Navigating Capacity Challenges in Electronics Manufacturing: A Strategic Approach to Outsourcing and In-House Production

Abstract

This study investigates strategic capacity planning in an electronics manufacturing firm constrained by capital limitations and compressed timelines. It develops an integrated decision framework to evaluate the trade-offs between internal capacity expansion and subcontracting under demand volatility. A mixed-method approach combining SWOT analysis, 4M-based Root Cause Analysis, and stakeholder-validated Test of Theory assessment was employed to diagnose structural barriers to capacity optimization. Findings identify capital intensity, subcontractor technological immaturity, and the absence of a formalized dual-sourcing architecture as principal constraints. A linear programming model was formulated to minimize total cost subject to capacity and demand constraints, and SAS JMP desirability analysis was applied to rank subcontracting alternatives based on cost competitiveness, technological readiness, and projected savings. Results demonstrate that subcontracting approximately 20 million units per quarter yields the most robust balance between economic efficiency, operational flexibility, and strategic control. The study proposes phased capital deployment and structured dual-sourcing governance as mechanisms for resilient and financially sustainable capacity management.