In-house production

In-house production (or in- house production ) is the manufacture of products using our own production facilities . The opposite is external production .

General

The operational function of production is always understood to mean in-house production. Goods are manufactured with their own production factors and production processes. If semi-finished products are still required for production , these intermediate goods must be obtained as external production via the incoming goods department . From the point of view of their manufacturer, semi-finished products are in-house production, from the point of view of the company processing them externally. Raw materials , consumables and supplies are not economically to the semi-finished products, are nevertheless strictly materials and supplies semi-finished products, because they are intermediate goods. In-house production means internalization , i.e. the organization of economic activities in the corporate hierarchy.

Business aspects

The terms internal and external manufacturing diving especially in the vertical integration on. This can therefore be characterized as the percentage of in-house production for the end product . The vertical range of manufacture decides how high the proportion of in-house and external production is in a company:

${\displaystyle {\text{Fertigungstiefe in Prozent}}={\frac {\text{Eigenfertigung}}{\text{gesamte Fertigung}}}\cdot 100\,\%}$.

The vertical range of manufacture (or in- house production rate ) decreases with outsourcing ( offshoring or onshoring ) and increases with insourcing and forward integration .

The question of whether house production or external reference ( English make or buy ) is to be preferred, is part of the strategic planning . If in-house production is reduced, the manufacturing costs will decrease , but components previously manufactured in-house must be procured as semi-finished products from other companies ( suppliers / subcontractors ), so that the material costs also increase by the profit of these suppliers included in the purchase price . In addition, there are dependencies, especially in just-in-time production , while any storage costs do not change due to the storage of semi-finished products. The higher the estimated sales volume and market potential , the more profitable in-house production is due to the usable fixed cost degression . Also, the expertise can influence this decision; Current or future advantages from the Experience Curve Act are also incorporated here .

criteria

When deciding between in-house and external production, the following criteria must be taken into account:

criteria	Reasons for in-house production
Product quality	Close cooperation between design and production in product innovations ongoing quality control Use of own patents and know-how Acquisition of specific production know-how
capacities	Utilization of existing production capacities in terms of personnel and equipment
costs	Cost reduction due to a lack of supplier profits and external transport and packaging costs Independence from unjustified price increases due to the monopoly of suppliers
Risks	Secrecy of the production conditions from the competition Confidentiality of product innovations Preventing forward integration of suppliers

In-house production is useful if the object to be procured is of high strategic importance and external procurement would be associated with a high level of uncertainty and dependence on the supplier; In contrast, a third-party purchase makes sense if the procurement objects are highly available.

Strategies

In-house or third-party production is also a production strategy , because a decision has to be made as to whether extensive in-house production represents a core competence that will also be maintained in the future or not. The lean management and its strand lean production aimed among other things at reducing the proportion of in-house production in favor of external procurement, so as to reduce the level of vertical integration and to take goods originally self-produced by suppliers strange. In the context of these concepts, the optimal vertical range of manufacture is automatically answered by in-house production or by external sources. In gastronomy , restaurants are forced to manufacture intermediate goods themselves if they want to be awarded several Michelin Guide stars . This is achieved through our own agriculture ( meat production , chicken eggs , milk production ).

See also

• Transaction cost theory

literature

• Günter Fandel: Production. Volume 1: Production and Cost Theory. 6th edition. Springer, Berlin et al. 2005, ISBN 3-540-25023-9 .
• Christoph Schneeweiß: Introduction to the production economy. 8th improved and enlarged edition. Springer, Berlin et al. 2002, ISBN 3-540-43192-6 .
• Marcell Schweitzer (Hrsg.): Industrial management. Business in industrial companies. 2nd completely revised and expanded edition. Vahlen, Munich 1994, ISBN 3-8006-1755-2 .

Individual evidence

1. ↑ Clemens Büter, Internationale Unternehmensführung , 2010, p. 133
2. ^ Stefan Bernhard Eckel, The Just-in-time Contract , 1998, p. 26
3. ↑ Dominik Endler, Product Parts as Means of Product Design , 1992, p. 131
4. ↑ Clemens Büter, Internationale Unternehmensführung , 2010, p. 133
5. ↑ Dietram Schneider / Cornelius Baur / Lienhard Hopfmann, Re-Design of the value chain by Make or Buy , 1994, p. 54
6. ↑ Michael Lorth, Optimal Risk Allocation in Supplier-Buyer Systems , 2000, p. 30