Designing Mathematical Model for Development the Product Portfolio make-or-buy Decisions

Decision making about buying pieces (outsourcing) or manufacturing them by factory (insourcing) is the main challenge for manufacturing organizations and strategic issue. This study has aimed to present an appropriate methodology to solve this problem. Using combinative approach of multiple-criteria decision and zero-one multi objective linear programming, the methodology has been able to investigate the decision of manufacturing or buying to develop and increase product portfolio. In the study, primary factors and indices of decision making about manufacturing or buying have firstly been identified by investigating review of literature, and their importance have been measured by experts and the most important factors were selected as final ones. Among final factors, those that had qualitative nature along with insourcing and manufacturing options have been ranked and scored by using analytic hierarchy process (AHP). According to qualitative factors, their amounts and quantitative factors, zero-one multi objective linear programming has been proposed. According to decision -making factors, mathematical model has, finally, made final decision and has selected insourcing (manufacturing inside the factory).