Remake or Buy? Reconditioning Products at Xtra Power Energy Systems

Pradeep Dutta (Dutta), proprietor of Xtra Power Group, found himself on the horns of a dilemma. Dutta had recently reconfigured Xtra Power Energy System’s (Xtra Power) supply chain. The reconfiguration had resulted in a lowering of lead times and increased production, making it difficult for the company to focus on the line of reconditioned batteries. Dutta was considering two options: 1. Hire Revathi Batteries (Revathi) to manufacture its reconditioned line of batteries. 2. Rent an adjacent facility and start reconditioning the batteries on its own. However, Revathi Batteries insisted on a contract of at least three years for an annual payment. On the other hand, if Xtra Power went ahead with the other option, it had to incur significant expenditure on procuring machinery, equipment, etc.