Authors: Liu, Linda Boardman; Berger, Paul; Zeng, Amy; Gerstenfeld, Arthur

Source: Supply Chain Management: An International Journal, Volume 13, Number 6, 2008 , pp. 435-449(15)

Publisher: Emerald Group Publishing Limited

Abstract:

<B>Purpose</B> - The purpose of this paper is to show that there is a wealth of academic literature that qualitatively examines the outsourcing and offshoring from a go/no go perspective. The paper examines the complex "where to outsource" question by applying a quantitative approach called Analytic Hierarchy Process (AHP). <B>Design/methodology/approach</B> - The authors examine a <IT>Fortune</IT> 500 company's real-world decision about where to outsource and summarize the current selection process employed by the company. We then apply our AHP model to the company's decision and compare the results. <B>Findings</B> - There are four major findings: the location selection decision is a component of the outsource supplier selection decision; the AHP model effectively manages the complexity of the decision making process, incorporating all decision criteria harmoniously; a method such as AHP, which is able to incorporate both qualitative and quantitative criteria into evaluations, would streamline the decision-making process; and the AHP process allows firms to look at a portfolio of choices and determine which firms are basically equal in qualifications. <B>Research limitations/implications</B> - The research implies that: (AHP may be more applicable in these areas by providing a rigorous framework for assessment of qualitative and quantitative factors together; and AHP offers substantial flexibility to accommodate the variety and quantity of decision criteria set forth by the firm. <B>Practical implications</B> - As firms are more active in pursuing opportunities in global markets, identifying the right offshoring location is critical. The selection process is complex, involving a set of qualitative and quantitative factors and requiring rigorous and careful analysis. Therefore, a scientific method that not only offers flexibility and simplicity, but also simultaneously accommodates a wide variety of decision criteria is invaluable. The research demonstrates that AHP provides these benefits and is an effective technique for analyzing the where-to-outsource decision. <B>Originality/value</B> - The extensive literature review suggests that the majority of the existing works focus on analyzing the go/no-go decision using a qualitative approach. This paper applies the AHP method to the "where to outsource" question to demonstrate one quantitative approach to this complex decision. Additionally, the paper provides a detailed description of how the AHP method is implemented in analyzing the decision by using a Fortune 500 company's data and information as an example.

Keywords: Analytical hierarchy process; Decision making; Outsourcing

Document Type: Research article

DOI: http://dx.doi.org/10.1108/13598540810905697

Publication date: 2008-09-26

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