Empirical make-or-buy decision making model in the Japanese automobile industry

The decision on whether Japanese automobile companies produce crucial components in-house or outsource them is complicated and time-consuming topic within the industry. In response to questions about the use of a make or buy model as part of a scientific decision making process for the issue, industrialists had the same answer that the final decision on make or buy has been made for the most part based on experiences and various discussions, and that no models were used. The main purpose of this paper is to propose a model for a make or buy decision from an empirical point of view. The model was developed as the Analytic Hierarchy Process (AHP) method in which the main criteria and sub-criteria were summarized from practical interviews with Japanese automobile industrialists. The proposed model also was applied in an actual project to confirm the feasibility of the model.