AI Prompts for Make-vs-Buy Analysis

Make-versus-buy decisions are usually argued on unit cost and decided on something else — control, capacity, capability, or someone's preference. A sound analysis separates the strategic question (is this a capability we must own?) from the economic one (which path is cheaper at realistic volumes?) and from the risk question (what can go wrong on each path and how reversible is it?).

These prompts take those three questions in order and then write the memo. The cost comparison is only as good as the cost data you give, and the model should show the volume at which the answer flips rather than declare a winner at one point.

Before you use these

Have these ready to replace the highlighted [variables]:

• The item or process in question and its role in your product or service
• In-house cost structure: fixed and variable costs, capacity needed, capital, ramp time
• Outsourcing option: quoted price, terms, supplier capability, lead time, transition cost
• Volume forecast with a range
• Strategic considerations: IP, quality control, flexibility, capability building

The prompts

• 1. Structure the decision framework
• 2. Compare costs with volume sensitivity
• 3. Write the decision memo

1. Structure the decision framework

Act as an operations strategy advisor structuring a make-vs-buy decision for [item / process].

Context: [role in the product, current arrangement, why the question has come up]
Strategic factors: [IP sensitivity, differentiation, capability we want to build or retain, customer requirements]
Operational factors: [volume and variability, quality requirements, lead-time needs, capacity available, workforce skills]
Constraints: [capital availability, timeline, existing commitments]

1. Assess against each criterion for both options with a short rationale: strategic importance / core competence; control over quality and IP; flexibility to volume change; capacity and capital requirements; capability and learning; speed to implement; supplier market health; reversibility.
2. Identify the decisive criteria — those where the options differ most and the difference matters most.
3. State the conditions under which 'make' is clearly right, 'buy' is clearly right, and where a hybrid (make critical variants, buy standard; or dual capability) makes sense.
4. List the assumptions the strategic assessment depends on and how to test them.
5. Note any criterion where the organization's preference is likely to bias the analysis, and how to guard against it.

Do not weigh cost in this step — it is analyzed separately. Keep the output to one page.

2. Compare costs with volume sensitivity

You are building the economic comparison for a make-vs-buy decision on [item].

Make: [fixed costs per year (labor, equipment, overhead), variable cost per unit (material, labor, energy), capital investment and life, ramp-up time and cost, capacity ceiling]
Buy: [unit price by volume tier, MOQ, freight and duty, inventory carrying effect of lead time, qualification/transition cost, contract term, price escalation assumptions]
Volume: [low/base/high per year over [horizon]]
Other: [cost of capital, tax treatment if relevant, cost of exit for each option]

1. Total annual cost for each option at each volume level. Show fixed and variable components for make; show tiers and landed cost for buy.
2. Break-even volume where make equals buy, with the formula.
3. Horizon view: cumulative cost over [horizon] including one-off costs, discounted at the cost of capital.
4. Sensitivity: the effect on the result of ±20% on in-house variable cost, supplier price, volume, and utilization of the in-house asset. Identify the assumption that most affects the answer.
5. Costs commonly omitted and whether they apply here: management attention, quality escapes, working capital, opportunity cost of capacity, exit costs.

Present as tables and one break-even chart description. Do not round the answer to a recommendation — state which option is cheaper under which conditions.

3. Write the decision memo

Act as an operations director writing a make-vs-buy decision memo for [item] to [audience].

Strategic assessment: [summary]
Cost comparison: [summary including break-even and sensitivity]
Risks identified: [make-side and buy-side]
Timeline pressure: [if any]

Write the memo:
1. Recommendation in one sentence, with the horizon it applies to.
2. Rationale: the two or three decisive factors, referencing the analysis. Cost and strategy separately.
3. What we are choosing not to do and what it would take to be right about that choice.
4. Risks of the recommended path with mitigations; risks of the rejected path for completeness.
5. Reversibility: how hard it is to change course later, and the point at which the decision becomes effectively permanent.
6. Implementation outline: phases, owners, timeline, investment, first milestone that will show whether it is working.
7. Conditions that would reverse the recommendation (volume, supplier market, capability) and the review date.
8. Decision required, phrased precisely.

Tone: direct and evidence-led. No advocacy language. Length: under two pages.

Break-even in numbers

An illustrative comparison from the second prompt, stripped to the arithmetic.

Related prompts

• Sourcing Strategy
• Capacity Planning
• Operational Cost Reduction
• Supplier Risk Assessment
• Operations Strategy Review
• Procurement Strategy
• Financial model sanity check — Finance

Logical next step

After this, most operations teams move on to Sourcing Strategy.

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