Abstract
The aim of this research is to developed an optimization model to determine an optimal process parameter to help a decision maker in making decision concerning make or buy considering price and quality dependent demand. In this paper, two models are developed for make regime and buy regime. The price and quality level will determine the demand of the product. The quality level was treated as parameters in many research, but in this paper the quality level is treated as model component and expressed in term of process parameter. The objective function of the model is to maximize total profit of both manufacturer and supplier. The cost components consist of material purchasing cost, manufacturing cost, and quality loss. The results of optimization shows that both model gives the same value of optimal process parameter in manufacturer side.
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