What is a bought-in component?

A bought-in component refers to a part that is sourced from another company, rather than being manufactured in-house. This practice allows businesses to leverage the expertise, technology, and efficiency of specialized suppliers to enhance their own products without the costs and time associated with producing every single part internally. By sourcing components, companies can focus on their core competencies and improve overall product quality, as well as reduce lead times.

In contrast, components produced internally or uniquely designed for a specific product do not qualify as bought-in components, since they are either manufactured within the company or customized. Similarly, free components provided by suppliers are not representative of the typical bought-in component, which generally incurs a cost and is purchased rather than given.