Aitken Engineering (AE) is a Dallas engineering firm that produces customized instrumentation for the aerospace industry. AE is thinking about outsourcing the production of a particular component to a Fort Worth manufacturer. The Fort Worth manufacturer has offered to make the components for a price of $25 each, based on an annual volume of 32,000. However, there are additional costs associated with maintaining this supplier relationship. AE management has developed the following cost figures:
In addition to cost, AE management has identified two other dimensions to consider: quality (specifically, the percentage of defect-free items) and on-time delivery. AE management has established importance weights of 0.2, 0.5, and 0.3 for cost, quality, and on-time delivery, respectively. Finally, purchasing managers at AE have rated the performance of the current assembly operation and the Fort Worth manufacturer with regard to these three dimensions. Their ratings (1 5 “poor” to 5 5 “excellent”) are as follows:
Calculate the total cost of each option, as well as the overall preference score.
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