Annals of Operations Research

, Volume 208, Issue 1, pp 251–289 | Cite as

Supply chain networks with global outsourcing and quick-response production under demand and cost uncertainty

Article

Abstract

This paper develops a modeling and computational framework for supply chain networks with global outsourcing and quick-response production under demand and cost uncertainty. Our model considers multiple off-shore suppliers, multiple manufacturers, and multiple demand markets. Using variational inequality theory, we formulate the governing equilibrium conditions of the competing decision-makers (the manufacturers) who are faced with two-stage stochastic programming problems but who also have to cooperate with the other decision-makers (the off-shore suppliers). Our theoretical and analytical results shed light on the value of outsourcing from novel real option perspectives. Moreover, our simulation studies reveal important managerial insights regarding how demand and cost uncertainty affects the profits, the risks, as well as the global outsourcing and quick-production decisions of supply chain firms under competition.

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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Department of Business and EconomicsPennsylvania State UniversityHazletonUSA
  2. 2.Department of Finance and Operations Management, Isenberg School of ManagementUniversity of MassachusettsAmherstUSA

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