The Research On Make Or Buy Decision Of Company A

The world economic history since the 20 th century is a history of deepening globalization.Since the reforming and opening up,China has gradually integrated itself into the system of global division.And now China is known as the leading "World Factory".The rise of domestic manufacturing attracted outsourcing business of a growing number of foreign brands,who built their own factories and are proud of their own production.For MNCs that have both manufacturing plants and outsourcing production,there are pros and cons for either in-house making or outsourcing.Company A has its own manufacturing plant in China.The factory is facing the rising competition of "made in China".The original products of the factory have lost their advantages and the factory is in urgent need of transformation.Meanwhile,the newly established Smart Home BU of Company A,who has recently entered the air purifier industry,is looking for reliable,efficient,flexible and economic supply chain to survive in the highly competitive market.On the other hand,the supply chain of domestic air purifier industry is highly mature,the excellent OEM manufactures have been working in the industry for many years.Usually,they could provide lower cost,faster delivery cycle and more suitable products.The decision of In-house making or outsourcing has become a dilemma to Company A.Previous researches mainly focused on building up various decision-making matrices,which were based on the enterprise's core value,market environment,internal needs of the enterprise.And mainly the consideration of overall costs including transaction costs in specific decisions.While in the real world,the decision-making is much more complicated.This paper introduces the internal and external environment of company A,as well as the process of make or buy decisions of three NPI projects.Through the analysis of the decision-making process,it is found that Company A mainly considers three factors in this decision: short-term financial benefits,control over suppliers,and expectations for the future.In addition,Company A's own factories play an active selection role in decision-making is also proposed.On the basis of the above analysis,the key issues in the decision making are found: core business not clearly defined,lack of cross-departmental coordination mechanism,short tenure of senior management,and the procurement department is not independent.At the end of this paper,the improvement strategies are also proposed,including defining core competencies,defining outsourcing strategies,establishing cross-departmental coordination mechanisms,adjustment on organizational structure and keep reasonable tenure of senior managers.In the past,enterprises were always pursuing advantages in cost,quality,delivery and service of supply chain.Now,as a key part in the whole value chain,the competitiveness of supply chain comes from systematic information sharing,relationship between enterprises and coordination.Both inhouse making and outsourcing have advantages and disadvantages.For different enterprises and products,different strategies and tactics should be applied to enhance the competitiveness of supply chain,thus boosts the competitiveness of the enterprises.In addition,in a dynamic environment,every enterprise must regularly review and adjust its strategies and tactics to maintain competitiveness.It is hoped that the strategy provided in this paper could be theoretical and decision-making supporting for Company A's future decision.It is also hoped that this paper be reference for peers who are troubled by similar decision-making.