HKSM
Make-or-Buy Analysis
A structured approach to collect and organize product requirements, then evaluate viable options to decide whether to purchase the item from an external vendor or manufacture it within the organization.
Key Points
- Compares external procurement versus in-house production to meet project needs.
- Assesses total lifecycle costs, including acquisition, operations, maintenance, and disposal.
- Considers schedule, quality, risk, capacity, and organizational expertise.
- Guides the procurement strategy and documentation in the procurement management plan.
Example
A hardware project requires custom metal brackets. The team gathers specifications, estimates internal fabrication effort, and requests quotes from suppliers. Analysis shows a qualified vendor can deliver sooner with lower total cost and acceptable quality, so the project opts to buy rather than make.
PMP Example Question
While planning procurements, the team compiles product requirements and compares building a component internally versus purchasing a commercial alternative to meet a tight deadline. What technique are they using?
- Make-or-buy analysis
- Bidder conference
- Source selection criteria
- Procurement performance review
Correct Answer: A — Make-or-buy analysis
Explanation: Make-or-buy analysis evaluates whether to procure from an external supplier or produce in-house by comparing requirements, costs, schedule, risks, and capabilities.
