“To produce or not to

produce ?”That is the real

question

LOOK AT THE SHORT LIST BELOW – ALL OF WHICH ARE PRODUCTS THAT THE

SCHOOL OFFERS, SOME WE ‘BUY’ SOME WE ‘MAKE’ – IDENTIFY WHICH ARE

WHICH AND THEN TRY JUSTIFY EACH.

SUMMER CARNIVAL

CAFETERIA

SCHOOL UNIFORMS

I have used the school as an example because it is the business we are all familiar with, but it is not the best. We will do more later on.

Deciding whether to ‘make’ or ‘buy’ is a decision and therefore any of the relevant Decision making tools studied earlier can and should be used eg

Eg investment appraisals, breakeven analysis, ishikawa fishbone, decision tree, SWOT PEST, Lewin Force Field, Cost Benefit Analysis.. etc

In particular though for quantitative purposes we create 2 simple formulaes

COST TO BUY : = Price x Quantity

And then we compare that with

COST TO MAKE : = [total] Fixed Costs + Total Variable Costs

Variable Cost per unit x # of units

And if CTB > CTM , then we seriously consider the MAKE option , and vice versa

Some Case Studies p 280 - 282