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Coordinating strategic outsourcing decisions for semiconductor assembly using a bi-objective genetic algorithm

Increasing global competition has forced high-tech companies to focus on their core competences and outsource other activities to maintain their competitive advantages in the supply chains. While most companies rely on domain experts to coordinate strategic outsourcing decisions among a number of qualified vendors with different capabilities, the present problem can be formulated into a complex nonlinear, multi-dimensional, multi-objective combinatorial optimisation problem. Focused on real settings, this study aims to fill the gap via developing a bi-objective genetic algorithm (boGA) for determining the outsourcing order allocation with nonlinear cost structure, while minimising both the total alignment gap and the total allocation cost. The proposed boGA incorporates specific random key representation to facilitate encoding and decoding. This study also develops a bi-objective Pareto solution generation algorithm to enable efficient searching of Pareto solutions in multiple ranks and designs a composite Pareto ranking selection with uniform sum rank weighting for effective selection. To estimate its validity, the proposed boGA was validated with realistic cases from a leading semiconductor company in Hsinchu Science Park in Taiwan. The optimal boGA parameters were tested using a set of experiments. Scenario analyses were conducted to evaluate the performance of the proposed algorithm under different demand conditions using the metrics in the literature. The results have shown the practical viability of the proposed algorithm to solve the present problem of monthly outsourcing decisions for the case company in practicable computation time. This algorithm can determine the near-optimal Pareto front for decision makers to further incorporate with their preferences. This study concludes with discussion of future research directions.