Production
Make-or-buy analysis
Make-or-buy analysis: determining the optimum depth of added value
The demand for products is subject to constant change – for certain products and sectors, this is accelerated by technological progress on the one hand and social changes on the other. It is important for companies to react appropriately. In order to be able to react flexibly to changes, it is important to question how the individual components for your products are manufactured. Does it make more sense to produce them yourself or is it better to have them produced by other suppliers?
We are happy to support you in finding an answer to this question. With the help of a make-or-buy analysis, we determine how you can align your production portfolio so that it fits your company and its structures perfectly, taking into account economic efficiency, technology and organization.
To determine this, we examine how profitable your company is, how your production network is set up and which growth potential you are not yet exploiting. We also take into account what know-how and technological expertise your company has, what market access you have and how flexible you should be. This allows us to work out in which product areas you should increase or reduce your vertical integration in order to become even more successful.
Optimization of manufacturing costs
Reduce manufacturing costs through optimal vertical integration
Whether it makes more sense to manufacture a certain product in-house or have it produced by another supplier depends not only on whether the necessary expertise is available in your own company, but also to a large extent on the manufacturing costs. It is not only the pure cost of the material that plays a role here, but also the overall production costs.
In order to make a well-founded make-or-buy decision, a number of questions must therefore be answered: Is it possible to produce the product in-house with existing resources? Would this possibly even improve machine utilization? Will a critical quantity of the product be produced above which in-house production is worthwhile? What indirect costs, such as purchasing processes and logistics, would have to be taken into account when purchasing? Can a service be better provided by another company?
We support you in finding answers to these questions so that you can make an informed decision. Our experts will analyze your production costs and use this as a basis to create a strategy that best suits you. We examine what growth is possible in the respective business area and find out what measures you can take to optimize your costs.
Ultimately, we will provide you with specific recommendations for action that are perfectly tailored to your company, both economically and technically. At the same time, we ensure that our results meet the requirements for delivery capability, flexibility and focus that you bring and need for these products.
Our service packages:
- Analyze manufacturing costs of “Runner products
- Prioritize opportunities for cost optimization
- Define strategy
- Carry out a technical and economic benefit analysis
- Develop business case according to your specifications (ROI, EBIT, EBITDA, etc.)
- Derive a recommendation for action
Your benefit:
- Strategic concept through to implementation support
- Cost-optimized value creation network
- Neutral, data-supported and open-ended analysis
- Management-oriented make-or-buy decision template
Philipp Kappus
Production Manager
Talk to us!
Would you like to have a make-or-buy analysis carried out in order to cut costs, increase delivery reliability, reduce lead times or create space? Then please send me a message. I will get back to you as soon as possible.
Increasing the depth of added value
Increase delivery reliability and shorten delivery times through vertical integration
In order to grow further in certain market segments or improve the market position, the depth of added value could be increased. There are various ways of penetrating the market. For example, you can set up a new division in your company, enter into a joint venture or take over another company.
The way in which you increase vertical integration should always be based on a sound business case and fit in with your corporate strategy. We will be happy to analyze for you which products in your specific case it makes sense to increase vertical integration. To do this, we look at the specific product, the framework conditions for production and your associated processes.
On this basis, we use your future scenarios and requirements (e.g. delivery reliability) to work out in which areas it is economically or objectively advantageous to increase the depth of added value. If it turns out that outsourcing makes more sense, you will have a basis with which you can conduct confident and well-informed negotiations with suppliers or service providers thanks to the cost structure that has been developed.
Our service packages:
- Analyze products and processes
- Check vertical integration
- Carry out factory planning to determine necessary investments
- Compare different options (company acquisition, joint venture or setting up your own production)
- Develop a roadmap for implementation with concrete recommendations for action
- Supporting implementation and start-up management
Your benefit:
- Building up know-how
- Sound business case
- Additional arguments for negotiations with suppliers
- Utilization of synergy effects of your existing structures
Outsourcing of logistics processes
Focus on your core business and increase flexibility
Outsourcing logistics processes to external service providers can have several advantages for a company. Outsourcing often makes it possible to react more flexibly to changes; at the same time, a specialized company has the opportunity to work more efficiently thanks to its greater technical expertise.
