Method for Determining the Economic Make-or-Buy Partition in a Serial Production Process Using the Payback Period

Abstract

This study addresses the problem of the make-or-buy decision for products manufactured in multistage serial production processes. With a focus on the capital investment required to transition from external to internal manufacturing, the present paper proposes a method for determining the economic make-or-buy partition using the payback period. In this proposed approach, the economic make-or-buy partition is determined based on the estimated production period and production volume of the products. In addition, for multi-product scenarios where make-or-buy partitions are considered for each product, the present paper elucidates a process for determining the economic make-or-buy partition while adhering to capital investment budget constraints.