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Selecting an optimal contractor for production outsourcing: a case study of gear grinding

ABSTRACT Outsourcing has become a competitive business model for the global manufacturing market, enabling firms to increase their overall production efficiency and enhance their own competitiveness in manufacturing. In view of this, we took into account the two important factors of process quality and manufacturing time to develop an optimal contractor selection model. To effectively assess process quality, we employed the Six Sigma quality index (SSQI) as our assessment tool. Based on the concept that manufacturing time that is too short may affect manufacturing quality and manufacturing time that is too long may affect delivery, we proposed an index to evaluate the performance of manufacturing time for contractors. Index values require estimation of sample data prior to assessment. Thus, sampling errors can result in uncertainty and misjudgment in performance evaluation. To overcome this limitation, we calculated the upper confidence limits of the SSQI and the manufacturing time index as standards for the evaluation of contractor process performance. Finally, we developed a contractor selection matrix with manufacturing time index as the horizontal axis and SSQI as the vertical axis. We applied the proposed approach to a case involving grinding of a gear product to demonstrate its efficacy and applicability.