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Efficiencies Of In-House Manufacturing And Outsourcing

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  • Chiang Kao

    (National Cheng Kung University, Taiwan)

Abstract

Garment manufacturing has a network structure when both outsourcing and in-house manufacturing are considered. The conventional data envelopment analysis (DEA) models for measuring efficiency ignore operations of the component processes, and thus are unable to carry out a detailed analysis. This paper develops a network DEA model, taking the internal structure of the network system into account, to measure the system and process efficiencies at the same time. The efficiency of the system can be decomposed into those of the processes, and the inefficient ones can thus be identified. The data of a garment manufacturing firm is used for illustration. For the two major operations of the firm, cutting and sewing, the former is less efficient than the latter, although it is also less sophisticated. The difference between the efficiencies of in-house manufacturing and outsourcing for cutting is not significant. For sewing, in contrast, in-house manufacturing is less efficient than outsourcing. This indicates that, in addition to the lower cost, outsourcing is also faster.

Suggested Citation

  • Chiang Kao, 2017. "Efficiencies Of In-House Manufacturing And Outsourcing," ABEM Conference Proceedings, Academy of Business and Emerging Markets (ABEM), Canada, number 023378, July.
    • Handle: RePEc:ris:abemcp:023378
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