Productivity measurement of the manufacturing process for outsourcing decisions: the case of a Taiwanese printed circuit board manufacturer

Abstract

Outsourcing is used to alleviate capacity shortages and increase production flexibility. Generally, the outsourcing decision of manufacturing processes is determined by the capacity utilization rate and focus on individual process. In this article, multicriteria are considered by applying the data envelopment analysis to evaluate the relative efficiencies of all the manufacturing processes to help to assess the allocation of a company's resources. The Malmquist productivity index (MPI) is further employed to measure the productivity changes of each process, on which the outsourcing decision can be based. The empirical case of a Taiwanese printed circuit board manufacturer is applied to illustrate the outsourcing decision process. According to the outsourcing decision matrix proposed in this article, the manufacturing process with low efficiency score and MPI value was identified as a high priority for outsourcing. The outcome shows that the manufacturing process with a higher investment of fixed assets does not guarantee better efficiency. If a company follows the outsourcing decision suggested by the proposed approach, the capacity utility rate and the production quantity per person can be increased. The results and analysis model can provide an alternative for managerial thinking and practical application for outsourcing decisions.