What is make-or-buy?
Make-or-buy is the decision to perform a service internally or source it externally for a defined product, component or process scope and planning horizon.
Cost comparison
The comparison extends beyond manufacturing cost and purchase price to investment, tooling, quality, scrap, logistics, inventory, coordination, supplier management, ramp-up, phase-out and transfer. Fixed and variable as well as one-off and recurring costs remain separate.
Strategic criteria
- differentiation and core capability
- know-how protection and development
- quality capability and traceability
- delivery response and scalability
- technology access, dependency and resilience
More than a binary decision
Dual sourcing, partnerships, licensing, an extended workbench, internal critical steps or phased transfer can be assessed alongside pure make and buy.
Further reading: manufacturing strategy and make-or-buy.
Applying Make-or-buy in a project
A make-or-buy decision compares not only unit cost but also capability, quality, delivery, scalability, investment and dependency.
Before applying Make-or-buy, define the objective, system boundary and decision to be supported. The distinction from adjacent methods and systems is equally important: which processes are included, which interfaces remain outside the scope and which metrics indicate an improvement? This prevents a term from becoming a label and avoids local optimisation that creates new problems elsewhere.
A reliable assessment of Make-or-buy combines current-state data with documented assumptions. Sources, reference periods, units and exceptions need to be transparent. Alternatives or measures can then be compared using consistent criteria. Depending on the task, these include performance and cost as well as space, inventory, ergonomics, quality, feasibility, risk and expandability.
The output from applying Make-or-buy should support a concrete decision or a verifiable next step. Ownership, a target value and a review date make the expected effect measurable. To transfer the concept to a real assignment, connect it with the relevant consulting, planning, optimisation and digital capture services.
Make-or-buy in practice: Our services overview brings together the relevant planning and consulting approaches.