Make-or-buy decision

Definition

A make-or-buy decision is the strategic choice between producing an item internally (in-house) or purchasing it externally (from an outside supplier). This decision involves considering the cost, capacity, quality, and speed of obtaining the goods or services.

Related terms

Outsourcing: The business practice of hiring a party outside a company to perform services or create goods that traditionally were performed in-house by the company's own employees and staff.

Cost: benefit analysis - A process by which businesses weigh the costs and benefits of a decision, including all potential expenses and revenues that could result from the decision.

Supply Chain Management: The management of the flow of goods and services, involving the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption