INCORPORATING AN OUTSOURCING STRATEGY AND IN-HOUSE QUALITY ASSURANCE INTO THE PRODUCTION-SHIPMENT DECISION MAKING
Abstract
To stay competitive in turbulent business environments, manufacturing firms’ managers today constantly seek ways to reduce order response time, smooth production schedules, ensure the quality of their products, and lower overall making and shipping costs. This study incorporates an outsourcing strategy and in-house quality assurance into a production-shipment problem to address the aforementioned operational goals. The objectives are to simultaneously find the optimal fabrication batch size and frequency of delivery that minimize the system’s relevant costs and reveal in-depth information regarding the impact of diverse system parameters on the optimal policy and system cost. This study develops a model and uses the optimization method to resolve the problem. The research results facilitate managerial decisions in such a real-life situation.
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