Outsourcing decision under Utopian environment

Purpose – The aim of this paper is to develop and demonstrate an outsourcing decision model in which constraint resource prevents the throughput of the organization. Design/methodology/approach – An integrated model is proposed by incorporating the weighted product model (WPM) of AHP in estimating the priority of each product in a multi‐product constraint resource environment. A numerical example is presented to demonstrate the effectiveness of this model. The outsourcing decision model compares four alternatives: Standard cost accounting, standard theory‐of‐constraints (TOC), LP analysis and an original solution. Findings – The numerical results show that the proposed model is superior and more realistically optimizes resource allocation and measures the performance of the model. Research limitations/implications – This research is limited to the production processes that do not have multiple constraints. Practical implications – This research is applicable to the companies which produce multi‐products in a situation in which market demand exceed the company's production capacity. Originality/value – This is the first time that the WPM of AHP/TOC has been used to maximize the product throughput. Instead of calculating $return per constraint minute, it decides the priority of product that maximizes the product throughput in the constraint resource environment. It makes a significant contribution to the manufacturing organization where one can compare the financial performance of the organization by selecting the right decision model.