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Lean Manufacturing Cost Capacity: The 2 Biggest Considerations
Whilst there are a range of variables and considerations that may influence your decision to make or buy, ultimately there are 2 that are the most important.
Cost is a broad term and should in fact include a variety of obvious and not so obvious contributing expenditures. Additionally, cost incurred should be considered both in the short and long term. Again, based on work by Burt, Dobler and Starling, different types of costs for both ‘make’ and ‘buy’ include:
In-house ‘Make’ costs:
Outsource ‘buy’ costs:
Like all financial planning, try to quantify costs as best as you can, even if it means rough estimates.
Available production capacity only applies to the option of in-house manufacturing. On the face of it the question seems straightforward – ‘is there the internal capacity to make this in-house?’ However there are a few other factors that come into play.
Before you can answer the question you need to understand what is currently making its way through the factory and what is planned in the short and medium term. Your production schedule should give you the ball-park answer.
Other considerations include the availability of skilled employees. Also:
The first thing to do here is probably assembly those people in a position to know the answers within your business. Production supervisors and operations managers are often a good place to start.