Make-or-Buy: The strategic choice between in-house production and external procurment

The decision to produce products or components in-house or to purchase them externally, also known as the “make-or-buy” decision, is a key strategic consideration in the technology procurement of manufacturing companies. This decision does not only affect the cost structure of a company, but also its efficiency, flexibility and long-term competitiveness.

It is therefore recommended that this strategic decision is backed up by a proper analysis of the cost implications, quality requirements and the company's own competencies. Industry-specific parameters and entrepreneurial framework conditions play a decisive role here. High investments in machines and tools as well as a low level of technological expertise can, for example, speak in favor of the decision to purchase from external providers.

The basis for the evaluation is a detailed specification and analysis of technical requirements and a breakdown of the related value processes. To evaluate the technical feasibility of in-house production, the most promising technology chains in the manufacturing process have to be identified and additional analyses of the most critical production processes must be carried out. The manufacturing costs (“make”) are then calculated on the basis of given production volumes. These costs are compared with the prices of external suppliers (“buy”) in order to finally make a well-founded decision - taking into account further qualitative considerations and strategic plans.

Fraunhofer IPT supports you in carefully balancing these factors through an individual analysis of your purchasing and value-added scopes - so that you can make a more informed “make or buy” decision for your company.

Our Services

• Workshops to determine the evaluation criteria for the "make-or-buy" decision
• Development of technology chains and analysis of critical production processes
• Cost comparison calculations on the basis of target price offers
• Evaluation of possible suppliers for the production facilities and external procurement
• Analysis and evaluation of the risk of various options for action
• Roadmaps and action plans for implementation