Make vs Buy Calculator: True Cost Per Unit and Breakeven Volume
This free make vs buy calculator helps manufacturing engineers, sourcing managers, and operations executives compare true in-house production cost against fully landed purchase price for a specific part. It adds the burdens both sides of the argument usually omit: freight, duty, and inspection on the buy side, and tooling amortization and burdened machine rates on the make side. Enter seven inputs and you get total cost per unit each way, the annual dollar advantage at your volume, and the breakeven volume where the decision flips.
Your numbers
Units required per year. Use a realistic multi-year average, not a peak year.
Quoted piece price at the annual volume above, before freight, duty, and inspection.
Freight, duty, brokerage, receiving inspection, and supplier management added on top of piece price.
Raw material and purchased components consumed per unit if you make it, including expected scrap.
Total run time per unit across all operations, plus setup time allocated across a typical lot.
Wages, benefits, and applied overhead per productive hour. Use the work center rate from your ERP costing.
Tooling, fixtures, equipment depreciation, and qualification cost spread across one year.
Your results
Estimates only. This model compares cost, not strategy. Capacity displacement, intellectual property control, supplier capability, and program qualification requirements often outweigh a modest cost difference.
Get your full make vs buy analysis
We will email you a personalized expert breakdown of your make versus buy economics, breakeven sensitivity, and hidden cost gaps, and a Netray manufacturing specialist will follow up with concrete next steps.
No spam. Your results stay private. Unsubscribe anytime.
How the comparison is calculated
The buy side starts with the quoted piece price and adds a logistics and quality burden. At 42 dollars with a 6% burden, the true landed cost is 44.52 dollars, not 42. The make side sums material at 18 dollars with burdened conversion: 12 minutes at 68 dollars per hour is 13.60 dollars, giving 31.60 dollars variable. Amortizing 250,000 dollars of tooling across 25,000 units adds 10 dollars, for a total of 41.60 dollars. Making wins by 2.92 dollars per unit, or about 73,000 dollars a year. The breakeven volume divides fixed investment by the per-unit variable advantage of 12.92 dollars, giving roughly 19,350 units - below that, buying wins because tooling has too few units to spread across.
The costs each side of the argument forgets
Make vs buy decisions go wrong in predictable ways, and almost always because the comparison was not symmetric: one side was costed rigorously and the other was costed from a quote or a memory. The omissions below are the ones we see most often in discrete manufacturing cost models, and any one of them can flip the answer entirely. Before you trust a comparison, confirm that both sides were built to the same standard of completeness. A useful discipline is to have the sourcing lead build the make case and the manufacturing engineer build the buy case, which tends to surface the assumptions each side would otherwise leave flattering.
- Buy-side quotes routinely exclude freight, duty, brokerage, receiving inspection, and the cost of managing the supplier relationship.
- Make-side models often use a direct labor rate rather than a fully burdened work center rate, understating conversion cost by 40% or more.
- Setup time is frequently ignored, which badly distorts the answer for low-volume, high-mix parts run in small lots.
- Neither side usually prices the capacity displaced: making this part in-house means some other part does not get made.
Interpreting breakeven volume and volume risk
The breakeven number is the most decision-relevant output because it exposes your exposure to volume assumptions. If breakeven sits at 19,350 units and your forecast is 25,000, you have roughly 23% of headroom before the decision inverts. That is thin for a program with uncertain demand, and it argues for buying until volume is proven or for reducing the tooling investment. If breakeven sits well below realistic volume, the cost case is robust and the remaining questions are strategic rather than financial. Always test breakeven against a downside volume scenario, since tooling investment is largely unrecoverable while a purchase agreement can usually be wound down.
How Netray helps you make the decision with real data
The hardest part of make vs buy is not the arithmetic; it is getting trustworthy routing times, burdened rates, and true landed costs out of your systems. Netray builds costing analytics against Infor SyteLine, CloudSuite Industrial, Infor LN, and Baan that compare standard routings to actual labor and machine reporting, so your make-side estimate reflects what the shop really does rather than what the router says. We also assemble true landed cost from purchase order, freight, and inspection records. On-prem AI models capacity displacement across scenarios, all inside your firewall to satisfy ITAR and CMMC obligations. Engagements typically start with a costing accuracy audit on one product family.
Frequently Asked Questions
Should overhead be included in the make-side cost?
Include the overhead that genuinely changes with the decision, and be explicit about the rest. A fully burdened work center rate is the right starting point because it captures the real cost of consuming machine and floor capacity. However, if your plant has idle capacity and the fixed overhead will be absorbed regardless, a pure incremental analysis may favor making more strongly. Run both views, since the fully burdened number protects long-run pricing and the incremental number reflects short-run cash.
How do I account for capacity displacement?
If your constraint work centers are busy, making a part in-house means giving up the contribution margin of whatever it displaces. Price that opportunity cost and add it to the make side, because a part that looks cheaper to make can easily destroy value by consuming constraint hours that a higher-margin product needed. If the required capacity is genuinely idle and would remain idle, no displacement cost applies and the make case improves considerably.
What non-cost factors should override the calculated answer?
Several routinely should. Intellectual property protection, control over quality-critical processes, program qualification requirements, and customer or contractual source restrictions can all justify making a part that is cheaper to buy. In the other direction, supplier specialization, avoiding a capability you cannot staff, and preserving capital for higher-return investments often justify buying a part that is cheaper to make. Treat the calculation as the financial floor of the decision, not the decision itself.
Get a personalized make versus buy analysis built from your own routing, rate, and landed cost data by Netray's manufacturing systems engineers.
Related Tools
Supplier Risk Scorecard
Score your supply base across financial, sourcing, quality, cyber, and continuity risk in eleven questions, and get a banded action plan for the gaps you find.
Discrete ManufacturingProcure-to-Pay Efficiency Calculator
Quantify the labor cost buried in your purchase order and invoice processing, including exception handling, and benchmark your cost per invoice against automation leaders.
Discrete ManufacturingInventory Turnover Calculator
Convert your COGS and average inventory into turns and days on hand, then see how much working capital a realistic turns target would release.
Go Deeper
Manufacturing Costing Methods Compared: Standard, Actual, Average
Standard, actual, and average costing compared for manufacturers: variance analysis, ERP setup in SyteLine and LN, DFARS considerations, and AI cost intelligence.
ERP RFP Template for Discrete Manufacturers
A complete ERP RFP template for discrete manufacturing: requirements matrix, CMMC and ITAR questions, weighted scoring model, and vendor demo scripts.