The topic of discussion is the preparation of a make-or-buy analysis. To investigate the topic, I selected the article by Rosyidi et al. titled “An Optimization Model of Make or Buy Decision and Quality Improvement of Components Using a Rebate.” The article’s purpose is to describe research conducted to develop a make-or-buy decision model (Rosyidi et al., 2020). Such a model employs a rebate for all quality improvements, which minimizes total expenses and includes manufacturing and lateness costs (Rosyidi et al., 2020). The research attempts to describe a model that successfully utilizes make-or-buy decision analysis.
The article starts with a discussion regarding the manufacturer’s task of improving the quality of their products. According to Rosyidi et al., three significant elements must be addressed during make-or-buy decisions: manufacturing capacity, process competence, and technology capability (Rosyidi et al., 2020). Manufacturing capacity refers to the ability to meet the volume of demand (Rosyidi et al., 2020). Technology capability determines the capacity to produce specified item features, whereas process capability measures a process’s ability to meet a product’s or component’s standards (Rosyidi et al., 2020). These elements entail a successful make-or-buy decision process and determine the final results.
Later, the article discussed the importance of rebates in the process of improving production. According to the authors, the rebate model demonstrated in the article was taken from the research of Kusukawa (Rosyidi et al., 2020). The rebate model consists of terms such as “appraisal cost,” which is combined with costs associated with prevention and appraisal (Rosyidi et al., 2020). Later, the researchers mention that suppliers will obtain a rebate from the manufacturing company if they are able to successfully raise the quality level of products and surpass the preset quality standard established by the manufacturer (Rosyidi et al., 2020). Such a model uses rebates to encourage suppliers to increase the quality of their services.
In my opinion, the article provides an essential addition to the process of analyzing make-or-buy decisions. A company should maintain a high level of competition and control the activities that are significant for the improvement of quality and economic leadership (Brewer et al., 2021). Therefore, a model that emphasizes a constant improvement in quality has a high demand from companies that aim to pursue strong competition in the market.
I believe the rebate model used in the research develops a potential for financial and manufacturing improvements. By compensating the suppliers with appropriate benefits, the model encourages them to minimize the quality loss and focus on delivering products that surpass the quality standards of the manufacturers. In my opinion, such an approach forms a psychological foundation for improvement and therefore enhances the long-term opportunities to maintain the standards throughout the years. Such a model provides an opportunity for suppliers to share their vision and ideas with the manufacturers and creates a positive environment for future cooperation.
Additionally, I believe the make-or-buy decision process may become easier since all parties will be more interested in providing the highest quality services. A company may be encouraged to focus not only on opportunity and production costs but also on the personal traits of the supplier teams. Such a shift of focus may demonstrate an increase in quality and may as well reduce the costs associated with the manufacturing since the workers and assessment teams would receive appropriate rebates for their efforts. On the whole, the article provides a model that employs rebates to improve the process of make-or-buy decisions.
References
Brewer, P. C., Garrison, R. H., & Noreen, E. W. (2021). Introduction to managerial accounting (9th ed.). McGraw-Hill Education.
Rosyidi, C. N., Imamah, N. U. F., & Jauhari, W. A. (2020). An optimization model of make or buy decision and quality improvement of components using rebate. Cogent Engineering, 7(1), 1767266.