Costing for the ‘Do vs Buy’ decisions
It’s very important when selecting suppliers or making ‘Do vs Buy’ decisions to make sure we compare the full costs rather than just prices and some issues such as transport. When most people build their comparative cost model, they include differences in, for example, freight and packaging. Getting a realistic comparison also calls for some judgement and risk evaluation. Here are some additional items you could include: Additional inventory holding due to longer lead-times. Airfreight when customer orders demand. Resources such as Engineering who may need to visit global sites. Risks such as process control failure, industrial action, company bankruptcy, shipping damage, customs delays.