Make-or-Buy: When is it worth outsourcing production?
Every industrial company sooner or later faces the dilemma: manufacture in-house or buy externally? This decision affects not only costs and technological equipment but also personnel strategy and long-term competitiveness.
When one of the leading manufacturers of cryogenic vessels decided to buy a Czech plant, they had no idea how difficult it could be to find a balance between in-house production and purchasing components from suppliers. After decades of established processes and long-term employees retiring, the company reached a point where it had to ask a fundamental question: is it still worth making these parts in-house, or is it more efficient to outsource them?
How to recognize the right time for a change?
Deciding between in-house production and outsourcing is not just about price. In addition to technology and raw material costs, the following should be considered:
Aging workforce – if key experts are leaving and are not easy to replace, it may be more advantageous to switch to external suppliers.
Quality and reliability of production – when processes are obsolete and require frequent repairs, it can be more efficient to find a specialized supplier.
Delivery flexibility – external manufacturers can respond more quickly to changes in demand and offer variable delivery volumes.
Why is it more complicated than it seems?
One of the biggest problems this manufacturer faced when switching to external suppliers was the fragmentation of the supply chain. Parts they already purchased were spread across hundreds of suppliers, leading to chaotic logistics and inconsistent quality. Furthermore, it turned out that much of the drawing documentation did not correspond to reality – components produced by long-term suppliers often contained know-how that was never documented. This meant that when a new supplier produced a part exactly according to the drawing, it did not function in production as it should.
What did PARTORY do?
Our solution was simple but effective:
We compared physical products with drawing documentation – we identified where the differences were and helped the company adjust the drawings according to the actual state.
We produced samples that met actual production needs – thereby eliminating the risk of errors and inconsistencies.
We consolidated suppliers – instead of hundreds of small manufacturers, we offered a broader portfolio of products from a single source, which simplified logistics and reduced costs.
We created a price benchmark – this ensured that even original suppliers lowered their prices because they suddenly found themselves in a competitive environment.
Result?
Thanks to this optimization, the manufacturer of cryogenic vessels not only reduced costs but also gained greater control over the quality and stability of the supply chain. And most importantly – they freed up their hands for key areas of their business where they truly bring the highest added value.