An expert system for evaluating the make or buy decision

Abstract

The aim of this paper is to show how a knowledge-based systems technology can assist in the area of strategic purchasing. The authors discuss a knowledge-based system (KBS) designed to help companies in the make or buy decision, which is arguably the most fundamental component of manufacturing strategy. A model of the make or buy decision was developed conceptually from a thorough review of the literature and was supported by a series of interviews with procurement managers. The model consists of five main stages: identifying and weighting performance categories; analyzing technical capabilities; comparing internal and external capabilities; analyzing supplier organizational capabilities; total acquisition cost analysis. A KBS was developed which incorporates these five phases into the outsourcing decision. Preliminary evaluation indicates that the KBS can assist the purchasing team by providing feedback to suppliers, monitoring suppliers against performance benchmarks, improving cooperation between the multifunctional purchasing team members and reduces the time involved in conducting the make or buy evaluation. Ultimately, the KBS tool developed can assist an organization in enhancing its competitive position. © 2002 Published by Elsevier Science Ltd.