A joint location and outsourcing sustainability analysis for a strategic offshoring decision

Abstract

With economic globalisation and the emergence of extended enterprises derived from interrelationships among organisations, there has been a steady increase in offshore outsourcing activities. Subsequently, the strategic importance of offshoring decisions is important. Traditional offshoring decisions mainly emphasise outsourcee (supplier) selection problems, with their focus upon economic factors. Sustainability, which has recently been regarded as a competitive necessity in most industries, rarely enters into the modelling or discussion. Furthermore, additional and integrated facility location factors need to be included into the offshoring decision process. To help integrate these factors and concerns, this paper constructs a model for 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. Feedback from practising managers who are responsible for outsourcing/offshoring decisions also support the validity of the model. The paper closes with a discussion of managerial implications and an outlook on aspects for further research.

Keywords:

• offshoring decision
• facility location
• supplier selection
• sustainability
• analytic network process
• dynamic perspective

Acknowledgements

This work is supported by the China Scholarship Council and the National Natural Science Foundation of China Project (70772085).