Answer to Question 1
A make-or-buy analysis helps managers decide whether a product should be prepared on-site or purchased as a partially or fully processed item. Generally, the purchase price of a convenience food is higher than from scratch ingredients. However, this price may be offset by reduced labor costs. Determining the cost of both alternatives is an objective of make-or-buy analysis.
There are two primary concerns in a make-or-buy analysis. The first and most important relates to equal quality. After quality concerns are addressed, costs for each alternative become important.
There are 10 basic steps in a make-or-buy analysis. The need for a specific product must be determined and its quality requirements defined. Then possible supply sources should be identified, and vendors should provide samples. The samples are evaluated and those meeting quality requirements are selected. The cost of these products should be determined, cost-per-portion comparisons with on-site preparation should be undertaken, and then the make-or-buy decision can be made. Once implemented, its effectiveness should be evaluated to ensure that critical assumptions of the analysis are put into practice.
Answer to Question 2
A
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