Make or buy analysis model in a multi-stage manufacturing processes

In this research, a make or buy analysis model is developed to determine an optimal set of processes and suppliers to minimize manufacturing costs, purchasing costs, quality loss, scrap cost and lateness cost considering the process capability, manufacturing capacity, customer orders, and the routing of the manufacturing process in the multistage manufacturing processes. The constraints of the model are the tolerance limits, process variance for each component, the production capacity of the machine, consumer demand, and the minimum number of machine/supplier selected. A numerical example is given to show the application of the model using a simple assembly consists of three components. There are two production cells in which each cell has three identical machines that can be selected to produce the components. Each machine has different characteristics in terms of manufacturing costs, tolerances, processing time and capacity. In addition, there are also two alternative suppliers to supply the components. The model is used not only in process/supplier selection but also the amount of components allocation to the selected process/supplier.