APICS Certified Supply Chain Professional (CSCP) — Question 48

When deciding whether to make a component internally or to outsource production, a company must:

Answer options

• A. evaluate the landed cost of the component
• B. select the lowest-price source
• C. outsource only low-value components
• D. select the source with the shortest lead time

Correct answer: A

Explanation

The correct answer is A because evaluating the landed cost of the component includes all expenses associated with producing or acquiring the component, which is crucial for informed decision-making. Options B and C simplify the decision-making process too much by focusing solely on cost or value, and option D prioritizes lead time over comprehensive cost analysis, which may not align with overall business strategy.