The Make or Buy Decision at Sensormatic

The Make or Buy Decision at Sensormatic

Available Options

Outsourcing. There are suppliers available to Sensormatic that are reliable and offer attractive prices for the plastic components of Sensormatic's tags. The Asheville manufacturer sells plastic components at roughly the same cost as the one in Mobile (Canon), and shipping costs are similar. The only apparent disadvantage to relying on the Asheville facility is that it has no ties to Sensormatic and cannot be counted on to give the company preference in its production schedules.

Canon. Acquiring the Mobile site is an attractive option in that its full production can be dedicated to Sensormatic's needs. Its primary disadvantage is its distance from the main manufacturing facility and the amount of travel that would be required between sites. There is a single good road between Florida and Mobile, and no air service, so travel will require long and largely unproductive car rides. Canon has other customers that Sensormatic can retain, providing it with a non-core business.

Deerfield. Purchasing new machinery and placing it at Deerfield keeps the full manufacturing operation integrated geographically, provides newer equipment with longer life expectancy and provides additional challenge for Sensormatic's unskilled workers. It does nothing to alleviate the uncertainty in the oil industry regarding plastics manufacturing and provides only marginal cost savings. All production, however, can be dedicated exclusively to Sensormatic's needs and having the manufacturing facility at Deerfield likely would eliminate growth of the costly scrap pile.

Recommendation: Purchase machinery and manufacture plastic parts at Deerfield. Sensormatic will be able to make exactly what it needs and only what it needs, and there will be no outside parties with which to have misunderstandings or disagreements.

SWOT Analysis

Strengths

* Sensormatic has very little competition in its industry.

* Sensormatic is the industry leader.

* The company invests heavily in new product development.

* Production is based only on orders received: not unsold inventory languishing in warehouses.

* Sensormatic