Should you buy in or manufacture materials?

Sometimes, manufacturers have difficulty in deciding whether to manufacture materials for a finished product in-house or to buy them in from outside.

Although the principal consideration is financial, there are also other factors that need to be weighed.

The following checklist will help you focus on the most important factors:

  YES NO
Does demand for the finished product seem relatively buoyant for the foreseeable future?    
Does demand for the finished product tend to fluctuate?    
Do you have unused plant and labour that could be utilised to manufacture the materials?    
Could you achieve greater economies of scale by manufacturing in-house than you could by buying in?    
Would manufacturing in-house give you greater control over such things as the quality of the materials and delivery time?    
Could you manufacture in-house without having to recruit extra labour?    

Every 'Yes' answer is a case for manufacturing in-house.

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