A Study of Outsourcing Material Availability Decision-Making

Abstract

Effective supply chain design calls for robust analytical models and design tools. Previous works in this area are mostly Operation Research oriented without considering manufacturing aspects. Recently, researchers have begun to realize that the decision and integration effort in supply chain design should be driven by the manufactured product, specifically, product characteristics and product life cycle. In addition, decision-making processes should be guided by a comprehensive set of performance metrics. In this paper, we relate product characteristics to supply chain strategy and adopt supply chain operations reference (SCOR) model level I performance metrics as the decision criteria. An integrated analytic hierarchy process (AHP) and preemptive goal programming (PGP) based multi-criteria decision-making methodology is then developed to take into account both qualitative and quantitative factors in supplier selection. While the AHP process matches product characteristics with supplier characteristics (using supplier ratings derived from pairwise comparisons) to qualitatively determine supply chain strategy, PGP mathematically determines the optimal order quantity from the chosen suppliers. Since PGP uses AHP ratings as input, the variations of pairwise comparisons in AHP will influence the final order quantity. Therefore, users of this methodology should put greater emphasis on the AHP progress to ensure the accuracy of supplier ratings.