Building in-house capability means control and integration. Outsourcing means flexibility and capital efficiency. Neither wins universally; the right answer depends on what matters most for your specific products and strategy. The make/buy decision for injection molding shapes competitive position for years, making thorough analysis worthwhile.
This decision isn’t purely financial. Strategic factors, operational considerations, and risk tolerance all influence the optimal choice. A framework that examines multiple dimensions produces better decisions than simple cost comparison.
The Core Tradeoff
The fundamental tension is between control and flexibility.
In-house molding provides direct control over production scheduling, quality processes, and continuous improvement. Manufacturing integrates with assembly and other operations. Knowledge stays inside the organization. But in-house molding requires capital investment, specialized expertise, and ongoing operational attention.
Outsourced molding preserves capital for other uses and accesses specialized capabilities without building them internally. Production capacity flexes with demand. Multiple suppliers provide resilience and leverage. But outsourcing introduces dependencies, communication overhead, and potential alignment challenges.
Neither option is inherently superior. The right choice depends on how the specific tradeoffs apply to your situation.
Arguments for In-House
Certain conditions favor building internal capability.
Quality control receives direct attention when manufacturing is in-house. Quality issues get immediate response. Process improvements happen continuously. The feedback loop between production and design shortens. For products where quality is critical and complex, direct control may justify the investment.
Responsiveness to demand changes and design modifications improves with internal manufacturing. Emergency orders don’t depend on supplier capacity. Engineering changes can be implemented immediately. For products with volatile demand or frequent changes, internal capability provides agility.
Intellectual property protection is simpler when manufacturing stays internal. Tooling, processes, and part details remain confidential. For proprietary products where manufacturing knowledge provides competitive advantage, internal production limits exposure.
Integration with assembly and other operations creates efficiency when injection molded parts flow directly to next operations. Inventory between operations decreases. Transportation cost and time disappear. For products with extensive post-molding operations, integrated manufacturing may optimize total cost.
Cost at high volume favors internal production when utilization is high. If volume fully utilizes equipment, internal production eliminates the margin paid to outside molders. At sufficient volume, owned equipment costs less than rented capacity.
Arguments for Outsourcing
Other conditions favor using external manufacturing.
Capital avoidance preserves cash for core business investment. Injection molding equipment, facilities, and working inventory represent substantial capital. If that capital creates more value elsewhere in the business, outsourcing converts the capital requirement to operating expense.
Access to specialized capability provides options that would be impractical to build internally. Cleanroom molding, large tonnage equipment, specific material expertise, or advanced quality systems may be needed occasionally but not enough to justify internal investment. Outsourcing provides access without ownership.
Flexibility to scale production up and down matches supply to demand without capacity risk. When demand increases, qualified suppliers provide additional capacity. When demand decreases, cost reduces proportionally. Internal capacity creates fixed cost that must be covered regardless of demand.
Geographic distribution becomes practical through multiple regional suppliers. Instead of shipping parts globally from a central facility, local suppliers near each market reduce freight cost, lead time, and supply chain risk. Global distribution through internal facilities would require massive investment.
Focus on core competency keeps organizational attention on differentiating activities. If injection molding is commodity manufacturing rather than competitive advantage, resources devoted to running a molding operation could create more value in design, marketing, sales, or customer service.
Financial Analysis
Financial comparison requires capturing true total cost, not just visible purchase price.
True cost of in-house includes:
- Equipment depreciation or lease cost
- Facility cost (space, utilities, insurance)
- Direct labor (operators, technicians, supervisors)
- Indirect labor (maintenance, quality, engineering support)
- Material cost including waste
- Tooling maintenance
- Inventory carrying cost
- Training and capability development
True cost of outsourced includes:
- Purchase price (piece cost times volume)
- Freight and logistics
- Incoming inspection and quality management
- Inventory carrying cost for safety stock
- Supplier management overhead
- Tooling investment (typically comparable either way)
Common errors in financial comparison:
Comparing purchase price to manufacturing cost, ignoring overhead allocation.
Ignoring inventory differences between models.
