Integrating Economic Factors in Make-or-Buy Decisions PPT
This PPT slide, part of the 23-slide Make-or-Buy Decision Analysis PowerPoint presentation, presents an overview of the economic considerations in the Make-or-Buy Decision Analysis, emphasizing the importance of integrating economic factors for optimal decision-making. The primary focus is on how outsourcing impacts capital expenditures, return on invested capital, and return on assets. It highlights potential savings that can be realized through outsourcing, which is crucial for executives looking to enhance financial performance.
The "Decision Rule" section suggests a shift in perspective from merely evaluating the price of a finished product to understanding the overall cost of providing that product or service. This approach encourages a more comprehensive analysis, allowing decision-makers to consider long-term implications rather than short-term costs.
In the "Role of CPO" section, the responsibilities of the Chief Procurement Officer (CPO) are outlined. Key tasks include identifying the supplier's cost drivers and designing a pricing mechanism that accurately reflects current costs and anticipated changes. This ensures that the CPO can negotiate effectively and maintain a strategic partnership with suppliers.
Another critical point is the emphasis on ongoing cost improvements. The slide suggests that these improvements should be incorporated into contracts and shared between the outsourcing entity and the CPO’s organization. This creates a collaborative environment where both parties are incentivized to optimize costs.
Lastly, the slide touches on the importance of a gain-sharing mechanism that rewards suppliers for their contributions while ensuring that the benefits of cost improvements are passed on to the buyer. This collaborative approach can lead to a more productive outsourcing relationship, ultimately benefiting both parties involved.
This slide is part of the Make-or-Buy Decision Analysis PowerPoint presentation.
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