When logistics processes are outsourced, however, this also brings with it a number of challenges. What scope must the logistics have? What requirements must it fulfill? How can the necessary quality be ensured and how does the process handover work reliably? We can help you answer these questions. To do this, we first look at your products and processes, particularly with regard to logistics requirements. We create different scenarios and outsourcing variants for the logistics processes.
We then work with you to evaluate these options in terms of potential savings and other defined soft factors. If outsourcing makes sense in your case (even if only for certain sub-areas), we will support you in the tendering process and the independent selection of the service provider that best suits your needs.
Our service packages:
- Analyze products and processes
- Determine savings potential
- Check soft factors
- Develop and evaluate variants
- Define optimal interfaces for a work contract
- Tender a service
Your benefit:
- Focus on value-adding activities
- Increasing the efficiency of warehouse logistics
- Optimization of the infrastructure
- Reduction of space requirements for production expansion
- Examination of time and cost savings
Portfolio analysis
Recognize opportunities early on and plan for the future
It is a key challenge for every company to design its own product portfolio ideally with the available resources. It is difficult to say goodbye to established structures, and people continue to invest in well-performing products simply out of habit. For sustainable and future-proof development, however, it is essential to take a look into the future and adapt production to tomorrow’s markets with foresight.
We conduct strategy workshops with you in which we cluster your products according to growth and market share (e.g. with the BCG matrix) and analyze your production and logistics on this basis. The aim of this approach is to enable you to align your production and logistics structure with the most profitable and sustainable products.
For the analysis, we naturally also take into account the flexibility and focus, and above all the core competencies of your company. We then not only draw up well-founded recommendations for action with regard to plant structure planning for you, but also create a concrete roadmap with the next steps.
Our service packages:
- Check growth potential of individual product groups
- Analyze core competence
- Examine complementary products and established structures
Your benefit:
- Focus on core competence and increasing the contribution margin
- Dissolving established structures
- Discontinuation of unprofitable products
- Leveraging economies of scale in high-growth product groups
- Basis for network or plant structure planning
Risk assessment
Maximize opportunities, minimize risks
In- or outsourcing, the expansion of the business area and changes in the portfolio always entail both internal and external risks. Identifying these risks is not trivial and requires an expert assessment.
A risk assessment allows potential problems to be identified and evaluated at an early stage using various methods. This allows you to minimize risks on the one hand and to define and plan suitable countermeasures in advance on the other.
We support you in the assessment as well as in the subsequent risk management in the implementation of the results of the make-or-buy analysis. We contribute the industry-specific expertise of our consultants in the areas of production, logistics and supply chain, but above all we design the methodology for identifying, analyzing and evaluating the risks. Depending on your requirements, we use qualitative (e.g. SWIFT analysis or Delphi technique) or quantitative methods (e.g. FMEA or sensitivity analysis).
Our service packages:
- Coordinate risk analysis
- Moderate workshops
- Identifying risks together with you
- Analyze and assess risks using proven methods
- Record procedure, document results
Your benefit:
- Minimize your risk
- Validation of the corporate strategy
- Recommendations for dealing with the risks
What does make or buy mean?
“Make or buy” describes a decision as to whether a certain product should be manufactured in-house (in-house production, “make”) or purchased from an external business partner (external procurement, “buy”). In order to make the make-or-buy decision, it is important to define key criteria: Cost, quality of the product, know-how and resources are of course among them. However, factors such as any necessary adjustments to the product, feasibility and much more must also be taken into account.
It should always be borne in mind that a company is dependent on its suppliers, at least to a certain extent, so that the reliability of the supplier can be regarded as one of the most important non-material factors alongside specific costs and quality issues.
What is the difference between outsourcing and make or buy?
While “make or buy” is generally used for products, the term “outsourcing” or “insourcing” is usually used for services or service measures. A typical example is logistics, which many companies like to outsource to specialized service providers. Especially below a certain cost threshold, it can make sense to use the expertise that has been built up over many years of experience in this area.
In some cases, however, the terms “outsourcing” and “make or buy” are used interchangeably.
