Sourcing decisions of project tasks with exponential completion times: Impact on operating profits

H. Dharma Kwon, Steven A. Lippman, Christopher S. Tang

Research output: Contribution to journalArticlepeer-review

Abstract

When managing a project, a firm must evaluate multiple strategic factors and operational issues before deciding which tasks to keep in-house and which to outsource. We focus on one operational aspect of this evaluation process by examining the impact of different sourcing decisions of project tasks with exponential completion times on operating profits. As an initial attempt, we present two stylized models that capture two simplest types of projects: (a) a project with two parallel tasks that can be performed simultaneously and (b) a project with two serial tasks that must be performed sequentially. For each model, we determine the optimal operating profit for the case when the firm outsources zero task, one task, or two tasks. These operating profits can be informative for making sourcing decisions of different project tasks.

Original languageEnglish (US)
Pages (from-to)138-150
Number of pages13
JournalInternational Journal of Production Economics
Volume134
Issue number1
DOIs
StatePublished - Nov 1 2011

Keywords

  • Project management
  • Sourcing decisions
  • Stackelberg game

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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