Global markets and competitiveness together with information technology have forced companies around the world to change the way they manufacture and sell their products. Companies now need to compete based on multiple competitive performance objectives such as price, quality, dependability, flexibility and responsiveness. Outsourcing has become a key strategic component to develop a cost effective global supply chain in order to meet the increasing needs of customers in terms of flexibility, responsiveness and cost. However, little research dealing with modelling and analysis of outsourcing decisions and performance measurement, by quantifying both the inputs and outputs with the objective of making correct decisions about outsourcing in a global supply chain, has been published.
The aim of this special issue is to help researchers and decision makers to understand the processes involved in outsourcing decisions and performance measurement. It is intended that contributions will provide a better understanding of modelling and analysis to evaluate outsourcing deployments, through identifying the constructs associated with global supply chains.
This special issue presents researchers and senior managers with analytical and simulation models, and the conceptual and empirical bases for various outsourcing decisions and their performance outcomes in a global supply chain. Emphasis has been placed on outsourcing modelling and performance measurement in a global supply chain. The application of operations research techniques is also explored.
The papers included in this special issue demonstrate the application of operations research/management models and interesting empirical results arising from research on the evolving approaches and concepts of outsourcing decision-making. The papers deal with evaluating the impact of strategic outsourcing decisions, performance measures and metrics in outsourcing, implications of outsourcing on a global supply chain, qualitative and quantitative evaluation techniques, capital budgeting and financial appraisal of outsourcing decisions, cost/benefit and risk considerations/realisations in outsourcing, social/human aspects of decision making, macro-economic or industry-wide assessment of outsourcing, information systems in outsourcing and global supply chains, justification of outsourcing reasons and benefits, strategic vs. tactical outsourcing, selecting the outsourcing alternatives, and evaluating the impact of outsourcing on global supply chain configuration. A brief overview of the 14 papers in this special issue is presented hereunder.
Yao et al. in their paper, “Outsourcing timing, contract selection and negotiation” examine outsourcing contracts subject to irreversible outsourcing investment and cost uncertainty. They consider three common outsourcing contracts (fixed-price, cost-plus and gain-sharing) and address issues of which to outsource and which contracts to select. The paper, “Outsourcing with quality competition: insights from a three-stage game-theoretic model” by Bae et al. recognises the strategic and operational implications of outsourcing decisions. It models the situation where an organisation with quality and cost pressures and operational strategies may arrive at different outsourcing solutions based on competitor quality strategy traits. They develop a three-stage game theoretic oligopolistic model based on differentiated product strategy and integrating quality expectations of the market. The model is solved for equilibrium points on price, outsourcing activity, and investments in quality.
The paper, “Outsourcing decisions in global supply chains: an exploratory multi-country survey” by Schoenherr reports the results from a survey conducted in 15 countries on outsourcing decisions. Using a total dataset of 806 responses, interesting empirical exploratory insights are reported on the evolving approaches and concepts of outsourcing decision-making in different countries. More specifically, this study provides characteristics of the most important suppliers to respondents across the 15 nations, and explores rationales for outsourcing, highlighting country-specific similarities and differences.
Narasimhan et al. in their paper, “Explicating the mediating role of integrative supply management practices in strategic outsourcing: a case study analysis”, discuss the role of integrative supply management practices (ISMP) in enabling higher performance in an outsourcing relationship. It is hypothesised that ISMP plays a mediating role between the motivation to outsource and the success of the outsourcing relationship. Two distinct supply management practice types are identified: failure prevention practices and performance enhancing practices. In addition, these two practice types play a role in determining performance outcomes in an outsourcing relationship. Ravindran et al. in their paper, “Risk adjusted multicriteria supplier selection models with applications”, develop two different types of risk models, Value–at–Risk (VaR) type risks and Miss–the–Target (MtT) type risks. They model the risk-adjusted supplier selection problem as a multicriteria optimisation problem and solve it in two phases.
Using data envelopment analysis, the paper, “An efficiency comparison of supply management and information systems practice: a study of turkish and bulgarian SMEs in food products and beverages”, by Bayraktar et al. attempts to compare the relative efficiencies of supply chain management (SCM) and information system practices (IS) of the SMEs operating in food products and beverages in two neighbouring South East European countries, Turkey and Bulgaria. While there exist some significant differences between the efficiency level of SCM practices and the country of origin of the sample firms, no significant differences were found between the efficiency levels of both IS practices and the composite variable of SCM and IS practices, and the country of origin of the SMEs. Turkish SMEs tend to achieve higher efficiency level with respect to the implementation of SCM practices. There are also significant differences in returns to scale for each group of input variables with respect to the country of origin of the SMEs.
