ERP & MRP Planning worked example

Make or Buy Break Even with supplier buy cost benchmark of 46,300 $: a worked example

Push supplier buy cost benchmark up to 46,300 $ and the picture changes. This example computes every intermediate figure at that operating point. a plant manager needs to compare internal make cost against a supplier quote

The inputs for this scenario

  • Supplier buy cost benchmark: 46,300 $ (raised for this scenario; the documented default is 18,500)
  • Internal make cost estimate: 17,200 $ (unchanged)
  • Reference cost basis: 18,500 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Make-or-buy margin = supplier buy cost benchmark - internal make cost estimate) to the inputs above produces each figure below.
  • At this operating point the engine returns 157 % for make-versus-buy cost advantage, the number this scenario is built around.
  • At this operating point the engine returns 29,100 $ for make-versus-buy cost difference.
  • At this operating point the engine returns 46,300 $ for supplier buy cost benchmark.
  • At this operating point the engine returns 17,200 $ for internal make cost estimate.

How this compares with the baseline

  • Against the tool's baseline example, where supplier buy cost benchmark sits at 18,500 $ and the headline result is 7.03 %, this scenario comes in 2,138% above the baseline at 157 %.
  • It computes the dollar gap between a supplier quote and your internal make cost, and the size of that gap as a percentage of a chosen reference cost basis. The value of this scenario is the size of the gap it exposes: that gap, priced out over a year, is the budget you can justify spending to close it.

Results at a glance

  • Make-versus-buy cost advantage: 157 % (headline result)
  • Make-versus-buy cost difference: 29,100 $
  • Supplier buy cost benchmark: 46,300 $
  • Internal make cost estimate: 17,200 $

Run it with your numbers

  • Every input above is editable in the live Make or Buy Break Even calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.