IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v257y2017i2p456-467.html
   My bibliography  Save this article

Services outsourcing under asymmetric cost information

Author

Listed:
  • Mahadevan, B.
  • Hazra, Jishnu
  • Jain, Tarun

Abstract

In this paper, we investigate the impact of cost heterogeneity on the optimal sourcing strategy of a client firm that outsources her service requirements to a set of outside vendors/service providers. We analyze a typical situation involving service providers, who differ from one another with respect to the marginal cost and characterize the firm’s optimal size of vendor network. In our model, the client firm does not have complete information about the vendors’ cost structure.

Suggested Citation

  • Mahadevan, B. & Hazra, Jishnu & Jain, Tarun, 2017. "Services outsourcing under asymmetric cost information," European Journal of Operational Research, Elsevier, vol. 257(2), pages 456-467.
    • Handle: RePEc:eee:ejores:v:257:y:2017:i:2:p:456-467
    DOI: 10.1016/j.ejor.2016.07.020
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221716305574
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2016.07.020?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wenbo Shi, 2016. "Entry and exit of service providers under cost uncertainty: a real options approach," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 229-239, February.
    2. Dimitris Kostamis & Damian R. Beil & Izak Duenyas, 2009. "Total-Cost Procurement Auctions: Impact of Suppliers' Cost Adjustments on Auction Format Choice," Management Science, INFORMS, vol. 55(12), pages 1985-1999, December.
    3. Weber, Charles A. & Current, John R. & Benton, W. C., 1991. "Vendor selection criteria and methods," European Journal of Operational Research, Elsevier, vol. 50(1), pages 2-18, January.
    4. Tunay I. Tunca & Qiong Wu, 2009. "Multiple Sourcing and Procurement Process Selection with Bidding Events," Management Science, INFORMS, vol. 55(5), pages 763-780, May.
    5. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    6. Tarun Jain & Jishnu Hazra, 2016. "Sourcing under incomplete information and negative capacity-cost correlation," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(3), pages 437-449, March.
    7. Jin, Mingzhou & David Wu, S., 2007. "Capacity reservation contracts for high-tech industry," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1659-1677, February.
    8. Xiang Li & Yongjian Li, 2016. "Optimal service contract under cost information symmetry/asymmetry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 269-279, February.
    9. Saif Benjaafar & Ehsan Elahi & Karen L. Donohue, 2007. "Outsourcing via Service Competition," Management Science, INFORMS, vol. 53(2), pages 241-259, February.
    10. Hazra, Jishnu & Mahadevan, B., 2009. "A procurement model using capacity reservation," European Journal of Operational Research, Elsevier, vol. 193(1), pages 303-316, February.
    11. Serel, Dogan A. & Dada, Maqbool & Moskowitz, Herbert, 2001. "Sourcing decisions with capacity reservation contracts," European Journal of Operational Research, Elsevier, vol. 131(3), pages 635-648, June.
    12. Minner, Stefan, 2003. "Multiple-supplier inventory models in supply chain management: A review," International Journal of Production Economics, Elsevier, vol. 81(1), pages 265-279, January.
    13. Subhajyoti Bandyopadhyay & John M. Barron & Alok R. Chaturvedi, 2005. "Competition Among Sellers in Online Exchanges," Information Systems Research, INFORMS, vol. 16(1), pages 47-60, March.
    14. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    15. Benaroch, Michel & Webster, Scott & Kazaz, Burak, 2012. "Impact of sourcing flexibility on the outsourcing of services under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 219(2), pages 272-283.
