1. Make versus Buy introduction
Hello! My name is Nick and I'll be your instructor for this case study in supply chain analytics. In this case study, you will perform a make versus buy analysis in Power BI.
2. Case study and prerequisites
A case study enables you to apply your skills. You won’t be learning any new Power BI concepts; instead, you’ll focus on using the skills you learned in previous courses and practice them on a real-world problem.
This case study uses iterative functions, so it is relatively advanced. It might help to review iterative functions in DAX before taking this case study.
Below you can see the prerequisites we suggest you take before completing this case study.
3. What is a Supply Chain?
So, what is a Supply Chain exactly? A supply chain is a network of individuals and companies who are involved in creating a product and delivering it to the consumer. The Supply Chain begins with the producers of raw material and ends with the product being delivered to the consumer.
For example, a fork begins as a piece of ore from the earth. The ore is processed into metal, and the metal is formed into the shape of a fork and then polished. The fork is then packaged and shipped to the consumer.
4. What is Make versus Buy?
What do we mean by make versus buy decision? A good definition is the one from Investopedia: "A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier."
The make option means manufacturing the product in-house and the buy option means buying the product from an external supplier.
5. Make versus Buy in real life
Another example of a Make versus Buy decision from daily life is the choice to eat at a restaurant or to prepare lunch at home.
If you prepare your own pizza, that is the Make option.
If you buy a pizza from the local pizza restaurant, that is the Buy option.
6. Factors in the Make versus Buy analysis
Sticking with the tasty pizza analogy, it is clear that the Make versus Buy option has a lot of considerations.
Quality:
Your own pizza might be less tasty than the local Italian restaurant.
Time: Making a good pizza might take you an hour, but ordering a pizza takes 3 minutes.
Cost: You might save money making pizza at home. But then again, the pizza restaurant might buy pizza ingredients in bulk.
It is clear that with such a complex decision, companies need help quantifying all of these aspects.
For simplicity, this case study focuses on analyzing the cost of the Make and Buy options. Real companies need to consider quality, time and ethics in their supply chain decision-making.
The skills you learn in the course can also be applied to product lead times, sustainability and many other factors in the Make versus Buy decision.
7. The problem
The problem you will be working on in this case study is a make versus buy decision. You are hired as a supply chain analyst at a fictitious company called Tenate Industries - a company that sells replacement parts for industrial pizza ovens. Your task is to calculate the full cost of the Make and Buy Options. You'll be using fictitious data tables of quotes and internal manufacturing estimates.
A quote or a quotation is a document that a seller provides to a buyer to offer goods or services at a stated price, under specified conditions.
8. The Buy option
We will start by learning how to analyze costs for the buy option. In the buy option, we are considering purchasing the products from an external supplier.
In the quotes dataset, you will find that you have quotes from many suppliers for multiple parts at multiple production volumes. It is common to quote the same part to many suppliers to ensure the best option is selected.
Each quote line consists of part number quoted, supplier
minimum production volume for the price quoted, unit cost (per product), non-recurring expenses associated with the minimum production volume.
9. Time to explore the quote data!
It is your time to check if you understand the concepts of make versus buy. After that, we will explore the quote data. Good luck!