SCM 301 Study Guide - Final Guide: Total Quality Management, Outsourcing, Third-Party Logistics

• School: Iowa State University
• Department: Supply Chain Management
• Course: SCM 301
• Professor: All

Document Summary

Additional reasons: strategic benefits of using best in class suppliers, greater flexibility in the purchase of rapidly developing new technologies, a reduction in design cycle times, risk is transferred to the supplier, less capital is required as the requirement for investment is transferred to the supplier, technology. Reasons for making: protecting proprietary technology (trade secrets), no competent supplier, better quality control, use existing idle capacity, control of lead time, warehousing cost, and transportation, lower cost. Assumptions: all costs can be classified as fixed or variable, fixed costs remain the same, a linear variable cost relationship exists, the fixed cost of the make option is higher because of initial capital investment (equipment), variable cost of buy option is higher because of supplier profits. Reasons for favoring a single supplier: to establish a good relationship, less quality variability, lower cost, transportation economies, proprietary product or process, volume too small to split.