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What is Make-Buy Analysis

Make-Buy Analysis: Business decision which compares the costs and advantages of manufacturing a product or product component alongside purchasing it. When the purchase price is high than what it would cost the manufacturer to prepare it, or when the manufacturer has surplus capacity that could be employed for that product, or the manufacturer's suppliers are not reliable, then the manufacturer might select to make the product. This supposes the manufacturer contains the skills and equipment essential, access to raw materials, and the capability to meet its own product standards. The company who prefers to make instead of buy is at risk of losing alternative sources, access to technological innovations and design flexibility.

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