A multiple-factor decision analysis framework for manufacturing outsourcing

F. Fred Choobineh, Esmail Mohebbi and Bashar Al-Salim

International Journal of Data Analysis Techniques and Strategies, 2013, vol. 5, issue 3, 270-290

Abstract: The competitiveness of the global market and availability of multiple outsourcing options have greatly increased the complexity of making 'good' outsourcing decisions. Improving the decision-making process when faced with a complex decision situation requires a systematic decision-making framework. We propose such a framework for making strategic manufacturing outsourcing decisions that benefits from prominent decision analysis tools. We envision a multiple factor outsourcing decision model and specifically advocate the use of: 1) value-focused thinking to identify the outsourcing objectives; 2) a combination of an influence diagram and a decision tree to model the decision situation; 3) the cumulative prospect theory as an alternative to traditional utility theory for modelling the risk behaviour of the decision maker; 4) the prospect stochastic dominance to establish pair-wise dominance between outsourcing choices. We have developed a procedure for dividing the outsourcing choices into dominated and non-dominated sets, and rank ordering the elements of non-dominated set to identify the best strategy.

Keywords: multicriteria decision analysis; MCDA; manufacturing outsourcing; multiple factors; value-focused thinking; influence diagram; decision tree; cumulative prospect theory; modelling; risk behaviour. (search for similar items in EconPapers)
Date: 2013
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