    16. Edieal J. Pinker & Abraham Seidmann & Yaniv Vakrat, 2003. "Managing Online Auctions: Current Business and Research Issues," Management Science, INFORMS, vol. 49(11), pages 1457-1484, November.
    17. Cuihong Li & Laurens G. Debo, 2009. "Second Sourcing vs. Sole Sourcing with Capacity Investment and Asymmetric Information," Manufacturing & Service Operations Management, INFORMS, vol. 11(3), pages 448-470, July.
    18. Andy A. Tsay, 1999. "The Quantity Flexibility Contract and Supplier-Customer Incentives," Management Science, INFORMS, vol. 45(10), pages 1339-1358, October.
    19. Wedad J. Elmaghraby, 2000. "Supply Contract Competition and Sourcing Policies," Manufacturing & Service Operations Management, INFORMS, vol. 2(4), pages 350-371, April.
    20. Tsan-Ming Choi & Stein W Wallace & Yulan Wang, 2016. "Risk management and coordination in service supply chains: information, logistics and outsourcing," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(2), pages 159-164, February.
    21. Xin Wang & Stein W. Wallace, 2016. "Stochastic scheduled service network design in the presence of a spot market for excess capacity," EURO Journal on Transportation and Logistics, Springer;EURO - The Association of European Operational Research Societies, vol. 5(4), pages 393-413, December.
    22. Inderfurth, Karl & Kelle, Peter, 2011. "Capacity reservation under spot market price uncertainty," International Journal of Production Economics, Elsevier, vol. 133(1), pages 272-279, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiaoying Li & Qinghua Zhu, 2020. "Contract Design for Enhancing Green Food Material Production Effort with Asymmetric Supply Cost Information," Sustainability, MDPI, vol. 12(5), pages 1-18, March.
    2. Tarun Jain & Jishnu Hazra, 2019. "“On-demand” pricing and capacity management in cloud computing," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(3), pages 228-246, June.
    3. Shaojian Qu & Yefan Han & Zhong Wu & Hassan Raza, 2021. "Consensus Modeling with Asymmetric Cost Based on Data-Driven Robust Optimization," Group Decision and Negotiation, Springer, vol. 30(6), pages 1395-1432, December.
    4. Gossler, Timo & Wakolbinger, Tina & Nagurney, Anna & Daniele, Patrizia, 2019. "How to increase the impact of disaster relief: A study of transportation rates, framework agreements and product distribution," European Journal of Operational Research, Elsevier, vol. 274(1), pages 126-141.
    5. Huang, Min & Tu, Jun & Chao, Xiuli & Jin, Delong, 2019. "Quality risk in logistics outsourcing: A fourth party logistics perspective," European Journal of Operational Research, Elsevier, vol. 276(3), pages 855-879.
    6. Basu, Arnab & Jain, Tarun & Hazra, Jishnu, 2018. "Supplier selection under production learning and process improvements," International Journal of Production Economics, Elsevier, vol. 204(C), pages 411-420.
    7. Jain, Tarun & Hazra, Jishnu & Cheng, T.C.E., 2018. "Sourcing under overconfident buyer and suppliers," International Journal of Production Economics, Elsevier, vol. 206(C), pages 93-109.
    8. Jain, Tarun & Hazra, Jishnu, 2017. "Sourcing strategies under agglomeration economies, capacity risks and retail competition," International Journal of Production Economics, Elsevier, vol. 191(C), pages 311-322.
    9. Tarun Jain & Jishnu Hazra, 2019. "Vendor’s Strategic Investments Under IT Outsourcing Competition," Service Science, INFORMS, vol. 11(1), pages 16-39, March.
    10. Qinpeng Wang & Longfei He, 2018. "Incentive Strategies for Low-Carbon Supply Chains with Asymmetric Information of Carbon Reduction Efficiency," IJERPH, MDPI, vol. 15(12), pages 1-18, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Basu, Arnab & Jain, Tarun & Hazra, Jishnu, 2018. "Supplier selection under production learning and process improvements," International Journal of Production Economics, Elsevier, vol. 204(C), pages 411-420.
    2. Jain, Tarun & Hazra, Jishnu, 2017. "Dual sourcing under suppliers' capacity investments," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 103-115.
