| The "make-or-buy" decision problem presents a company with the choice of sourcing a product, process, or a service internally, or purchasing it from an outside supplier. These decisions can affect the capacity and the production methods of a firm, its internal span of activities, its overhead structure, its core capabilities, and its competitive position.;Second, a taxonomy of the make-or-buy problem is presented. The objective is to establish a research framework and a classification of proposed methods and models in order to facilitate the development of further research. This taxonomy also clarifies some of the confusion that has developed in the literature.;Finally, a multiple criteria decision analysis methodology for the evaluation of sourcing strategies is developed. This methodology represents a radical departure from existing frameworks by executing a dynamic, multi-attribute, and multi-objective performance evaluation of make-or-buy alternatives. The methodology contains a model that is comprised of four objectives: maximization of strategic competitive performance; maximization of managerial performance; minimization of sourcing risks; and maximization of financial performance. The attributes for the financial objective are measured using the net present value--a traditional discounted cash flow technique. The attributes for the other objectives are measured using the related concept of net present qualitative/operational flow analysis. These objectives and their attributes are traded-off using composite programming, resulting in a rank ordering of all the alternatives. In order to generate the measures of criteria importance, the model applies the AHP's principle of comparative judgments. However, since these measures are assumed to be time dependent, the proposed methodology utilizes the limiting power of stochastic matrices to generate the set of criteria priorities over the entire planning horizon.;The proposed approach has been designed to be applicable in manufacturing as well as in any primary activity of the value chain. An in-depth case study is provided which shows the successful application of the model and of the techniques developed in this work.;The goal of this work is to fill several gaps that have developed in the research of the make-or-buy problem over the last eighty years. First, this dissertation presents a multidisciplinary, state-of-the-art survey of the literature. A much needed reference for researchers and practicing managers is provided by examining the study of the make-or-buy problem in such fields as purchasing, industrial organization, corporate/business strategy, strategic operations/manufacturing management, operations research, and cost accounting. |