In the paper, “Examining the determinants of outsourcing partnership quality in chinese SMEs” by Ren et al. propose a research model to examine partnership quality formation factors in the pre-implementation stage in Chinese small and medium enterprises. Based on previous partnership studies and small and medium business theories, they identify four sets of antecedents of partnership quality characteristics: perceived outsourcing benefits, outsourcing readiness, human characteristics and environmental technical uncertainty. The results of this study show that perceived benefits, outsourcing management competence, outsourcing cognisance and top management's attitude towards outsourcing are significantly related to partnership quality.
Battini et al. in their paper, “Consignment stock inventory model in an integrated supply chain” develop a single-vendor and multi-buyer Consignment Stock inventory model in which many clients can establish a CS policy with the same vendor. The aim of the paper is to evaluate the real economical and logistic benefits by the point of view of both partners and by the point of view of the whole supply chain, following the adoption of a CS policy. They determine the maximum and minimum inventory stock levels to store in buyers’ plant warehouse and the optimal quantity delivered from the vendor to each buyer in order to minimise total supply chain costs. Space constraints in clients’ plant warehouse, stock-out risk due to the variability of consumption and obsolescence risk for the materials stored are also considered.
The paper, “Analysis of outsourcing cost-effectiveness using a linear programming model with fuzzy multiple goals” by Wang et al. present a linear programming model with fuzzy multiple goals for analysing cost effectiveness during vendor selection. The proposed model considers material preparation for outsourcing firms, technological transition, quality, lead time, and their interactions. The model also uses cost, quality and effectiveness as decision criteria for capacity planning and for determining product requirements for multi-stage planning of the make/outsourcing formulation. Different scenarios involving capacity transitions limited by technical factors, additions, and support shortages are mathematically formulated.
Hafeez et al. in their paper, “E-supply chain operational and behavioural perspectives: an empirical study of malaysian SMEs” propose a generic framework for evaluating business performance of e-supply chain companies. A survey data from 208 Malaysian SMEs were collected. Structural Equation Modelling (SEM) was employed to test the impact of Supply Chain Strategy, E-Business Adoption, and the interaction of these constructs, on overall Business Performance. With regards to the operational perspective the results suggest that E-Business Adoption relate more positively to Business Performance compared to Supply Chain Strategy construct. Also Technology Capability scored relatively higher compared to Organisational Capability and Attitudinal Capability. Overall Supply Chain Relationship (behavioural perspective) demonstrates relatively weak result. They argue that operational and behavioural perspectives can be embedded within the systems engineering principles that provide necessary theoretical underpinning for conducting such a research.
In their paper, “Selection among ERP outsourcing alternatives using a fuzzy multi-criteria decision making methodology”, Kahraman et al. present a fuzzy multicriteria decision making methodology for the selection among ERP outsourcing alternatives. The methodology is based on the analytic hierarchy process (AHP) under fuzziness. It allows decision makers to express their evaluations in linguistic expressions, crisp or fuzzy numbers. In the application of the proposed methodology, an automotive firm selects the best alternative among three ERP outsourcing firms. Dou and Sarkis in their paper, “A joint location and outsourcing sustainability analysis for a strategic offshoring decision” construct a model for the evaluation and selection of various offshoring alternatives by simultaneously considering facility location factors, supplier selection metrics, and sustainability factors. The model allows for input from a variety of managerial decision making levels and involves the dynamic perspectives of the competitive environment in its evaluation process. An illustrative case is applied to demonstrate the efficacy of the model.
Lockamy and McCormack in their paper, “Analysing risks in supply networks to facilitate outsourcing decisions” present a methodology for analysing risks in supply networks to facilitate outsourcing decisions. The methodology includes the development of a risk profile for a given supplier through the creation of Bayesian Networks. The networks are used to analyse a supplier's external, operational and network risk probabilities, and the associated revenue impact on the organisation. The methodology can be used by supply chain professionals to facilitate outsourcing decisions with either current or prospective suppliers.
The paper, “A value and risk analysis of offshore outsourcing business models: an exploratory study” by Weerakkody and Irani deals with an exploratory study of four offshore outsourcing vendors and the risks and value propositions of the different offshore outsourcing models they offer. The findings suggest that although offshore outsourcing offers new business opportunities for vendors, much of the outsourced work continues to be in areas of low risk and low value to client businesses. This research concludes that the main challenge for outsourcing vendors is therefore to develop strategies that facilitate low cost, high value contracts, without incurring additional risk. From the client side, being able to identify and assess the value and risks of the different offshore outsourcing models helps organisations to make better choices during the decision making process when selecting vendors.
We hope the special issue papers will be a source of latest research results on outsourcing and provide a direction for future research and generate significant interest among researchers and practitioners in modelling and analysis of outsourcing. We are very grateful to all referees who have provided their constructive comments in order to improve the quality of the papers. We would like to thank the authors who have contributed their work in this special issue.
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