Research On Make Or Buy Decision For TPU Outsole In E Company

Make or buy decision is one of the important decisions in supply chain management,which is related to supply chain flexibility,risk management,strategic positioning,cost optimization and sustainable development of competitiveness.This paper takes one of E company's key component-TPU outsole,as the research object,to explore how the Make or Buy decision is made.The TPU outsole is currently buying from external suppliers and having a series of problems including long development lead time,unstable supply to the bulk production,difficult to control cost,and potential risk of new design patent leakage.These problems show that it's necessary to re-valuate the option of make or buy for the TPU outsole.Firstly,this paper analyses the external environment,finds out the company is facing several challenges such as fierce market competition,cost rising and industrial transfer to other countries,but also in a stable political environment which is good for long term operation.Secondly this paper further analyses its internal environment,find out the company has efficient and experienced management team,stable workforce,equipped with strong ERP system,all these enabled the company to achieve good financial and operational performance in the past years.One of the core competencies of the company is the manufacturing capability,with direct injection technology,and the TPU outsole has direct influence on this capability.Thirdly,the paper makes a detailed and quantitative analysis on the total cost of purchasing from external suppliers and making in house.The result shows that the cost of making in house is lower than buying from external suppliers.Finally,this paper uses two theoretical Make or Buy decision matrix:one from Quinn and Hilmer,another one from Fine and Whitney,evaluate from different perspective,and concludes the best option for E company is to make the TPU outsole in house.After that,the paper introduces a concrete plan to implement the in-house making project and evaluate the effect after the implementation.This paper explores various factors which need to be considered in the decision making of Make or Buy,and illustrate how to apply the theoretical models to the business operation,provides a valuable realistic case for the research in this field.