Integrating DANP and modified grey relation theory for the selection of an outsourcing provider

Globalization has inevitably forced firms to pursue outsourcing as a strategy to reduce operating costs and improve their competitiveness in the global marketplace. However, a successful outsourcing activity depends on the selection of the appropriate provider. Unlike previous multiple criteria decision-making (MCDM) methods that assume the criteria are independent, we propose a novel hybrid model, combining a Decision Making Trial and Evaluation Laboratory (DEMATEL) and Analytical Network Process (ANP) method called DANP, which addresses the dependent relationships between the various criteria to better reflect the real-world situation. At the same time, instead of ranking the alternatives, we apply a modified grey relation method to select and improve the criterion-gaps to the aspiration levels. To demonstrate the usefulness and effectiveness of the proposed model, we use data from a Taiwanese company.