A decision support model based on the Analytic Hierarchy Process for the Make or Buy decision in manufacturing

In recent years the literature has offered a number of models developed for the Make or Buy decision. Most of them, however, seem to be of limited use to organisations because many Make or Buy decisions are mainly taken on the basis of cost considerations. In this study, two factors are believed to be important with respect to this limited usability of the current models. The first factor is content: these models lack some necessary concepts and are inadequate for strategic purposes. The second and perhaps more important factor is the process: these models do not pay enough attention to the complexity of the outsourcing decision-making process and are mainly descriptive in nature. In this article, the essential elements of the current models will be integrated into a new model with prescriptive features. The Analytic Hierarchy Process will be introduced as a suitable and helpful approach to the complexity of the outsourcing decision-making process. This study presents a decision-making model that provides support to managers confronted with the choice of whether to maintain production internally, or at least parts of it, or to outsource. The model is illustrated by its application in a shipyard in the Netherlands.