What is a make-or-buy decision?

Make or buy is the decision about which work stays in-house and which goes to outside suppliers. The choice plays out at two levels. With a subcontract operation your own workpiece leaves the shop for one step, such as hardening, anodising or wire EDM, and comes back for the rest of the route. A bought-in part arrives finished, such as a sheet metal part or a turned part a supplier makes to your drawing. For catalogue parts such as bearings and fasteners the question rarely arises.

What does a make-or-buy decision depend on?

A price comparison alone is rarely enough. Which in-house costs you count depends on how busy the shop is: if the machine would otherwise stand idle, mainly the variable costs count in the short term; if it is full, the work also costs the contribution of the order it displaces. Subcontracting adds ordering, transport, goods-in inspection, any dimensional allowance made beforehand and extra lead time to the supplier's price. Non-financial factors weigh in too: quality control, traceability, know-how, access to a process with the required qualification, dependence on a single supplier and protection of the design.

How does ‘make or buy’ work in practice?

A subcontract operation sits in the route, between or after your own operations, and helps set the lead time: hardening often comes before grinding, anodising after the last machining, with transport and waiting on either side. Sequence, grinding allowance and the pre-coating size are matched to what the supplier does, for example to the layer build-up in anodising or the distortion in hardening. A process you rarely need is more likely to be subcontracted than a step that recurs every week.

What is ‘make or buy’ often confused with?

Make or buy is not the same as outsourcing: outsourcing is only one possible outcome of the decision.

How do you see ‘make or buy’ in Blake?

In Blake a subcontract operation such as anodising or hardening gets its own estimate line, priced from your own subcontract library. If that price is missing, the line stays open and does not count as zero. In an assembly, made parts, bought-in parts and the assembly's own work roll up into one total. More on estimating.