A Study On The Improvement Of Decision Making Process For Outsourcing At Q Company

With the acceleration of economic globalization,rapid development of industrial technology and the increasing customized demand,the companies are facing with more and more intense market competition,and outsourcing,as a production mode that can effectively integrate the internal and external resources,due to its capability to rapily improve the company’s core competence,has attracted more and more attention from both academia and industry field,while achieving good business results from the implementation,there are also many cases of failure,which resulted in the increase of cost and loss of company competitiveness,and even brings about operational risk,the main reason for the failure of outsourcing is related to outsourcing decision-making,therefore,the company that is in the practicing of outsourcing is in a need of a scientific and effective decision-making method.Q company is a hardware company that is producing cap for high-end perfume bottle,due to its capacity、technology and other restriction,the company has performed a lot of outsourcing activities,which has created a very high cost of outsourcing,but the company’s timely delivery rate is still very low,one of the main reasons is the lack of a scientific and effective outsourcing decision making process,which has lead to the wrong outsourcing decision,and resulted in the unreasonable allocation of internal and exteranl resource,and finally,the on time delivery is impacted as well.Based on the related theory and outsourcing decision-making literature,with the integration of the outsourcing practise of Q company,and then from both qualitative and quantitative perspective,we developed a structured decision making framework,which includes the identification process of core process and three decision making model at different stages and levels,they are: 1,decision making for the company’s boundary;2,decision making for the organization mode of production;3,decision making for the internal and external resource allocation.After that,a model to solve the resource allocation issue was created by using the LINGO software,so as to achieve the minimum total cost of resources through the optimal allocation of various internal and external resources.Finally,from empirical perspective,the decision making model is validated by the improved business results coming from the new process implemented by the Q company.With the implementation of the new outsoucing decision making model,the profit rate after the removal of the variable cost has improved by 33%;labor costs(including direct labor and outsourcing)has droped from 42% to 36% in proportion to sales;the on time delivery rate has increased from 69% to 89%.The improvement of these business indicators illustrates the effectiveness of the structured outsourcing decision making frameworks which combine various outsourcing theories and include multiple qualitative and quantitative decision-making models.