Make-or-Buy Analysis is the process of gathering and organizing data about product requirements and analyzing them against available alternatives, including the purchase or internal manufacture of the product
As part of the Procurement Management Plan, we do a Make-or-Buy Analysis
which results in the Make-or-Buy Decision
Make-or-buy analysis may use payback period, return on investment (ROI), internal rate of return (IRR), discounted cash flow, net present value (NPV), benefit/cost analysis (BCA), or other techniques in order to decide whether to include something as part of the project or purchase it externally.
For PMP Exam
On the PMP Exam, questions about Make or Buy analysis will ask you about:
- You need to know that both direct and indirect costs are important in Make or Buy analysis.
- Don’t think about sunk costs when doing Make or Buy analysis.
- It happens during Procurement Management, so understand the process.
- Learn the definitions of Make or Buy Analysis and Make or Buy Decision.
- Know what factors to think about when deciding to make or buy something.
- Understand how this decision can affect the project’s overall procurement strategy.