A common issue in technology, business, and service industries are vendor selection problems. This is the same for a make/buy decision but one of the "vendor" alternatives is to produce the product or service in-house. The days of accepting the lowest bid are gone, and the complexity of making this kind of decision is evident in the list of important measures that need to be considered.
Measure Details
Low development cost Evaluate the anticipated relative capital cost of preparing for production. This includes equipment, facilities, personnel, and other expenditures. Be sure that the costs compared are based on the same starting and ending conditions.
Low product cost Evaluate the anticipated relative cost of producing the product. This needs to include all costs required to get the product ready for insertion into an assembly or ready for delivery to the customer. Be sure that the costs compared are based on the same starting and end conditions.
High product life cost stability Evaluate the anticipated relative stability of the cost estimates. How might the costs change over a two-year or five-year period? What controls are in place to manage the cost?
Low development lead-time Evaluate the anticipated relative lead-time to get the product ready for production.
Low order lead-time Evaluate the anticipated lead-time needed between placing an order and receiving the product.
High product quality Evaluate the anticipated relative quality of the product. Product quality includes finish and function.
Good product support Evaluate the anticipated relative ease with which you will be able to support the product.
Easy to change product Evaluate the anticipated relative ability you will have to change the product.
Strong intellectual property control Evaluate the anticipated relative control you will have over intellectual property.
Good control of order volumes Evaluate the anticipated relative control you will have over the size of the orders and how well the volume matches your needs.
Good control of supply chain Evaluate the level of control you have over suppliers.
To use these measures to make a decision about one of your vendor selection problems, try the templates in a free 30-day trial version of Accord Professional.
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