You are the purchasing manager of a company and are responsible for ensuring that necessary inputs are available to keep your factory operating. For each of the three types of purchases identified below, recommend whether your company should use spot purchases, contract purchase, or internal production. Support your answer using economic concepts from this course. To what extent is your decision and any contract terms affected by the variability in the demand for your product and thus your need for the product purchased?
a. A subsystem that is similar to but not exactly the same as subsystems used by competitors; several large companies offer to make modifications to the subsystem to fit your requirements.
b. A part that is unique to your company and requires significant capital investment in order to produce. Your company is the only one using this part but several vendors have offered to manufacture it for you.
c. Light fixtures and light bulbs used to illuminate the factory floor.