In reality it is not as simple as it seems because the choice can rotate from small matters such as if a company makes turbine generators they might have to consider either to set up ball bearing manufacturing machine with in their business premises or should they simply purchase it from outside or for instance a car manufacturing company might consider making a engine or purchasing it from outside resources. The buy or make decision does not only pertain in manufacturing companies but it is also found excessively in outsourcing companies for instance a data processing company will think if they should hire data entry employees or give them out to specialized service providers (Probert, 1997).
Till the twentieth century many of the companies were manufacturing all their components in house. While some companies like Ford Motor Company was not only extracting the iron ore from their own plant but was also fabricating the equipment needed to assemble the car on the other hand Toyota had started purchasing three fourth of their entire raw material from the suppliers and were only focusing on assembling the car parts together. As years passed the trend of purchasing from outside resources has become more and more common. The trend is more common amongst the service businesses such as fleet management, billing and collection, fleet management and man power recruitment. The Business Process Outsourcing has become extremely popular. The companies are now outsourcing their entire value chain to other companies both locally and outside the boundaries of the county. The best example of outsourcing would be the IT outsourcing industry which has grown from 131 billion to $ 160 billion in 2006 (Mahadevan, 2008).
Whether to buy or whether to manufacture is a question that is always on the minds of the procurement team.