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Dipesh Patel is the President & CEO of DP Gayatri, partnering with OEMs and Contract Manufacturers to automate and scale operations. A seasoned management consultant and graduate of the UofM Carlson School of Management, he brings strategic leadership to a portfolio of manufacturing and automation companies delivering factory automation, contract assembly, facility relocation and expansion, and supply chain localization across the U.S. and Latin America.
When OEMs ask "should we make this in-house or buy it from a contract manufacturer?" they usually frame it as a unit-cost question. Cost per part in-house versus cost per part from a vendor. Whoever is cheaper wins.
That framing misses what actually matters. The right question is: where does this work earn its keep on our balance sheet, and where does it drag?
Every make-vs-buy call comes down to five variables. Run them in order.
What does the equipment, tooling, and floor space cost? What is the depreciation curve? If you need a $400K capital expenditure to bring something in-house and you ship 2,000 units a year, the depreciation alone may eat the supposed savings. Capital you do not spend is capital you can deploy somewhere that earns a higher return.
Does this work require a specialized skill set you can hire and retain in your market? A wire harness team in Plymouth, Minnesota is different from a wire harness team in Guadalajara. If the skill is scarce and you cannot reliably staff it, outsourcing is not weakness — it is portfolio management.
If demand swings 40% quarter over quarter, in-house capacity becomes either a bottleneck or a sunk cost. Contract manufacturers absorb that volatility by spreading capacity across customers. You pay a margin for that buffer, but you do not carry the variance on your own P&L.
Is this the work your customers buy you for? If the assembly is the thing that makes your product different — proprietary tolerances, IP-laden integration, your secret sauce — keep it. If it is undifferentiated wire-and-connector work, you are not winning customers because of how you do it.
In-house assembly ties up working capital in WIP, raw materials, and finished goods. A good contract assembly partner can shift that to their balance sheet. For OEMs running tight cash cycles, that shift alone can be worth more than the margin you pay.
About 70% of the OEM make-vs-buy decisions we evaluate end up "buy." Not because the contract partner is cheaper per unit. Because once you account for capital deployed, capacity utilization, working capital, and management attention, the apples-to-apples economics shift.
The other 30% — the ones that should stay in-house — share a pattern. The work is high-margin, demand is steady, the skill is hireable, and the IP matters. That is the work where you should not outsource even if it costs more on paper.
Do not benchmark on unit cost alone. Build a five-year DCF on both paths. Include capital, working capital, management attention, and risk-adjusted demand. The decision usually inverts when you do.
If you are weighing this for an electrical assembly, wire harness, or panel build program, that is the calculus DP Gayatri runs through every week with OEM operations leaders. Reach out if you want to test the framework against a specific program.
