KEVOS® WORKOS · Decide
Make or Buy (quick check)
Should you make it yourself or outsource it?
Compares the annual cost of making a part in-house with buying it, and finds the volume at which the cheaper option changes.
Open the calculatorRuns in your browser. No account needed.
How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Annual quantity | units | Sales forecast or MRP annual demand for the part |
| Internal variable cost / unit | $ | Costing system: material, direct labour and variable overhead per unit |
| Internal setup + tooling | $ | Annual tooling, set-up and fixed costs that exist only if you make the part |
| Supplier price / unit | $ | Written supplier quotation at the forecast volume |
| Freight + supplier fixed cost | $ | Freight, supplier tooling or annual fixed charges from the quotation |
Method and formulas
- Make total = quantity × internal unit cost + internal fixed cost
- Buy total = quantity × supplier unit price + supplier fixed cost
- Crossover volume = (internal fixed − supplier fixed) ÷ (supplier unit price − internal unit cost)
- Decision robust if the crossover is at least 25% away from the entered volume
Limitations
- Uses relevant (avoidable) costs only if you enter them that way
- Ignores capacity, quality, lead time, intellectual property and supply risk
- Single volume and constant unit costs; no price breaks
Typical uses
- First screen of a sourcing decision
- Checking whether a supplier quote is worth pursuing
- Re-testing a past decision after volume or price changes
Who it is for
- Production and operations managers
- Purchasing and supply chain staff
- Owners of small manufacturing businesses
What you get
- MAKE or BUY at the entered volume
- Annual cost of each option and the difference
- Crossover volume where the preference changes
Interpreting the result
- A crossover close to your volume means the decision is sensitive: test both forecasts
- A large cost advantage still needs the non-cost checks to pass
- Use the detailed make-or-buy tool when freight and overhead matter
References
- Relevant costing for make-or-buy decisions, e.g. Horngren, Datar and Rajan, Cost Accounting: A Managerial Emphasis (Pearson)
WORKOS tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.
