Supply Chain Management: Make or Buy Decisions

Play an AI-generated podcast conversation about this lesson

What should be considered when deciding between incremental expansion and single step expansion?

Competitive pressure and market opportunities

Only the cost of expansion

Disruption of operations and training requirements

All of the above, including costs and availability of funds (correct)

What is the primary goal of constraint management?

To resolve all constraint issues at once

To identify all possible constraints

To achieve the maximum benefit despite the constraint (correct)

To eliminate all constraints

According to the theory of constraints, what is the first step in resolving constraint issues?

Change the operation to achieve the maximum benefit

Eliminate all constraints at once

Overcome the constraint by increasing resources

Identify the most pressing constraint (correct)

What type of constraint occurs when there is insufficient demand for a product or service?

Market constraint Signup and view all the answers

Which of the following is NOT a category of constraint?

Technology Signup and view all the answers

What is the benefit of leading in expansion, despite the higher risk?

It may have greater potential for rewards Signup and view all the answers

Why might an organization prefer to outsource work to specialists?

To combine orders from multiple sources and offset individual buyer fluctuations Signup and view all the answers

What should be considered when evaluating the cost of buying or making an item?

The cost of the item, transportation cost, and fixed costs associated with making the item Signup and view all the answers

What is a potential risk of buying goods or services from other companies?

Loss of direct control over operations and potential damage to an organization's reputation Signup and view all the answers

Why might a firm choose to perform part of the work itself and outsource the rest?

To hedge against loss of a subcontractor and maintain flexibility Signup and view all the answers

What is a key factor to consider when deciding whether to buy or make an item?

The cost savings achievable from buying or making Signup and view all the answers

What is a consequence of outsourcing if the products or services of other companies cause harm to customers or the environment?

The organization's reputation is damaged and liability is a tremendous risk Signup and view all the answers

What is the purpose of evaluating alternatives for future capacity?

To examine economic considerations and feasibility Signup and view all the answers

What is a common approach to ranking investment proposals?

Using financial analysis to consider the time value of money Signup and view all the answers

What is cash flow in financial analysis?

The difference between cash inflow and outflow Signup and view all the answers

What is the primary goal of identifying and addressing constraints?

To achieve acceptable levels of constraints Signup and view all the answers

What is present value in financial analysis?

The current value of all future cash flows Signup and view all the answers

What is a constraint in a process or system?

A limitation that affects performance Signup and view all the answers

What is the primary goal of bottleneck management?

To achieve maximum utilization of bottleneck operations Signup and view all the answers

What is the main advantage of the WAIT-AND-SEE strategy?

Higher capacity utilization and accurate matching of supply and demand Signup and view all the answers

What is a potential risk of the EXPAND-EARLY STRATEGY?

Underutilized equipment Signup and view all the answers

Why is asset disposal important in capacity contraction?

To consider the cost benefit of disposal Signup and view all the answers

What is a potential reason for capacity contraction?

Replace aging equipment with newer equipment Signup and view all the answers

What is the primary goal of capacity expansion strategies?

To maximize capacity utilization Signup and view all the answers

What are the three most commonly used methods of financial analysis?

PAYBACK, PRESENT VALUE, and INTERNAL RATE OF RETURN Signup and view all the answers

What does flexibility in capacity decisions reduce dependence on?

Long-range forecasts Signup and view all the answers

What is a potential advantage of maintaining a capacity cushion?

Blocking entry into the market by new competitors Signup and view all the answers

What can provide capacity increases?

EFFICIENCY IMPROVEMENTS and UTILIZATION IMPROVEMENTS Signup and view all the answers

Why do some organizations maintain a capacity cushion?

To block entry into the market by new competitors Signup and view all the answers

What is a potential drawback of maintaining a capacity cushion?

Higher-than-necessary unit costs Signup and view all the answers