CPIM Practice Exam

What decision is made when choosing whether to produce an item internally or to buy it from an outside supplier?

1. Make-or-buy decision

2. Production planning

3. Outsourcing decision

4. Resource allocation decision

The correct answer is: Make-or-buy decision

The make-or-buy decision is a critical aspect of supply chain management and operations strategy that involves evaluating whether to produce a product in-house (make) or purchase it from an external supplier (buy). This decision takes into account a variety of factors, including cost, quality, capacity, and expertise. When a company assesses this decision, it involves analyzing the costs associated with both options, as well as considering strategic aspects such as control over production processes, timelines for delivery, and potential impacts on long-term relationships with suppliers. The goal is to determine which option will provide the best overall value to the organization while aligning with its business strategy and operational capabilities. By opting for a make-or-buy analysis, organizations can optimize their production strategies to enhance efficiency and responsiveness to market demands, making this decision a pivotal part of operational effectiveness.