Strategic sourcing: developing a progressive framework for make-or-buy decisions

Abstract

Purpose: Make-or-buy decisions represent a critical dilemma faced by many firms. The appropriate decision between designing and manufacturing parts or services in-house, buying them from external providers or combining both is a fundamental firm process. This paper seeks to address this question by updating the traditional make-or-buy literature with new academic insights, developing a make-or-buy framework with a tool for its operationalisation to help managers evaluate sourcing decisions. Design/methodology/approach: First, a literature review of the principal theories and approaches about make-or-buy decisions is discussed. Second, the development of the make-or-buy framework is described and explained based on the results of qualitative interviews with practitioners and a set of interviews of an in-firm case study. Third, the results and the implementation of the framework are outlined. Findings: This study addresses the problematic identified by developing a practical framework to guide practitioners and academics to make sourcing decisions in a structured and standardized manner Our results suggest to build multidisciplinary teams of different disciplines (purchasers, Research and Develop employees (R&D), quality representatives, etc.) in order to avoid resolving make-or-buy decisions under the conditions of inaccurate and incomplete information. Implications: This paper aims to contribute to the study of the make-or-buy literature in supply chain management through the graphical representation of why and how make-or-buy decisions are made. Interestingly, the paper presents relevant dimensions and factors to be studied and evaluates possible outcomes when approaching make-or-buy decisions. Originality/value: Our results suggest that practitioners should combine this framework with a pairwise comparison matrix and a multi-criteria decision analysis based on the TOPSIS methodology to assess strategic sourcing decisions.