ERP & MRP Planning calculator

Make or Buy Break Even Calculator

Make or Buy Break Even helps planners and operations leaders compare outsourcing with internal production when capacity, cost, or lead time is constrained.

What this calculator does

  • Compare supplier buy cost with internal make cost and show the make-versus-buy margin.
  • a plant manager needs to compare internal make cost against a supplier quote
  • It compares the cost advantage of making internally versus buying externally.

Formula used

  • Make-or-buy margin = supplier buy cost benchmark - internal make cost estimate
  • Margin percent = make-or-buy margin ÷ reference cost basis × 100

Inputs explained

  • Supplier buy cost benchmark: Use quoted supplier cost, outside processing cost, or landed buy cost for the same quantity.
  • Internal make cost estimate: Include material, labor, overhead, setup, tooling, quality, and capacity cost.
  • Reference cost basis: Usually the supplier buy cost or internal make cost used for percentage reporting.

How to use the result

  • Use it during ERP cleanup, MRP review, production scheduling, S&OP prep, purchasing decisions, shortage meetings, capacity planning, or daily shop-floor execution reviews.
  • This is a planning estimate. Confirm final commitments against current ERP/MRP records, released BOMs and routings, inventory accuracy, supplier commitments, open work orders, quality holds, and shop-floor constraints.

Common questions

  • What is the Make or Buy Break Even calculator for? It compares the cost advantage of making internally versus buying externally.
  • What information do I need before using it? You need supplier buy cost, internal make cost, and a reference basis.
  • How should I use the result? Use it to decide whether to outsource, insource, quote differently, or protect internal capacity.
  • When is the result only an estimate? It is only an estimate when demand, inventory, lead time, routing hours, setup time, yield, supplier dates, or work-center capacity comes from forecast assumptions or stale ERP data instead of current orders and recent execution history.

Last reviewed 2026-05-12.