Expert Manufacturing Advice tailored for step-by-step implementation in the workplace. Small Manufacturers, Machine Shops and CAD Engineers improve and thrive with our hands-on help. Make or Buy? Outsourcing Considerations for Small Manufacturers
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Should I make or should I buy? A question all too familiar for small manufacturing businesses. The question is how do you answer it? Are there guidelines, considerations and ‘rules of thumb’ that can assist engineering managers make informed decisions, which are highly likely to be the right solution for their business?
Well fortunately the answer is yes!
By being aware of the key considerations, you and your engineering managers can make logical decisions reasonably quickly. You can decide whether to manufacture components or assemblies yourself, or alternatively outsource them to your supply base. Topics covered include:
Why Might the Make or Buy decision arise?
The Practicalities of Make or Buy Decision Making
What do the Experts Say?
A well quoted source of expertise on the matter is ‘World Class Supply Management’ (Burt, Dobler and Starling). The general advice provided here is very much in line with lean thinking; essentially focussing on activities that add value (in this case internally within the business). As such, the recommendation is manufacturers should outsource all items that do not fit the following three categories:
Considering the points above, items that fit under any one of these 3 categories are considered strategic in nature and should be produced internally if at all possible.
Hmmm – sounds OK in theory. However on the ground there are other considerations that come into play. Your business may have all sorts of constraints and limitations, not mentioned above; meanwhile you may be aware of a commercially viable, reputable supplier, more than capable of doing the job. If so, shouldn't outsourcing at least be considered? At this stage it’s worth reviewing some of the other variables which should be taken into account when making the ‘make or buy’ decision.