspective. In technological perspective, Make/Buy decision of the product is evaluated through QFD and patent portfolio analysis. In financial perspective, Make/Buy decision of the product is evaluated by Total Cost of manufacturing. In operational perspective, optimal production is considered in Make/Buy decision. A case study of Company A, home appliance manufacturer, is performed to prove the effectiveness of the proposed methodology.