You have guidelines on how to take the make vs buy decision
The make vs buy decision for key components or prime services is strategic. For that reason, it must be made by senior managers. These decisions impact the future structure of the business, define its core skill sets and the technologies in which it will invest.
Key Issues
·         The main make versus buy decisions are made as an essential part of the product introduction process
o     the process for taking the make vs buy decision must be defined and documented in the company’s operating manuals with clear guidelines on:
o     the criteria to be taken into account
o     how to categorise the importance of components
o     an escalation procedure, depending on the potential business impact of the decision
o     name(s) of the senior manager(s) who are authorised to approve the make vs buy.
o     In making the decision s/he will consider:
-   your company’s core competences and the investments you have made in the past, and may need to make in the future, in resources to develop new products and in-house production facilities
-    the fact that making an ill judged decision can result in creating a competitor who dominates your market place
-   the need to protect the company’s intellectual property and knowledge
-    a knowledge of the total acquisition costs, taking full account of how to recover business overheads that cannot be eliminated
-    the fact that specialist service providers can bring essential skills to non-core tasks, offer economies of scale and provide cost savings for non core activities
-    all potential suppliers have been validated to ensure they can deliver on time, to agreed cost and quality standards, and cover one-off costs
·         Deciding to outsource manufacturing operations can:
o      Allow the business to focus on its profitable, core value adding activities
o     Create access to new / complementary technologies
o     Allow manufacturing facilities to be rationalised
o     Facilitate taking advantage of low cost labour economies
o     Provide access to new markets by manufacturing in the region
o     Permit the company to acquire specialist expertise
o     Provide commercial benefit from joint purchasing agreements
o     Give away your core competences
Factors for Success      
Factors to  Avoid
1.     Using a structured management process
2.     Grouping components and buying families of parts not individual “bits and pieces”
3.     Ensuring that retained in-house equipment is fully utilised before outsourcing
4.     Distinguishing between purchased items and parts made to your specifications
1.     Allowing your purchasing team to take the decision on what items to buy
2.     Outsourcing just because competitors have done so
3.     Taking decisions that will have a significant long term impact. influenced by short term issues
Who does this apply to?
Senior management teams
Realisable Benefits
Greater focus on key business activities and exploitation of core competencies


Logistics co-ordinationLogistics co-ordination

Logistics co-ordination

Uninterrupted material flowUninterrupted material flow

Uninterrupted material flow

Responding to changes in volumes and product mixResponding to changes in volumes and product mix

Responding to changes in volumes and product mix

Make versus buyMake versus buy

Make versus buy

The supplier approval processThe supplier approval process

The supplier approval process

Monitoring supplier performanceMonitoring supplier performance

Monitoring supplier performance

Sharing information with suppliersSharing information with suppliers

Sharing information with suppliers

Managing inventory throughout the supply chainManaging inventory throughout the supply chain

Managing inventory throughout the supply chain

Improving the delivery performance of suppliersImproving the delivery performance of suppliers

Improving the delivery performance of suppliers

Material flow and the factoryMaterial flow and the factory

Material flow and the factory

Production scheduling processProduction scheduling process

Production scheduling process

Calculating production capacityCalculating production capacity

Calculating production capacity

Visual managementVisual management

Visual management

Health and safetyHealth and safety

Health and safety





Ensuring equipment is availableEnsuring equipment is available

Ensuring equipment is available





Consistent manufacturingConsistent manufacturing

Consistent manufacturing