Internal manufacturing of a product versus procurement from external supplier sources is a difficult decision requiring careful and thorough assessment of multiple elements. The assessment includes organization’s core competencies, business strategy, manufacturing strategy, internal capacity, resource limitations, demand fluctuations, time-to-market, and improved returns, among others. Top management has to negotiate the trade-offs between the make or buy alternatives.
Procurement from external sources liberates the organization’s resources, cuts investment demands, increases flexibility and return on capital. However, there are associated quality and supply risks involved with this strategy. In contrast, “in-house manufacturing” employs internal capacity, absorb fixed costs, and safeguard intellectual property. Nevertheless, the “make” approach entails unwarranted complexities, and avert resources and focus away from more important strategic priorities.
Dawgen Global Manufacturing Strategy Guide provides a comprehensive framework to help organizational leadership answer the make vs. buy question by evaluating their manufacturing network and strategies, developing an assessment criteria, detailed implementation process, and tactics for executing the framework.
There are 6 broad assessments to evaluate when making the make vs. buy decision:
1. Manufacturing Strategy compatibility – Does the product fit within our Manufacturing Strategy?
2. Total delivered costs – How do internal costs compare with third-party alternatives?
3. Capacity – Is there available or potential plant capacity for in-house manufacturing?
4. Intellectual Property exposure risk – What is the Intellectual Property risk of buying a product?
5. Business Case development – What is the Business Case for making vs. buying a product?
6. Contract manufacturers availability – Are there actually contract manufacturers available to make the product?
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