CEG How-To Guides

What Is a Make or Buy Analysis Template and How to Use It?

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A Make or Buy Analysis Template is a structured tool used to evaluate whether an organization should produce a product or service in-house (make) or outsource it to a third party (buy). This decision is crucial for cost efficiency, resource allocation, and strategic planning in project management and procurement.

How to Use a “Make or Buy Analysis” Template

1. Define the Requirement
   • Clearly outline the product, service, or component under evaluation.
   • Identify the business need, quality standards, and project constraints.
2. Gather Cost Data
   • Make Costs: Include materials, labor, equipment, facilities, and overhead.
   • Buy Costs: Include vendor pricing, shipping, import duties, and contract management fees.
3. Assess Strategic Factors
   • Consider core competencies — does making the product align with business strengths?
   • Evaluate long-term sustainability, flexibility, and scalability.
4. Analyze Risks
   • Make Risks: High initial investment, production delays, and resource strain.
   • Buy Risks: Supplier dependency, quality concerns, and potential hidden costs.
5. Compare and Decide
   • Use a cost-benefit analysis to weigh financial and strategic factors.
   • Consider qualitative benefits such as control, innovation, and competitive advantage.
   • Select the most viable option and document the rationale for stakeholders.

Why Use a “Make or Buy Analysis” Template?

• Ensures Data-Driven Decisions — Provides a structured approach for cost and risk evaluation.
• Improves Resource Allocation — Helps prioritize internal capabilities vs. outsourcing benefits.
• Reduces Risks — Identifies potential pitfalls before committing to a decision.

By leveraging a Make or Buy Analysis Template, organizations can make informed choices that optimize efficiency, reduce costs, and align with strategic business goals.