The main objective of this paper is to propose a two levelmake/buy decision and subcontractor selection modelbased on situation of a small scale make-to-ordermanufacturer. The proposed model consists of two levels.In the first level make/buy decision are considered. Thesecond level model responsible to select the bestsubcontractor based on the result from the first levelmodel. In this paper make/buy decision is affected by fivefactors: (i) availability of facilities and capabilities, (ii)load of subcobtractors, (iii) level of difficulties, (iv) cost,and (v) capacity. The objective function of make/buymodel is to minimize total cost consist of subcontractorcost, production cost, material cost, and inventory cost.The output from this model is quantity to make/buy.Subsequently, this output is considered as input forsecond level subcontractor selection model. The resultshows that the proposed model can be implemented tosolve make-or-buy decision and subcontractor selectionproblem.