3. Get senior management involved in defining a clear purchasing policy

The make or buy decision is the act of making a strategic choice between producing an item internally or buying it externally (from an outside supplier).

This purchasing side of the decision is also known as outsourcing.

Make-or-buy decisions usually arise when a company that has developed a product or part has problems with current suppliers, or has diminishing capacity or changing demand.

These purchases are analyzed at both strategic and operational levels.

Variables considered at the strategic level include analysis of the future, as well as the current environment. Issues such as government regulations, competing companies and market trends all have a strategic impact on the make-or-buy decision. Of course, companies should make items that reinforce or match their core competencies,...