ABSTRACT
This chapter introduces methodologies that help a client firm to determine an optimal proportion to allocate business activities between insourcing and various outsource providers. The chapter presents how models can be identified for use in a particular outsourcing-insourcing (O-I) application, as well as formulating them for input into a computer software application. The methodologies examined in this chapter are all capable of providing proportioned answers to international O-I decisions. They include game theory and linear programming. These methodologies originate from the field of operations research and are considered general purpose methodologies applicable to model a broad range of business, engineering, and economic decision-making situations. Game theory was shown to be useful as a logical extension of decision theory methods in conflict situations often encountered in international O-I decision making. Linear programming was demonstrated to be a highly flexible methodology capable of considering multiple variables and multiple criteria in rendering an optimal proportion allocation between outsourcing and insourcing business activities.
