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Managing the risks of outsourcing: Time, quality and correlated costs

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  • Zhu, Xiaowei

Abstract

Cost, quality and time to market are three main factors for outsourcing management. A game theoretic model is used to design optimal outsourcing contracts including these three factors for a buyer and a supplier under Full Information (F) case and Asymmetric Information (A) case where the buyer does not share her internal variable cost information with the supplier. Optimal outsourcing contracts are derived and results of numerical experiment are also presented. Several insights of managing the outsourcing risks due to the Asymmetric Information are given for various industries, like cost-sensitive industry, time-sensitive industry, and quality-sensitive industry.

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  • Zhu, Xiaowei, 2016. "Managing the risks of outsourcing: Time, quality and correlated costs," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 90(C), pages 121-133.
    • Handle: RePEc:eee:transe:v:90:y:2016:i:c:p:121-133
    DOI: 10.1016/j.tre.2015.06.005
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