Make-versus-buy analysis is a strategic sourcing decision that considers whether capabilities, products, components, services or processes should be performed internally or contracted to external sources.

Definition (ASCM) + plain-language translation

Make-versus-buy analysis determines whether a product, component, service, process, or capability should be performed internally or obtained from an external source. Outsourcing transfers work to an external provider; offshoring places work in another country.

Why it matters (service, cost, cash, risk)

• Service: the sourcing choice affects responsiveness, continuity and control over customer-facing performance.

• Cost: unit price is only one element; total cost, coordination effort and switching costs also matter.

• Cash and assets: internal production can require capacity and asset investment, while external sourcing changes working-capital and payment patterns.

• Risk: external dependence, geography, capacity constraints and loss of control can increase exposure if not deliberately managed.

How it shows up in real supply chains

• A capability is identified as strategically important or non-core before the sourcing decision is made.

• Internal capacity, competence and cost are compared with external supplier capability.

• Global sourcing options introduce lead-time, transportation, currency, political and relationship-management considerations.

• The supply plan is refined as better sourcing information becomes available.

Root causes / drivers

• Business strategy and the role of core competencies.

• Required capacity, expertise, technology and speed to market.

• Total cost rather than purchase price alone.

• Supply-market capability and the organisation's tolerance for external dependency.

How to measure it (diagnostic + what good looks like)

• Total cost of ownership for internal versus external options.

• Lead time and service performance under each option.

• Capacity availability and responsiveness to volume changes.

• Supplier or internal-process quality and continuity performance.

How to improve it (playbook)

• Start from the supply plan and business strategy rather than from a price quotation.

• Separate strategically critical capabilities from work that can be competitively sourced.

• Evaluate total cost, service, capacity, risk and time-to-market together.

• Revisit the decision when markets, technology, capacity or strategic priorities change.

SCOR DS lens (where to intervene)

• Orchestrate: align the sourcing choice with enterprise strategy, risk and governance.

• Plan: include the chosen sourcing model in supply and capacity plans.

• Source: translate the decision into supplier-market analysis, selection and ongoing management.

CSCP exam cues (what gets tested)

• Make-versus-buy is a strategic decision, not simply a unit-price comparison.

• Outsourcing and offshoring are related but are not the same concept.

• Core competencies and total cost can outweigh a lower purchase price.

• The sourcing decision should remain aligned with the business and supply plans.

End2End practitioner notes

• Use the decision to define the operating model before negotiating individual suppliers.

• Treat overseas sourcing advantages and added complexity as one combined decision.

• A sound answer usually balances capability, total cost, service and risk rather than maximising one factor.

Why it matters

Make-versus-buy analysis is a strategic sourcing decision that considers whether capabilities, products, components, services or processes should be performed internally or contracted to external sources.

Core concepts

• Make-versus-buy analysis is a strategic sourcing decision that considers whether capabilities, products, components, services or processes should be performed internally or contracted to external sources.

• Make-versus-buy analysis determines whether a product, component, service, process, or capability should be performed internally or obtained from an external source. Outsourcing transfers work to an external provider; offshoring places work in another country.

• Plain-language: decide what the organisation should keep inside, what it should buy from outside, and whether an external source should be domestic or overseas.

• Service: the sourcing choice affects responsiveness, continuity and control over customer-facing performance.

• Cost: unit price is only one element; total cost, coordination effort and switching costs also matter.

• Cash and assets: internal production can require capacity and asset investment, while external sourcing changes working-capital and payment patterns.

Remember for the exam

• Make-versus-buy is strategic, not simply a price comparison.

• Outsourcing and offshoring are related but not identical.

• Core competency and total cost considerations can outweigh unit price.

• Sourcing should be connected to the supply plan and business strategy.

Apply it

• Use this concept in a practical decision by asking: Make-versus-buy analysis is a strategic sourcing decision that considers whether capabilities, products, components, services or processes should be performed internally or contracted to external sources.

• Then check the decision against this principle: Definition (ASCM) + plain-language translation

Exam trap

Watch for questions that test this distinction or principle: Make-versus-buy analysis is a strategic sourcing decision that considers whether capabilities, products, components, services or processes should be performed internally or contracted to external sources.

Key takeaway

Make-versus-buy analysis is a strategic sourcing decision that considers whether capabilities, products, components, services or processes should be performed internally or contracted to external sources.