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A holistic approach for production outsourcing

A holistic approach for production outsourcing Purpose – The purpose of this paper is to develop and demonstrate an outsourcing model in which constraint resource prevents the throughput of the organization. Design/methodology/approach – The paper proposes an integrated model by combining the Hurwicz criterion, the theory‐of‐constraints (TOC) and linear programming (LP) into a single evaluation model in a multi‐product constraint resource environment. A case study is presented to demonstrate the effectiveness of this model. The decision model compares four alternatives: standard cost accounting, standard TOC, LP analysis, and our own solution, which is an approach that combines TOC, LP, and the Hurwicz criterion. Findings – The numerical results show that this model is superior and more realistically optimizes resource allocation and measures the performance of the model. Research limitations/implications – This research is limited to the production processes that do not have multiple constraints. Originality/value – This is the first time that the integrated model comprising of Hurwicz‐TOC‐LP model has been used to maximize the product throughput. Instead of calculating $ return per constraint minute, this method decides the priority of product and resource center that maximizes the product throughput in the constraint resource environment. It makes a significant contribution to the manufacturing organization where one can compare the financial performance of the organization by selecting the right decision model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Strategic Outsourcing: An International Journal Emerald Publishing

A holistic approach for production outsourcing

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8297
DOI
10.1108/17538290810897156
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to develop and demonstrate an outsourcing model in which constraint resource prevents the throughput of the organization. Design/methodology/approach – The paper proposes an integrated model by combining the Hurwicz criterion, the theory‐of‐constraints (TOC) and linear programming (LP) into a single evaluation model in a multi‐product constraint resource environment. A case study is presented to demonstrate the effectiveness of this model. The decision model compares four alternatives: standard cost accounting, standard TOC, LP analysis, and our own solution, which is an approach that combines TOC, LP, and the Hurwicz criterion. Findings – The numerical results show that this model is superior and more realistically optimizes resource allocation and measures the performance of the model. Research limitations/implications – This research is limited to the production processes that do not have multiple constraints. Originality/value – This is the first time that the integrated model comprising of Hurwicz‐TOC‐LP model has been used to maximize the product throughput. Instead of calculating $ return per constraint minute, this method decides the priority of product and resource center that maximizes the product throughput in the constraint resource environment. It makes a significant contribution to the manufacturing organization where one can compare the financial performance of the organization by selecting the right decision model.

Journal

Strategic Outsourcing: An International JournalEmerald Publishing

Published: Jun 6, 2008

Keywords: Standard costs; Accounting; Constraint handling; Linear programming; Production planning and control; Outsourcing

References