Optimal Manufacturing Outsourcing Decision Based on The Degree of Manufacturing Process Complexity and Standardization

• Main Authors: PHAN, THI THANH NHAN, Phan, Thi Thanh Nhan
• Other Authors: CHANG, PING-YU
• Format: Others
• Language: en_US
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/zw53fv

碩士 === 明志科技大學 === 工業工程與管理系碩士班 === 107 === In recent decades, manufacturing outsourcing has become a strategic trend in industry as manufacturing organizations desire to reduce costs and focus on core competencies. Organizations have a range of location options for outsourcing to select, such as, local, nearshore and offshore. Lower labor cost is considered as a dominant factor for many companies to choose outsourcing and foreign vendors in particular. However, higher transaction costs always are considers as one the most significant disadvantages of outsourcing especially in case of offshore and nearshore. Meanwhile, manufacturing process standardization, which is considered as a way to achieve, transparency and uniformity of manufacturing activities, resulting in reducing transaction costs. On the contrary, complexity in manufacturing process is pointed out as a significant deterrent against distant outsourcing due to complicatedness in operating manufacturing leading to extra transaction costs in outsourcing relationship. In this paper, I propose a framework and build up a decision model including factors, the degree of product or manufacturing process complexity, the degree of product or manufacturing process standardization, transaction costs and labor cost, to help the supply chain executives make optimal outsourcing location choice. I use a specific case to stimulate the decision model, in that case, focal firm locating in Taipei (Taiwan) is considering outsourcing to one of three kinds of location: TaoYuan (Taiwan) – local, Mainland China – nearshore and India – Offshore.