A Decision model for Selecting an Offshore Outsourcing Location: Using a Multicriteria Method

Abstract

As the offshoring becomes more widespread, business practitioners outsource their activities to overseas countries. Although there is a wealth of academic literature examining outsourcing and offshoring, there is little academic literature that addresses the current outsourcing decision most firms facing, which is where to outsource. Given multi-attribute nature of offshore location selection, this paper argues that five factors should be considered for decisions, and proposes the use of analytic hierarchy process (AHP) and PROMETHEE as aids in making offshore location selection decisions. AHP is used to analyze the structure of the location selection problem and determine weights of the criteria, and PROMETHEE method is used for final ranking, together with changing weights for a sensitivity analysis. It shows by means of an application that the hybrid method is very well suited as a decision-making tool for the offshore location selection decision. Finally, potential issues for future research are presented.

The Fundamentals of Global Outsourcing for Manufacturers

“…Because the proposed model is a convex linear model, the authors relaxed certain parameters to make the problem linear, but theirs is a descriptive model that is not applied to a real-world scenario. Lin et al (2007) proposed the use of a decision model to support global decision making. The model uses two multiple-criteria decision aid techniques (the AHP and PROMETHEE II) and incorporates multiple dimensions (infrastructure, country risk, government policy, value of human capital and cost) into a sensitivity analysis.…”

“…Narasimhan et al (2006) composed a model, for global supplier selection and order allocation and considered criteria such as direct product cost, the indirect cost of coordination, quality, delivery reliability and complexity of the supply base. Lin et al (2007) used infrastructure, country risk, government policy, human capital and cost when evaluating global suppliers. Carter et al (2008) analysed the low-cost countries and their capabilities.…”

A multicriteria approach to support the location of thalassotherapy (seawater therapy) resorts: Application to Galicia region, NW Spain

“…MCE techniques have been used in optimum site selection for industries (Ataei, 2005;Lin, Wang, & Qin, 2007), aquaculture (Hossain, Chowdhury, Das, Sharifuzzaman, & Sultana, 2009;Lane, Michalowski, Stephenson, & Page, 2008;Radiarta, Saitoh, & Miyazono, 2008), protection areas (Geneletti & van Duren, 2008;Wood & Dragicevic, 2007) or undesirable facilities as landfills (Erkut, Karagiannidis, Perkoulidis, & Tjandra, 2008;Geneletti, 2010;Moeinaddini, Khorasani, Danehkar, Darvishsefat, & Zienalyan, 2010;Sener, Sener, Nas, & Karagüzel, 2010), among others. Because these decision-making problems have a spatial component, Geographical Information Systems (GISs) are often used (Carver, 1991).…”

Applying Fuzzy Promethee Multi-Criteria Technique for Supplier Ranking Problem

“…Some of these are described in this section, in brief. Lin et al [1] applied both AHP and PROMETHEE for offshore outsourcing decisions. AHP had been used for the selection of location whereas PROMETHEE had been used for final ranking of those selected locations.…”

“…The weights of the criteria and the problem structure were determined by AHP and the final ranking of the alternatives was performed by PROMETHEE. Lin et al [10] used both AHP and PROMETHEE in offshore outsourcing location selection problem. Following the usual practice, AHP had been used to decide over the structure of the problem and calculating the weights of the criteria considered and PROMETHEE was used to the final ranking of the alternatives.…”