Evaluate sourcing options with detailed cost and drivers. See break-even points, savings, and tradeoffs instantly. Plan better factory decisions using transparent manufacturing economics today.
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| Example metric | Sample value | Why it matters |
|---|---|---|
| Annual demand | 12,000 good units | Demand drives variable spend and break-even volume. |
| Internal unit variable cost | $25.00 | Includes materials, labor, overhead, quality, and internal logistics. |
| Internal scrap rate | 3.00% | Scrap increases required production quantity and true unit cost. |
| Supplier landed unit cost | $29.54 | Combines price, duty, freight, inspection, and inventory carrying. |
| Supplier defect rate | 2.00% | Defects raise required purchase volume and handling expense. |
| Capacity release value | $18,000.00 | Buying may free capacity for higher-value internal work. |
| Transition cost | $7,000.00 | Captures launch, onboarding, and switching effort. |
| Decision output | Choose the lower annual total cost | Recommendation should match both economics and operating constraints. |
This calculator compares annual internal production cost against annual external sourcing cost. It adjusts for scrap, defects, duty, risk, and capacity value.
Make required units = Annual demand ÷ (1 − Make scrap rate) Make total cost = (Make required units × Internal variable cost per attempted unit) + Make fixed cost Landed supplier unit = Supplier price × (1 + Duty rate) + Freight + Inspection + Inventory carrying Buy required units = Annual demand ÷ (1 − Supplier defect rate) Buy total cost = Base purchase spend + Defect handling + Risk premium + Tooling + Transition + Residual overhead − Capacity value − Salvage value Break-even quantity = (Buy fixed effect − Make fixed effect) ÷ (Make effective unit cost − Buy effective unit cost)Relevant cost view includes only avoidable internal fixed cost. Full absorption view also adds allocated fixed cost to the internal option for an accounting-style comparison.
It compares the annual economic impact of producing a part internally versus purchasing it from a supplier. A strong analysis includes quality losses, transition cost, fixed overhead effects, and the value of any released internal capacity.
Scrap means you must start more units than you can ship. That increases actual materials, labor, and overhead consumed for each good unit delivered, which changes the true internal cost.
Supplier defects create extra purchased volume, reinspection, returns, replacement orders, and schedule risk. Ignoring defect rate can make external sourcing look cheaper than it really is.
Relevant cost focuses on costs that change with the decision. Full absorption adds allocated fixed cost for accounting visibility. Strategic sourcing decisions usually rely more heavily on relevant cost.
Use the profit contribution or cost avoidance created by freeing machines, labor, or floor space. Only include value that is realistic, measurable, and likely to be captured.
It is an added percentage applied to supplier spend to reflect uncertainty such as delays, currency swings, shortages, or weak vendor performance. It helps prevent underpricing external risk.
Break-even quantity is the annual demand where both options cost the same. Below or above that point, the option with the lower slope or lower fixed burden may become preferable.
No. It supports financial comparison, but you should still review supplier capability, lead time, compliance, IP risk, continuity planning, and strategic fit before making a final decision.
Important Note: All the Calculators listed in this site are for educational purpose only and we do not guarentee the accuracy of results. Please do consult with other sources as well.