Assuming 100 percent utilization of internal capacity.
Ignoring supplier management costs for outsourcing.
Using marginal cost when fixed costs will exist either way.
Volume sensitivity affects the comparison. Internal production has higher fixed cost and lower variable cost; outsourcing has lower fixed cost and higher variable cost. Below some volume, outsourcing costs less. Above some volume, internal production costs less. The crossover depends on specific cost structures.
Strategic Factors
Beyond financial analysis, strategic considerations affect the decision.
Core competency assessment: Is injection molding central to competitive advantage, or is it supporting infrastructure? If molding expertise differentiates the company’s products, building internal capability makes sense. If molding is commodity capability, outsourcing may be appropriate.
Competitive advantage potential: Could superior manufacturing capability create differentiation? For some products, process expertise enables quality or cost advantages that competitors can’t match. For others, manufacturing is a commodity where competitive advantage comes from elsewhere.
Supply chain resilience considerations: Does owning manufacturing make supply more or less resilient? Internal capability reduces dependence on external suppliers. But concentration of production also creates single points of failure. Multiple external suppliers may provide more resilience than single internal operations.
Long-term capability building implications: What capabilities does the organization want to develop? Building internal molding capability develops manufacturing expertise, process engineering skills, and vertical integration. Outsourcing develops supplier management, specification writing, and partnership skills. Both are valuable; choose based on strategic direction.
Hybrid Approaches
The choice isn’t binary. Hybrid models combine internal and external production.
Core volume internally, overflow externally maintains base capability while accessing additional capacity. Internal operations handle predictable demand; outside suppliers handle peaks. This model provides control over core production while enabling flexibility.
Different products in different locations places products where each fits best. High-value, proprietary products may stay internal. Commodity components may go to low-cost suppliers. Complex products may go to specialized molders. This portfolio approach optimizes each product’s sourcing.
Capability-based allocation reserves internal capacity for what internal operations do best. Products requiring close engineering integration stay internal. Products requiring specialized capability go to specialists. Products requiring geographic presence go to regional suppliers.
Managing split production requires coordination. Quality standards must be consistent. Process documentation must enable multiple sources. Supply planning must balance internal and external capacity. The complexity of hybrid models requires management attention that pure approaches avoid.
Decision Framework
Systematic decision-making considers multiple factors in combination.
Volume assessment: What is current volume? What is expected volume in three to five years? Is volume stable or volatile? How certain is the volume forecast?
High, stable, certain volume favors internal production.
Low, volatile, uncertain volume favors outsourcing.
Variety assessment: How many different parts? How often do designs change? Are products standardized or customized?
Low variety, stable designs favor internal production.
High variety, frequent changes favor flexible outsourcing.
Complexity assessment: How challenging is manufacturing? Is specialized expertise required? Are quality requirements demanding?
High complexity favoring internal control or specialized external capability.
Low complexity favoring commodity outsourcing.
Strategic importance assessment: Is manufacturing a competitive advantage or supporting function? Does manufacturing expertise differentiate products?
High strategic importance favors internal capability building.
Low strategic importance favors outsourcing and focus elsewhere.
Capital availability assessment: Is capital available for manufacturing investment? What is the opportunity cost of capital deployed in manufacturing?
Abundant capital with limited alternative uses favors internal investment.
Constrained capital or high opportunity cost favors outsourcing.
Weight factors according to your situation. No formula produces the right answer for all companies. The framework ensures that relevant considerations are examined and traded off appropriately.
Make/buy decisions shape competitive position for years. The analysis should be proportionally thorough, involving operations, finance, engineering, and strategy perspectives.
Sources
- Institute for Supply Management. “Make vs. Buy Decision Analysis.”
- Harvard Business Review. “The Right Way to Manage Outsourcing.”
- Plastics Technology. “In-House vs. Contract Molding Economics.” https://www.ptonline.com/
- Society of Plastics Engineers. “Manufacturing Strategy for Injection Molding.”
- MAPP (Manufacturers Association for Plastics Processors). “Industry Economics.” https://www.mappinc.com/