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Production outsourcing and operational performance: An empirical study using secondary data

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  • Kenyon, G.N.
  • Meixell, M.J.
  • Westfall, P.H.

Abstract

Firms undertake a variety of supply chain initiatives to improve their performance. Of particular interest to many practitioners and academics alike are the mixed outcomes that result from implementation of what is commonly viewed as a best practice. In this research, we consider one especially popular practice, the outsourcing of production. We investigate the effects of production outsourcing on the firm׳s overall operational performance, and its components (manufacturing cycle time, order lead-times, delivery, operating equipment effectiveness), and customer loyalty by analyzing secondary data across a wide variety of industries using data from a survey of manufacturing plant managers. We draw on resource based view of the firm along with the supply chain and quality management literature to aid in predicting the operational performance to be expected when outsourcing production. Our analysis found that production outsourcing has deleterious effects on operational performance, with significant reductions in operating equipment effectiveness and on-time delivery. Our research also found that production outsourcing has a negative influence on customer loyalty when mediated through operational performance. This research also makes methodological contributions in the development of robust measures of operational performance and related variables.

Suggested Citation

  • Kenyon, G.N. & Meixell, M.J. & Westfall, P.H., 2016. "Production outsourcing and operational performance: An empirical study using secondary data," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 336-349.
    • Handle: RePEc:eee:proeco:v:171:y:2016:i:p3:p:336-349
    DOI: 10.1016/j.ijpe.2015.09.017
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    Cited by:

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    2. Pournader, Mehrdokht & Kach, Andrew & Fahimnia, Behnam & Sarkis, Joseph, 2019. "Outsourcing performance quality assessment using data envelopment analytics," International Journal of Production Economics, Elsevier, vol. 207(C), pages 173-182.
    3. Garvan Whelan & Paul Hanly & Vincent O’Connell & Oldřich Ludwig Dittrich & Naser Abu Ghazalah, 2021. "Impact on Firm Liquidity Arising from Outsourcing Decisions as Evidenced by Off-Balance-Sheet Disclosures," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 27(1), pages 17-27, February.
    4. Florian Kaiser & Robert Obermaier, 2020. "Vertical (Dis‑)Integration and Firm Performance: A Management Paradigm Revisited," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(1), pages 1-37, February.
    5. Huiming Liu & Su Wu & Chongwen Zhong & Ying Liu, 2020. "The Sustainable Effect of Operational Performance on Financial Benefits: Evidence from Chinese Quality Awards Winners," Sustainability, MDPI, vol. 12(5), pages 1-23, March.
    6. Gao, Yongling & Driouchi, Tarik, 2018. "Accounting for ambiguity and trust in partial outsourcing: A behavioral real options perspective," Journal of Business Research, Elsevier, vol. 92(C), pages 93-104.
    7. Stentoft, Jan & Mikkelsen, Ole Stegmann & Jensen, Jesper Kronborg & Rajkumar, Christopher, 2018. "Performance outcomes of offshoring, backshoring and staying at home manufacturing," International Journal of Production Economics, Elsevier, vol. 199(C), pages 199-208.
    8. Fabio Antonio Sartori Piran & Alaércio De Paris & Daniel Pacheco Lacerda & Luis Felipe Riehs Camargo & Rosiane Serrano & Ricardo Augusto Cassel, 2020. "Overall Equipment Effectiveness: Required but not Enough—An Analysis Integrating Overall Equipment Effect and Data Envelopment Analysis," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 21(2), pages 191-206, June.

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