In a make-or-buy decision, when the product is modular and the company is dependent on external knowledge and capacity, outsourcing is often considered necessary. Key considerations include:
* Modularity: Modular products are composed of distinct components that can be independently produced and then assembled. This structure makes it easier to outsource production without compromising the overall product design.
* Knowledge Dependency: When specific expertise or technology is required that the company does not possess, outsourcing becomes necessary to leverage external knowledge and capabilities.
* Capacity Constraints: If the company lacks the internal capacity to produce the product in-house, outsourcing becomes a viable solution to meet demand without investing in additional resources.
* Focus on Core Competencies: Outsourcing non-core activities allows the company to focus on its core competencies and strategic activities, improving overall efficiency and competitiveness.
References:
* McIvor, R. (2005). The Outsourcing Process: Strategies for Evaluation and Management. Cambridge University Press.
* Arnold, J. R. T., Chapman, S. N., & Clive, L. M. (2008). Introduction to Materials Management.
Pearson.