Sourcing decisions of project tasks with exponential completion times: Impact on operating profits

Sourcing decisions of project tasks with exponential completion times: Impact on operating profits

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Article ID: iaor20119184
Volume: 134
Issue: 1
Start Page Number: 138
End Page Number: 150
Publication Date: Nov 2011
Journal: International Journal of Production Economics
Authors: , ,
Keywords: supply & supply chains
Abstract:

When managing a project, a firm must evaluate multiple strategic factors and operational issues before deciding which tasks to keep in‐house and which to outsource. We focus on one operational aspect of this evaluation process by examining the impact of different sourcing decisions of project tasks with exponential completion times on operating profits. As an initial attempt, we present two stylized models that capture two simplest types of projects: (a) a project with two ‘parallel’ tasks that can be performed simultaneously and (b) a project with two ‘serial’ tasks that must be performed sequentially. For each model, we determine the optimal operating profit for the case when the firm outsources zero task, one task, or two tasks. These operating profits can be informative for making sourcing decisions of different project tasks.

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