What must first be determined when doing a make-or-buy analysis?

What must first be determined when doing a make-or-buy analysis?

• A. Supplier lead times
• B. Packaging requirements
• C. Cost per unit
• D. Product quality

Answer: (D)

The essential starting point is defining the required quality and specifications of the product. In a make-or-buy analysis, you must know exactly what level of quality, performance, and any regulatory or standards criteria the final item must meet. This quality baseline lets you fairly judge whether in-house production can meet those requirements or if an external supplier can, at acceptable risk and cost. Without clear quality criteria, you might end up with a solution that fails to satisfy needs, making any later cost or lead-time comparisons irrelevant. Once quality is defined, you then weigh factors like cost per unit, supplier lead times, and packaging requirements, but only after you know the quality standards you must achieve.

The essential starting point is defining the required quality and specifications of the product. In a make-or-buy analysis, you must know exactly what level of quality, performance, and any regulatory or standards criteria the final item must meet. This quality baseline lets you fairly judge whether in-house production can meet those requirements or if an external supplier can, at acceptable risk and cost. Without clear quality criteria, you might end up with a solution that fails to satisfy needs, making any later cost or lead-time comparisons irrelevant. Once quality is defined, you then weigh factors like cost per unit, supplier lead times, and packaging requirements, but only after you know the quality standards you must achieve.