Abstract
AbstractA company has to produce a product that gives better value than its competitors. It means the company has to produce a better quality product with lower manufacturing cost. Outsourcing has become a common practice in manufacturing where a company outsources some of their needed components to the suppliers. Supplier selection is not an easy task since it will determine the manufacturing cost and quality of the product. In this research, we develop a two-stage optimization model to help decision maker in determining the optimal suppliers which will give least manufacturing cost and how to improve the quality of the components. In the first stage, a process/supplier selection model was developed to determine the optimal tolerance and component allocation to minimize manufacturing cost and quality loss. In the second stage, investment allocation model was developed to improve the quality of the components. The objective function of the second model is to maximize the return on investment (ROI). The im...
Highlights
In an intense competition, a manufacturing company must build a competitive advantage by creating better value product than its competitors
We develop a two-stage optimization model to help decision maker in determining the optimal suppliers which will give least manufacturing cost and how to improve the quality of the components
The objective function of the second model is to maximize the return on investment (ROI)
Summary
A manufacturing company must build a competitive advantage by creating better value product than its competitors. Rosyidi, Murtisari, and Jauhari (2016a) developed an optimization model to concurrently determine optimal suppliers and order allocation to minimize manufacturing cost and fuzzy quality loss. All the above models only discussed about how to find the optimal combination of outsource and in-house production decisions including the components allocation to the selected process/ supplier. An early research in this field was done by Chase, Greenwood, Loosli, and Hauglund (1990) They developed an optimization model to optimally select machine/ process to minimize manufacturing cost by considering the quality requirement in term of assembly tolerance. We can see that in the first stage, the manufacturer determines the optimal combination of components allocation using in-house/outsourcing production alternatives. The ROI will be used as the objective function of the second stage of optimization
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