Make or buy? : Developing a generic framework for make-or-buy decisions at Cardo AB

University essay from Linköpings universitet/Logistik; Linköpings universitet/Logistik

Abstract:

Cardo AB is an international corporate group that has performed major organizational changes the last few years. These changes utilize possible synergies that exist in a corporate group. One of the initiatives is that Cardo wants to develop a model for make-or-buy decisions. Therefore, the purpose of this thesis is stated as:

The study’s purpose is to develop a generic model for make-or-buy decisions at Cardo.

To develop the model, a theoretical study was conducted, where four main aspects were identified: core capability, risk, cost and relationship. For each aspect, a tool to define what the aspects consist of was identified. The aspects were combined together into a model, called model version 1. To enhance and adjust the model to suit Cardo’s situation, an empirical study was conducted. In the empirical study, it was investigated how different sites within Cardo are currently working with make-or-buy decisions. Moreover, in the empirical study it was also revealed how Cardo is dealing with each of the aspects identified in theory. The combination of theory and empirical study formed the enhanced model, called model version 2. The last step in the procedure was to let several end-users review the model and suggest improvements. After this step, the final model was formed, called model version 3.The model combines the best practices from Cardo with the latest theoretical aspects. Using this model will help Cardo deal with make-or-buy decisions in a structured way. The model highlights the importance of connecting business strategy with the core capabilities of Cardo and provides a tool to identify this connection. Furthermore, the model highlights risks connected to outsourcing and provides tools to identify these risks. The model also applies a total cost approach. To calculate the different costs, a model is presented that functions as a guide when quantifying costs. Lastly, the model shows the importance of developing a proper relationship with the supplier according to the strategic importance of the product.Cardo AB is an international corporate group that has performed major organizational changes the last few years. These changes utilize possible synergies that exist in a corporate group. One of the initiatives is that Cardo wants to develop a model for make-or-buy decisions. Therefore, the purpose of this thesis is stated as:The study’s purpose is to develop a generic model for make-or-buy decisions at Cardo.To develop the model, a theoretical study was conducted, where four main aspects were identified: core capability, risk, cost and relationship. For each aspect, a tool to define what the aspects consist of was identified. The aspects were combined together into a model, called model version 1. To enhance and adjust the model to suit Cardo’s situation, an empirical study was conducted. In the empirical study, it was investigated how different sites within Cardo are currently working with make-or-buy decisions. Moreover, in the empirical study it was also revealed how Cardo is dealing with each of the aspects identified in theory. The combination of theory and empirical study formed the enhanced model, called model version 2. The last step in the procedure was to let several end-users review the model and suggest improvements. After this step, the final model was formed, called model version 3.The model combines the best practices from Cardo with the latest theoretical aspects. Using this model will help Cardo deal with make-or-buy decisions in a structured way. The model highlights the importance of connecting business strategy with the core capabilities of Cardo and provides a tool to identify this connection. Furthermore, the model highlights risks connected to outsourcing and provides tools to identify these risks. The model also applies a total cost approach. To calculate the different costs, a model is presented that functions as a guide when quantifying costs. Lastly, the model shows the importance of developing a proper relationship with the supplier according to the strategic importance of the product.

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