In-house production or external procurement

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House production or external reference or make-or-buy (abbreviation mob ; v. English make , "produce" and english buy , "Buy") is in the business a production strategy of companies , products or services establish themselves ( in-house production ) or intermediate goods from To procure suppliers or subcontractors ( external production ).

General

Intermediate goods can be components , services , semi-finished products or intermediate products that are further processed into an end product . In-house production or external procurement has a direct effect on the vertical range of manufacture , because it determines how high the proportion of in- house and external production is in a company:

.

The manufacturing depth (or production ratio ) decreases at external procurement , outsourcing ( shoring , Onshoring ) and increases in sourcing and forward integration .

In addition to in-house production and third-party procurement, there are other options for dividing work in value creation , for example by means of contractors or contract manufacturing .

origin

The question of in-house production or external procurement has its origins, among other things, in Ronald Coase's book The Nature of the Firm , published in 1937 , which discusses the subject of vertical integration of production and procurement processes in companies. The transaction cost economy based on this , largely developed by Oliver Williamson , further develops the make-or-buy decision and examines it in connection with management and control structures in companies, which are ultimately reflected in the make-or-buy decision.

description

Each division of labor requires coordination and entails transaction costs and risks.

You can also decide to consciously buy from several suppliers instead of one (" single sourcing ") in order to avoid dependencies or other disadvantages (main article: procurement strategy )

Lean manufacturing ( english lean production ) is a term for the idea, to the core business focus, ie areas in which the company has a comparative advantage such as by specialization or by economies of scale ( economies of scale has). To pursue this goal, some companies reduce the proportion of in-house production or vertical integration . The purchase of certain - for example rarely needed - items from specialized suppliers can strengthen the company's competitiveness .

In contrast, economies of scope are also possible if one decides against lean production .

Criteria for a systematic make-or-buy decision are, in addition to transaction costs, the reliability of the delivery and the possible (undesired) dependence on suppliers. In the course of reducing the vertical range of manufacture, entire parts of the factory or entire factories can be closed or sold to suppliers, e.g. B. the foundry of an automotive company, when those responsible have decided to buy the castings. An alternative to this is that they no longer only work in-house, but also offer or market their services externally. A well-known example is that of the Porsche Development Center in Weissach : It has also been working for other automobile manufacturers for a long time (see also Coopetition , the duality of competition and cooperation in markets).

More intensive cost accounting ( controlling ) and the creation of profit centers have increased transparency in many companies and heightened awareness of costs, benefits, quantities and levels of utilization in companies.

application

Studies on the subject of in-house production or external procurement are diverse. Originally from the field of vertical integration of supply chains in corporate planning, today there are applications of the underlying theory and analysis in areas such as agronomy and agricultural economics , research and development as well as human capital , the analysis of so-called hybrid control modes (i.e. neither in-house production nor external procurement) such as Franchising, or research into the efficiency of agri-environmental measures , nature and species protection programs.

See also

literature

Individual evidence

  1. Ronald H. Coase: The Nature of the Firm . In: Economica . tape 4 , 1937, pp. 386-405 , doi : 10.1111 / j.1468-0335.1937.tb00002.x .
  2. Oliver E. Williamson: Markets and Hirarchies - Analysis and Antitrust Implications . Free Press, New York 1975, ISBN 0-02-934780-7 .
  3. Oliver E. Williamson: Transaction cost economics: how it works; where it is headed . In: Economist . tape 146 , 1998, pp. 28-58 .
  4. ^ Aric Rindfleisch, Jan B. Heide: Transaction Cost Analysis: Past, Present, and Future Applications . In: Journal of Marketing . tape 61 , no. 4 , 1997, ISSN  0022-2429 , pp. 30-54 , doi : 10.2307 / 1252085 .
  5. ^ Scott E. Masten: Transaction-cost economics and the organization of agricultural transactions . In: Advances in Applied Microeconomics . tape 9 . Emerald (MCB UP), Bingley 2000, ISBN 0-7623-0687-4 , pp. 173-195 , doi : 10.1016 / s0278-0984 (00) 09050-7 ( emeraldinsight.com [accessed June 25, 2019]).
  6. ^ Peter G. Klein: The Make-or-Buy Decision: Lessons from Empirical Studies . In: Claude Ménard, Mary M. Shirley (Eds.): Handbook of New Institutional Economics . Springer, Berlin 2004, ISBN 3-540-77660-5 , pp. 435-464 .
  7. Oliver Schöttker, Karin Johst, Martin Drechsler, Frank Wätzold: Land for biodiversity conservation - To buy or borrow? In: Ecological Economics . tape 129 , 2016, p. 94-103 , doi : 10.1016 / j.ecolecon.2016.06.011 ( elsevier.com [accessed June 25, 2019]).
  8. Oliver Schöttker, Frank Wätzold: Buy or lease land? Cost-effective conservation of an oligotrophic lake in a Natura 2000 area . In: Biodiversity and Conservation . tape 27 , no. 6 , 2018, ISSN  0960-3115 , p. 1327–1345 , doi : 10.1007 / s10531-017-1496-4 ( springer.com [accessed June 25, 2019]).