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Article
Flexibility – Examining an Underappreciated Motivation for Outsourcing with an Optimization Model in a Small E-Product Manufacturer
Portland International Conference on Management of Engineering & Technology (PICMET)
  • Asser Fayed, Portland State University
  • Timothy R. Anderson, Portland State University
  • David Fenwick, Portland State University
Document Type
Article
Publication Date
1-1-2005
Subjects
  • Offshore outsourcing -- Analysis,
  • Information technology -- Contracting out,
  • Integer programming
Disciplines
Abstract

Technology outsourcing has recently become a politically sensitive issue with proponents emphasizing longterm economic growth opportunities, and opponents pointing out immediate job losses. The underlying reason for outsourcing is often assumed to be the availability of cheaper labor outside the USA but this overlooks the possibility that companies may simply be seeking greater labor flexibility outside of US state and federal labor laws. This paper quantitatively tests a software company’s motivation to secure a flexible and adaptable labor pool. Although production lines located at multiple sites provide great flexibility for scheduling and costs because each site has its own local expenses, capacities, and capabilities. This flexibility comes at the cost of added complexity of production planning, hiring and training employees, and quality assurance of finished products. A mixed integer optimization model is introduced to evaluate an outsourcing decision by placing a value on labor flexibility. This model is then used to examine the sensitivity of the outsourcing decision to various parameters.

Description

This is the publisher's final pdf. Copyright © 2005 by PICMET. Paper delivered at Portland International Conference on Management of Engineering and Technology (PICMET), 2005.

Persistent Identifier
http://archives.pdx.edu/ds/psu/9291
Citation Information
Fayed, A., Anderson, T., and Fenwick, D. Flexibility – Examining an Underappreciated Motivation for Outsourcing with an Optimization Model in a Small E-Product Manufacturer. Portland International Conference on Management of Engineering and Technology (PICMET ’05)