Outsourcing or in-house manufacturing in Hi-tech industry: supply chain process with Delphi-AHP approach

Abstract

PurposeTechnological advancements have benefited businesses all over the world in how they set up production lines, create new products/services and trade goods. Multinational corporations can communicate instantly with their distant operations by utilizing information technology tools and communication networks. Businesses have taken a significant shift and new factors have emerged which affect company's competitiveness. In case of resorting to an outsourcing option, a comprehensive approach for valuing the essential criteria is often missing. While specifically focusing on the decisions that have a huge impact on company's performance, it is crucial to pay close attention to the ways of selecting suppliers. The purpose of research is to choose the optimal manufacturing alternative from a set of possibilities.Design/methodology/approachThe current research utilizes the Delphi technique for collection of vital criteria such as “quality”, “cost”, “delivery”, “warranties and claims”, “supplier profile”, “relationship and communication” and their respective sub-criteria. The purpose of research is to choose the optimal manufacturing alternative from a set of possibilities. In this regard, Analytical Hierarchy Process (AHP) technique is employed.FindingsThe current research enlightens that outsourcing can yield promising beneficial results. The results highlighted that in Hi-tech public sector organizations, international alternative is found best in almost all criteria especially in vital criteria such as “Quality”, “Cost”, “Delivery”, “Supplier Profile,” etc. Similarly, in case the outsourcing is done to a Domestic alternative, still the Domestic alternative is found effective in comparison to in-house manufacturing setups. The research showed unexpected results. Because previously it was assumed that in-house manufacturing would be more beneficial. However, the current findings support the “NASA” strategy which moved toward outsourcing to private sector.Research limitations/implicationsLimitations of the proposed methodology also produce opportunities for further exploration of the topic. One key limitation of the research described in this study is that the parameters and their sub-parameters interdependency were not taken under consideration. This means that quality and cost are not dependent upon each other. However, in reality quality and cost are interlinked. This means if quality is increased, cost is also increased. Similarly, for products having zero percent of re-claim, the product would have to be manufactured with high quality.Practical implicationsThe study is advantageous for both suppliers and purchasers, in any type of businesses where decision-making problem are under consideration. This model aids suppliers in revealing, how they can expand their profile, by focusing on the current research's selection criteria. In this way alternatives profile can now be perfected. Moreover, buyers can now rank suppliers on their quality management, financial status and other essential factors in order to conduct purchasing decisions. For the decision maker, the results illustrate which critical factors to evaluate when screening suppliers by applying current model techniques.Social implicationsIt is obvious that nearly almost every industry is forced to look for alternatives for all of its operations if outsourcing is an option. The study's findings have major benefits for all industries with an important role in manufacturing and supply chain operations. These objectives will serve the industries well and they will be able to prioritize their alternative selection criteria based on their operations. The findings of this study can assist any organization in their selection of vendors by providing a more detailed explanation of the impact that various criteria have on the decision-making process.Originality/valueTo the best of authors' knowledge, no previous study has used two approaches (AHP and Delphi study) to propose a model for making manufacturing decisions with domestic, in house and international alternatives in Hi-tech public sector organizations. The model not only benefits the manufacturers for choosing suitable suppliers but also aids suppliers to build their profile in an improved fashion by focusing on the vital attributes. This research benefits managers to improve their ability to make effective purchasing decisions, and also opens new avenues for researchers to further explore such findings in other areas as well.

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