Analysis of outsourcing cost-effectiveness using a linear programming model with fuzzy multiple goals

Abstract

This work presents a linear programming model with fuzzy multiple goals for analysing cost effectiveness during vendor selection. The proposed model considers material preparation for outsourcing firms, technological transition, quality, lead time, and their interactions. The model also uses cost, quality and effectiveness as decision criteria for capacity planning and for determining product requirements for multi-stage planning of the make/outsourcing formulation. Different scenarios involving capacity transitions limited by technical factors, additions, and support shortages are mathematically formulated. In addition to its functions for evaluating cost minimisation and for accommodating the components of lead time, quality, and responsiveness, the proposed model also integrates multi-stage functions for supply chain systems. Therefore, the analytical results of this study, regardless of application outcomes or analysis methodology, provide decision criteria for manufacturing firms and introduce a new area of academic research.