Today, changes in the competitive environment have led to creating organizations with a flexible structure and extensive supply networks, so that they are able to make the necessary changes coordinated with their environment. In this regard, organizations are trying to concentrate their efforts on their competing activities and outsource the other activities to other companies. Therefore, the decisions considering what activities are necessary to be done within the company and what activities to be outsourced and also which suppliers to be selected are important for organizations. This paper proposes a combination model of analytical hierarchy process and binary integer programming to respond to these questions.
Since previous researches considered the issue of the hidden cost rarely, this study uses the concept of well-known loss function for the hidden cost of dependencies between components. There are also various criteria with different scales to be considered in evaluating suppliers, Taguchi loss function method is applied to measure those criteria in the form of losses. The losses are taken into account in the proposed mathematical model. Finally, the proposed model was implemented in a case study and its results were analyzed.