The Trade-Off Between Make or Buy Strategy and Their Relationship With Firm Performance

Abstract

Purpose: The question of whether to make or acquire something is a crucial conundrum that many companies must solve. A crucial step in the operation of a business is determining whether it is more cost effective to develop and manufacture components or services in-house or to purchase them from outside vendors. In order to provide managers in the General Company for Electrical and Electronic industries (GCEEI) in Iraq with assistance in evaluating sourcing choices, the purpose of this study is to address this subject by bringing the conventional make-or-buy literature up to date by adding fresh academic insights. Theoretical framework: the most prominent ideas and methods for deciding whether to produce something oneself or purchase it are explored, along with a literature analysis of relevant material. The phrases "make-or-buy" and "insourcing" and "outsourcing" were used to search for relevant articles in scholarly databases. Design/methodology/approach: We analyzed the data for the year (2022) that is collected through visits and meetings with the Managers, in the (GCEEI) by using two approaches: a. economic analysis and b. break-even analysis to help managers evaluate sourcing decisions. Findings: According break-even analysis for this case, the quantity should be manufactured is more than 4000 Unit so that the manufacturing costs are more than the purchase costs, then the company should go for buy if less than 4000 Unit. According to the results of the economic analysis, the manufacturing decision is the best in the three models because manufacturing costs are lower than purchasing cost. Research, Practical & Social implications: The findings recommend forming interdisciplinary teams consisting of professionals from many fields (buyers, R&D staff, quality representatives, etc.) to prevent making make-or-buy judgments under circumstances of faulty and inadequate data. Originality/value: Both professional and unskilled workers contribute to the company's success, and when decision-making and procurement become routine, a company's long-tenured employees may ease the burden of these recurring tasks.