• The company is currently assessing a make versus buy decision.
• The company currently makes product line “A” using proprietary technology. Its variable cost/unit is $10, and its fixed cost allocation of overhead based on producing 10,000/yr is $20/unit, for a total standard cost of $30/unit.
• The company also makes 3 other completely different and separate product lines on different equipment.
• The company has a quote from an outside vendor for this product A, for $18/unit.

Assignment:

• Given the data presented, what criteria would you use to evaluate the make versus buy decision that faces you?
• As a company’s managers create the optimum supply chain, there are many criteria that must be weighed, and in some cases, trade-offs are made. List at least 5 trade-off type decisions that the firm’s managers would have to make to establish the optimum supply chain. Include why it is a trade-off and the added information that you would need to actually make the best choice.

The following is an example of a trade-off:

• Should the manufacturing plant be located closer to its raw material vendors or its customer base? Why?
• Make up a checklist that a company’s vendor certification team should fill out when it visits a vendor prior to certifying them. What are the pros and cons of installing a vendor certification program?