Supplier selection is one of the key decisions in the supply chain management. Most of the firms in asupply chain system have to make the “make” or “buy” decisions of components during product designphase. Outsourcing can reduce the product development time and cost, increase the external economy ofscale, and help respond agilely to variability in demand. Despite its importance, however, most papers onthis topic focus on the managerial issues, and only a few research papers consider the supplier selectionproblem from an engineering point of view. There is a need to further explore this issue. In this paper, wepresent a framework where the supply chain structure is investigated relative to the product architectureusing graph theory. Product architecture is first formulated according to design repository andDecomposition Approach. Supplier selection issue is considered by evaluating the potential impacts ofassembly and inventory decisions. The optimization of both product design and supply chain design can besimultaneously achieved during design stage. A case study in bike industry is presented to demonstrate theadvantages of this method.
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