Make vs. Buy Optimization for Industrial Manufacturing & Distribution Businesses
Name
esposito-nesposit-mba-mgt-2023-thesis[72].pdf
Description
Thesis PDF
Size
2.14 MB
Format
Adobe PDF
Checksum (MD5)
b0a6eac72a41bb71735194782cd1628e
Author(s)
Esposito, Nicholas
Advisor(s)
Welsch, Roy
Wiesman, Richard
Date Issued
June 2023
Publisher
Massachusetts Institute of Technology
Abstract
In organizations producing products ranging from complex assemblies to individual components for customers, strategic decisions whether to make or buy the components required for the final product can have significant implications on the organization’s income statement, balance sheet, and value proposition in the market. Existing literature describes broad frameworks for evaluating these make vs. buy decisions, but a gap exists in how these decisions should be treated in organizations that are vertically integrated across manufacturing and distribution, especially with a commoditized product. Here we show the development of a broad strategic sourcing framework and detailed item-level analytical tool to aid in these make vs. buy decisions for manufacturer-distributors in commoditized markets. We show that the novel combination of internal capability and capacity data, external supplier segmentation, and a total cost of ownership approach to the financial impacts of a supplier choice can significantly aid in the identification and prioritization of strategic sourcing opportunities. We expect these new methods and tools to have a significant positive impact on the profitability of the partner organization, reduce the total level of inventory required in their network, and improve their value proposition to customers in the market.
MIT Department
Massachusetts Institute of Technology. Department of Mechanical Engineering
Sloan School of Management
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