Dr. Anderson is an Assistant Professor of Operations Management at the University of Texas McCombs School of Business. He received his doctorate from the Massachusetts Institute of Technology and his bachelor's degree in electrical engineering and history from Stanford University. His research interests include supply chain management (especially service supply chains), outsourced product development, knowledge management, and system dynamics. He has published articles in such journals as Management Science, Production and Operations Management, and The Systems Thinker. Dr. Anderson won the prestigious Wickham Skinner Early-Career Research Award from the Production and Operations Management Society. He sits on the editorial review board of Production and Operations Management and has received research grants from SAP and Hewlett-Packard. Professor Anderson has consulted with Ford, Dell, Hewlett-Packard, Frito-Lay, and Atlantic-Richfield. Prior to his academic work, he was a product design engineer at the Ford Motor Company, from which he was granted three U.S. patents.
THE EFFECT OF LEARNING ON THE MAKE/BUY DECISION
Article first published online: 5 JAN 2009
© 2002 Production and Operations Management Society
Production and Operations Management
Volume 11, Issue 3, pages 313–339, September 2002
How to Cite
ANDERSON, E. G. and PARKER, G. G. (2002), THE EFFECT OF LEARNING ON THE MAKE/BUY DECISION. Production and Operations Management, 11: 313–339. doi: 10.1111/j.1937-5956.2002.tb00189.x
- Issue published online: 5 JAN 2009
- Article first published online: 5 JAN 2009
- Received February 2000, revisions received September 2000, accepted June 2001.
- LEARNING CURVE;
- PRODUCT DEVELOPMENT;
- VERTICAL INTEGRATION;
- PRODUCT DESIGN
By including the effects of learning over time on both the production of components and their integration into complete products, we develop an engineering-based model of outsourcing. This model provides an alternative explanation for much of what other outsourcing theories predict, as well as making several new predictions. In particular, we show that outsourcing decisions can create a path-dependent outsourcing trap in which a firm experiences higher long-run costs after an immediate cost benefit. We also describe conditions under which outsourcing a small fraction of component production may dominate either complete insourcing or complete outsourcing. Finally, we show that, with discounting, there is a convex, curvilinear relationship between the optimal outsourcing fraction and the rate of technological change.