To “Make” or “Buy”?

[Pat Lupica]

To “Make” or “Buy”?

This subject is haunting many firms these days. Outsourcing problems include: Lack of flexibility, competing for (far away) resources, protecting proprietary information, challenges with different measurement systems, association with questionable business practices, lack of visibility into external environment factors at point of production, cost of freight, potential loss of competencies, and the [oftentimes] underestimated relationship management talent and resources needed to manage the supply chain. As many procurement folks are finding out, the cost of outsourcing is about a lot more than low price. Most issues described here can be identified and assessed through a robust outsourcing assessment process. Burt, Dobbler, and Starling in “World Class Supply Management”, 7E, dedicate a chapter to the “Make or Buy” question to include strategic issues, the role of core competency, integration, relationship management, tactical activities, and cost implications. Additional considerations include “TCO” analysis, and pros and cons of make vs. buy relative to your product’s life cycle, and your company’s performance objectives in the market place. Doing this work up front as a matter of routine requires dedicated resources, but what it saves in the long run is priceless.

Pat Lupica, BLOGs

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Pat Lupica is an Academic and President of LNK Consulting, a value chain integration company that specializes in removing silo-centric performance barriers that inhibits supply chain alignment.

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