Work out insourcing break even volume instantly with clear inputs, formula shown and shareable results.
Insourcing break-even is the annual fixed operating cost divided by the per-unit saving. Amortising the setup investment over three years gives the more honest threshold, because a volume that only clears the operating fixed cost never repays the capital.
Saving per unit
Saving = Outsourced price - Internal variable cost
Break-even volume
Break-even = (Fixed operating cost + Setup / 3) / Saving per unit
Match it to the period over which the volume is credible. Three years is a common discipline for anything with technology content.
Do not insource. The flexibility of an outsourced arrangement is worth more than a marginal cost saving.