    3. Cheaitou, Ali & Cheaytou, Rima, 2019. "A two-stage capacity reservation supply contract with risky supplier and forecast updating," International Journal of Production Economics, Elsevier, vol. 209(C), pages 42-60.
    4. Jain, Tarun & Hazra, Jishnu & Cheng, T.C.E., 2018. "Sourcing under overconfident buyer and suppliers," International Journal of Production Economics, Elsevier, vol. 206(C), pages 93-109.
    5. Tarun Jain & Jishnu Hazra, 2019. "“On-demand” pricing and capacity management in cloud computing," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(3), pages 228-246, June.
    6. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    7. Karl Inderfurth & Peter Kelle & Rainer Kleber, 2011. "Dual Sourcing Using Capacity Reservation and Spot Market: Optimal Procurement Policy and Heuristic Parameter Determination," FEMM Working Papers 110014, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    8. Hazra, Jishnu & Mahadevan, B., 2006. "Impact of supply base heterogeneity in electronic markets," European Journal of Operational Research, Elsevier, vol. 174(3), pages 1580-1594, November.
    9. Zhao, Yingxue & Ma, Lijun & Xie, Gang & Cheng, T.C.E., 2013. "Coordination of supply chains with bidirectional option contracts," European Journal of Operational Research, Elsevier, vol. 229(2), pages 375-381.
    10. Awasthy, Prakash & Hazra, Jishnu, 2020. "Collaboration under outcome-based contracts for information technology services," European Journal of Operational Research, Elsevier, vol. 286(1), pages 350-359.
    11. Li, Jianbin & Luo, Xiaomeng & Wang, Qifei & Zhou, Weihua, 2021. "Supply chain coordination through capacity reservation contract and quantity flexibility contract," Omega, Elsevier, vol. 99(C).
    12. Inderfurth, Karl & Kelle, Peter & Kleber, Rainer, 2013. "Dual sourcing using capacity reservation and spot market: Optimal procurement policy and heuristic parameter determination," European Journal of Operational Research, Elsevier, vol. 225(2), pages 298-309.
    13. Wiedenmann, Susanne & Geldermann, Jutta, 2015. "Supply planning for processors of agricultural raw materials," European Journal of Operational Research, Elsevier, vol. 242(2), pages 606-619.
    14. Mohammed Alkahtani, 2022. "Mathematical Modelling of Inventory and Process Outsourcing for Optimization of Supply Chain Management," Mathematics, MDPI, vol. 10(7), pages 1-27, April.
    15. Ying-Ju Chen & Gustavo Vulcano, 2009. "Effects of Information Disclosure Under First- and Second-Price Auctions in a Supply Chain Setting," Manufacturing & Service Operations Management, INFORMS, vol. 11(2), pages 299-316, September.
    16. Tunay I. Tunca & D. J. Wu & Fang (Vivian) Zhong, 2014. "An Empirical Analysis of Price, Quality, and Incumbency in Procurement Auctions," Manufacturing & Service Operations Management, INFORMS, vol. 16(3), pages 346-364, July.
    17. Jain, Tarun & Hazra, Jishnu, 2017. "Sourcing strategies under agglomeration economies, capacity risks and retail competition," International Journal of Production Economics, Elsevier, vol. 191(C), pages 311-322.
    18. Xiaole Wu & Panos Kouvelis & Hirofumi Matsuo, 2013. "Horizontal Capacity Coordination for Risk Management and Flexibility: Pay Ex Ante or Commit a Fraction of Ex Post Demand?," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 458-472, July.
    19. Yim, Andrew, 2010. "Quality Cost and Failure Risk in the Choice of Single versus Multiple Sourcing," MPRA Paper 27858, University Library of Munich, Germany.
    20. Wu, Xiaole & Kouvelis, Panos & Matsuo, Hirofumi & Sano, Hiroki, 2014. "Horizontal coordinating contracts in the semiconductor industry," European Journal of Operational Research, Elsevier, vol. 237(3), pages 887-897.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:257:y:2017:i:2:p:456-467. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.