Using data envelopment analysis for outsourcing decision: A case of Taiwan PCB manufacturer

A successful printed circuit board (PCB) industry provides abundant downstream market capacity while the vertical disintegration system protects its upstream production edge. Determine which manufacturing process should be outsourced is a critical management decision to PCB manufactures. In practice, the outsourcing decision is mainly determined by the capacity utilization rate and focus on individual process. In this article, multicriteria are considered to assist the managers to assess the priority of outsourcing among the manufacturing process. This article employs the Data Envelopment Analysis (DEA) method to evaluate the performance of manufacturing processes and utilizes Malmquist Productivity Index (MPI) to measure the productivity change in these processes. The proposed approach is applied to a PCB manufacturer which is leadership in Taiwan PCB industry. This article firstly applies manufacturing processes as Decision Making Units (DMUs) in DEA model finding inefficient processes to be outsourced. The empirical application and analysis result in important insight into the managerial theory and references for outsourcing practitioners.