Global Journal of Economic and Finance Research

Outsourcing is one of the most important activities in many organizations. It involves at least two organizations, which have similar goals and a relatively long relationship with each other. The active presence of several companies with the individual objectives that each seeks to achieve them, creates a complex system. The purpose of this paper is to use modeling and simulation to identify and define appropriate outsourcing policies affecting supplier’s performance which sometimes get plagued by poor delivery condition, low productivity rate, decreased financial level etc. System dynamics modeling is used as a managerial approach in order to illustrate the existing relations among buyer’s outsourcing policies and supplier’s performance indicators. Using this model, polices are defined and set so that suitable performance levels are resulted. The main finding of this research is that having a short-term approach to outsourcing policies will lead to poor performances by suppliers. The long-term attitude towards suppliers will have a significant effect on improving the performance of suppliers. 

Outsourcing ، supplier، buyer، policies، system dynamics

1. Aubert, B.A., Patry, M., & Rivard, S. (1998). Assessing the risk of IT outsourcing, paper presented at the System   Sciences Proceedings of the Thirty-First Hawaii International                   
2. Conference, Kohala Coast, Hawaii, January 6-9.Barthélemy, J. (2003). The seven deadly sins of outsourcing, Academy of Management Executive, 17(2), 87-98.
3. Besanko, D. B., Dranove, D., & Shanley, M. (2000). Economics of strategy. New York: John Wiley & Sons.   
4. Dutta, A., Roy, R. (2005). Offshore outsourcing: a dynamic causal model of counteracting forces, Journal of Management Information Systems, 22(2), 15-35.
5. Duvvuru, Arjun., Balachandra, Ramaiya ., Zeid, Abe ., Kamarthi, Sagar. (2012). A system dynamics model for studying manufacturing outsourcing cost dynamics. Int. J.of Rapid Manufacturing, 3, 36 - 55.
6. Forrester, J.W. (1968). Industrial dynamics – after the first decade, Management Science, 14(7), 398-415.                   
7. Forrester, J.W. (1961). Industrial Dynamics, M.I.T Press, Cambridge. 
8. Forrester, J.W. (1975). The impact of feedback control concepts on the management sciences, Collected Papers of J.W. Forrester, Wright-Allen Press, Cambridge, MA. 
9. Franco, Raul., Arellano, Caldeira., Yoshizaki, Hugo.,Tsugunobu ,Yoshida., Vieira, José .,& Geraldo, Vidal. (2016). A system dynamics approach to logistics outsourcing policies and decisions. Production, 26(2), 285-302.   
10. Gandhi, s. J. (2010). An Analytical Characterization of Outsourcing Risk. Dissertation. 
11. GAO. (1997). Privatization Lessons Learned by State and Local Governments. Washington, DC, United States General Accounting Office. 
12. Ojugbele, Hammed., Bodhanya, Shamim. (2015). A managerial application of system dynamics modeling to outsourcing, Kybernetes, 44(4), 536-554.
13. Kremic, T. Tukel., O. I., & Rom, W. O. (2006). Outsourcing decision support: a survey of benefits, risks, and decision factors. Supply Chain Management, 11(6), 467–482. 
14. Liu, Z., Xu, J., Li, Y., Wang, X. & Wu, J. (2012). Using system dynamics to study the logistics outsourcing cost of risk, Kybernetes, 41(9), 1200-1208.   
15. Lonsdale, C. (1999). Effectively managing vertical supply relationships: a risk management  model for outsourcing. Supply Chain Management: An International Journal, 4(4), 176-8.
16. Lyneis, J.M., Madnick, S. (2008), Preventing accidents and building a culture of safety: insights from a simulation model, MIT Sloan Research Paper Nos 4710-08, Cambridge, MA.
17. Lyneis, J.M., Coopera., K.G.& Els, S.A. (2001). Strategic management of complex projects: a case study using system dynamics, System Dynamics Review, 17(3), 237-260. 
18. Mankins, M.C., Steele, R. (2005). Turning great strategy into great performance, Harvard Business Review, 83(7/8), 64-72.     
19. Marois, R., Ivanoff, J. (2005). Capacity limits of information processing in the brain, Trends in Cognitive Sciences, 9(6), 296-305. 
20. McCray, G.E., Clark, T.D. (1999). Using system dynamics to anticipate the organizational  impacts of outsourcing, System Dynamics Review, 15(4), 345-373.   
21. McIvor, R. (2005). The Outsourcing Process Strategies for Evaluation and Management. NeYork: Published in the United States of America by Cambridge University Press.
22. Mol, M.J. (2004). Outsourcing, supplier relations, and the external span of control. Proceedings at the 13th IPSERA Conference, Catania, April 4-7.   
23. Morecroft, J.D.W. (2007). Strategic Modelling and Business Dynamics: A Feedback System Approach, Wiley, Chichester.   
24. O’Keeffe, P., & Vanlandingham, S. (2004). MANAGING THE RISKS OF OUTSOURCING: A Survey of Current Practices and Their Effectiveness. APICS. Protiviti Independent Risk Consulting.   
25. Pruyt, E. (2013). Small System Dynamics Models for Big Issues: Triple Jump towards Real- World Complexity, TU Delft Library, Delft.
26. Quiggin, J. (2002). Contracting out: promise and performance, Economic and Labour Review, 13(1), 88-104.
27. Rabelo, L., Hamidreza, E., Shaalan, T. & Helal, M. (2007). Value chain analysis using hybrid simulation and AHP, International Journal of Production Economics, 105(2),536–547.     
28. Sterman, J.D. (1994). Learning in and about complex systems, System Dynamics Review 10(2), 291-330. 
29. Sterman, J.D. (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World, Irwin/Mcgraw-Hill, Boston, MA.       
30. Sterman, J.D. (2006). Learning from evidence in a complex world., American Journal of Public Health, 96(3), 505-514.       
31. Vennix, J.A.M. (1999). Group model-building: tackling messy problems, System Dynamics Review, 15(4), 379-401. 
32. Warren, K. (2005). Improving strategic management with the fundamental principles of System dynamics, System Dynamics Review, 21(4), 329-350.
33. Weimer, G., Seuring, S. (2009). Performance measurement in business process outsourcing decisions: insights from four case studies”, Strategic Outsourcing: An International Journal, 2(3), 275-292.
34. Yakhlef, A. (2009). Outsourcing as a mode of organizational learning, Strategic Outsourcing   An International Journal, 2(1), 37-53.
35. Young, S. (2005). Outsourcing in the Australian health sector: the interplay of economics an  politics, International Journal of Public Sector Management, 18(1), 25-36.
36. Zhixue, Liu., Juan, Xu., Yan, Li., Xiaojing, Wang., &Jianbo , Wu. (2012). Using system dynamics to study the logistics outsourcing cost of risk. Kybernetes, 41(9), 1200- 1208.