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Criteria Make Buy Difference
Direct Labo 10000 0 10000
Material Co 15000 18000 -3000 Overhead C 5000 0 5000 Capex Depr 5000 0 5000 Inventory 2000 0 2000 Production 70 0 70 Quality Con 8 7 1 Lead Time 15 0 15 Supplier Pr 0 22000 -22000 Shipping/Lo 0 4000 -4000 Supplier Le 0 5 -5 Supplier Fle 0 9 -9 Potential P 0 1000 -1000 Warranties 0 9 -9 Total 37093 45030 -7937 Step-by-Step Guide: How to Use the Make vs Buy Ana The Make vs Buy Analysis Excel Model is designed to help professionals in supply chain management evaluate the costs, 1. Identify the Part/Component Start by determining which part, product, or service you want to evaluate using the model. Ensure this component is ess 2. Input Costs for Internal Production (Make) In the 'Make' column, enter the following values:
- Direct Labor Costs: Include wages for the workforce involved in producing the component. - Material Costs: Input the cost of raw materials required for production. - Overhead Costs: Add any indirect production costs, including utilities, equipment maintenance, etc. - Capex Depreciation: Enter the annual depreciation of capital expenditures used for production, such as machinery. - Inventory Holding Costs: Include the cost of storing the materials and finished goods. - Production Capacity Utilization: Score (1-100) the extent to which your production line is used. A low score means und - Quality Control (Score): Rate (1-10) the expected quality control from in-house production. - Lead Time (Days): Input the number of days required for internal production and delivery. 3. Input Costs for External Sourcing (Buy) In the 'Buy' column, enter the following values:
- Supplier Pricing: Enter the total cost quoted by the supplier.
- Shipping/Logistics Costs: Include transportation, customs, and handling fees. - Supplier Lead Time Variability: Rate (1-10) the reliability of the supplier in delivering the part on time (a lower score in - Supplier Flexibility (Score): Rate (1-10) the supplier's ability to handle changes in demand. - Potential Penalties (Delays): Enter any potential penalties you might incur if the supplier fails to meet delivery deadline - Warranties and After-Sales Service (Score): Rate (1-10) the warranty or after-sales services offered by the supplier. 4. Review the Differences The 'Difference' column will automatically calculate the differences between the Make and Buy options. - Positive values indicate that making in-house is more cost-effective or beneficial. - Negative values favor buying externally, making it a more cost-effective option. 5. Analyze Total Costs and Benefits Review the totals at the bottom of the sheet for both 'Make' and 'Buy' columns. These totals help you quickly assess whic 6. Factor in Strategic Importance Depending on your company’s long-term strategy, assess whether maintaining control over certain components (Make) 7. Make a Decision After reviewing the data, make an informed decision based on the cost, operational impact, and strategic factors. You can Practical Tips - Update the Model Regularly: Costs, lead times, and supplier performance can change over time, so it's important to kee - Consider Scenario Analysis: Test multiple scenarios (e.g., changes in demand or supplier delays) to understand the pote - Collaborate with Other Teams: Share the model with finance, production, and procurement teams to gather insights an ke vs Buy Analysis Excel Model nagement evaluate the costs, benefits, and risks associated with producing a part or component in-house (Make) versus purchasing i
Ensure this component is essential to your decision-making process, whether it's a high-cost item or one that affects production time
tion, such as machinery.
used. A low score means underutilization, while a high score means full utilization.
part on time (a lower score indicates more variability in lead time).
ails to meet delivery deadlines.
es offered by the supplier.
Buy options.
help you quickly assess which option is more cost-effective or operationally efficient. Additionally, consider non-financial factors su
certain components (Make) or focusing on flexibility and scalability (Buy) aligns better with your business goals.
and strategic factors. You can revisit and adjust inputs as new data becomes available, such as changes in supplier pricing or interna
time, so it's important to keep your data updated.
elays) to understand the potential impact on your decision. t teams to gather insights and ensure accuracy. e (Make) versus purchasing it from an external supplier (Buy). Below is a precise step-by-step guide on how to use the model effecti
e that affects production timelines.
ider non-financial factors such as lead time, quality control, and supplier reliability.
