Strategic sourcing: a progressive approach to the make-or-buy decision

Executive Overview Historically, many firms have made sourcing decisions—commonly known as make-or-buy decisions—based disproportionately on unit cost, with insufficient regard for strategic or technological issues. This cost-focused approach has led to competitive tragedy for many firms, indeed, entire industries. Managers need better tools for evaluating sourcing decisions—tools that can accommodate the long-term, strategic issues. This article presents such a tool, the strategic sourcing model, which augments the traditional cost analysis by considering strategic and technological factors. Using this framework, in conjunction with a cost analysis, can help companies make the sourcing decisions that will move them into the leagues of world-class manufacturing and position them for sustained competitive success in the future.