A Make‐or‐Buy Decision Analysis Involving Imprecise Data

The make‐or‐buy decision has been performed on the assumption that cost data are deterministic and accurate. The data available to decision makers are often highly imprecise because of estimation inaccuracy and/or errors in measurement. The bounded interval estimate is a common allowance scheme to compensate for the inherent estimating error. Applies the propagation of errors technique to evaluate make‐or‐buy alternatives with estimate errors. The numerical examples show how the proposed error analysis generates more discerning power when assessing competing alternatives.