A “Make-or-Buy” decision is when you wonder if you’ll save money
by fabricating parts in-house instead of purchasing them pre-made from a supplier.
In a Make-or-Buy decision, the most important factors to consider are availability
of production capacity, labor costs, material costs, and total time.
A Teflon™ coating or powder spraying shop may decide to purchase any
part if it is cheaper to buy or if the shop does not have sufficient production
capacity to produce it in-house. The Make-or-Buy decision is one that managers
and shop owners must consider frequently in order to keep operational costs as
low as possible.
The following is an example of a cost analysis for the Make-or-Buy
decision that analyzes industrial hooks, assuming
that the shop has sufficient production capacity. We took hook part number
C-4076 as a typical example. This hook is a standard “C” style
hook that is 4” long, made of 0.076 wire that can hold up to 20 lbs.
We’ll consider how much it might cost to produce 2,000 hooks, which is a standard
shipping quantity.
Total Cost: $138 ($30 wire cost + $108 labor)
Total Cost: $76.15
The above cost analysis for buying vs. making hooks in-house shows
that it is more cost effective to purchase the C-4076 C-style standard hooks
rather than to produce them in-house.
Manufactured from hard drawn spring steel, these hooks survive
repeated stripping and offer higher loading capabilities than mild steel
hooks. These hooks are ideal for wider parts or multiple styles of parts
with varying thicknesses. For maximum loading and repeated usage, ensure the
product being hung seats into the bottom of the “C.”
