Make or buy: do not turn the SUNHOUSE lesson into a rush to build a factory

Decide on one activity, not the entire business

SUNHOUSE offers a starting point for identifying where a disadvantage originates. A small business might ask whether to package orders, run a warehouse, produce one component or hire a content team. Each activity has different capital, quality and substitutability requirements.

Define the output first: volume, acceptance criteria, timing, defect tolerance and rework responsibility. Comparing a quote for execution alone with an in-house option that includes checking and support creates a mismatch from the start.

Compare total cost rather than the quoted unit price

For outsourcing, include checking, logistics, coordination, defects and rework using supported assumptions. For in-house work, consider supervision, hiring, training, equipment, maintenance, space and unused capacity. Separate sunk costs from costs affected by the decision.

Business.gov.au recommends assessing suppliers on price, reliability, quality and delivery capability. This is general management guidance; its Australian legal and registration provisions are not applied to Vietnamese businesses here.

Illustrative example: a lower unit cost is not enough

Assume equivalent quality over one month, excluding tax. Outsourcing has total variable costs of VND 45,000 per item. In-house work adds VND 30 million in monthly fixed costs and VND 30,000 variable cost per item. Unchanged shared costs are excluded from the comparison.

At 1,000 items, outsourcing costs VND 45 million and in-house work VND 60 million. At 3,000 items, the totals are VND 135 million and VND 120 million. They are equal at 30,000,000 ÷ (45,000 − 30,000) = 2,000 items per month.

This threshold compares costs under linear assumptions; it is neither a profit break-even point nor an investment recommendation. Assess upfront investment, cash flow, payback and volume risk separately. Fixed costs may rise when capacity is exceeded, requiring recalculation.

Retain control over what makes you distinctive

You do not necessarily need to own every machine to control quality. A hybrid model can retain product design, standards and acceptance testing internally while outsourcing routine work. What matters is the ability to detect and correct deviations.

If a partner holds all operating knowledge and your team cannot assess the output, switching becomes difficult. Clarify documentation, data and access handovers, including the end of the relationship. Review sensitive or complex arrangements against the actual circumstances.

Run a small test before committing to large costs

Test a small batch or operating cycle against agreed standards, recording defects, management time, delivery and total cost. One good sample does not prove reliable high-volume delivery. Also consider lower demand, sudden spikes and key-person absence.

A sound decision may be to keep outsourcing, bring only part in-house or delay investment to gather evidence. Self-sufficiency is not a goal on its own. The goal is to keep customer promises through an operation that can function reliably and withstand change.

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