A “make or buy” decision must be made when a company reaches a certain crossroad, wondering whether it will be more cost effective and or efficient to make a given product or service themselves, or whether they should continue to buy that service from a third party (Schwarting & Weissbarth, 2011). Such a decision goes beyond simply addressing manufacturing or logistics, looking at the maintenance necessary, the human resources that must be allocated, the information technology that must be devoted to the project, and other associated concerns regarding infrastructure (Schwarting & Weissbarth, 2011).
In 2015, Amazon had to make the decision regarding whether it would, in essence, work to gain further control over its own supply chain by providing its own transportation and logistics, or whether it would continue to use UPS and FedEx in the delivery of its goods (SCDigest Editorial Staff, 2015). Advantages include more control over the delivery of goods by the promised delivery date, thus working to increase customer satisfaction and increase profits through continued and repeat sales, and being able to provide additional services to customers that were not previously available in their area. Disadvantages, on the other hand, include low returns on profit for the logistics side of the business, and even increased liability or delays if the company opts to use third party contract drivers.
While time will tell whether or not it is a good idea, personally, I have seen improvements across the board. Amazon has started limiting the amount of time that a package is in the hands of UPS, choosing to, instead of handing the packages off to UPS right at the distribution centers, drive the packages directly to the local center for the last leg of delivery, from the local post office to the individual. Last year there were three week delays in getting packages due to issues with UPS; since Amazon has taken over the first leg of transportation from the distribution center to the warehouse, packages are now getting to me before their estimated delivery date, and they are not banged up like they were before. Personally, I’m all for Amazon’s new venture.
- SCDigest Editorial Staff. (2015). Supply Chain Graphic of the Week: Will We Soon See Amazon Logistics?. Scdigest.com. Retrieved 4 September 2016, from http://www.scdigest.com/ASSETS/NEWSVIEWS/15-11-12-1.PHP?CID=9923
- Schwarting, D. & Weissbarth, R. (2011). Make or Buy: Three pillars of sound decision making (pp. 1-16). PWC. Retrieved from http://www.strategyand.pwc.com/media/file/Strategyand_Make-or-buy-sound-decision-making.pdf
