A Sustainable Outsourcing Strategy Regarding Cost, Capacity Flexibility, and Risk in a Textile Supply Chain

Abstract

The textile industry achieves economic benefits through outsourcing to low cost markets. Today, reshoring is an emerging trend due to rising cost and unemployment concerns. This problem is primarily due to an industry-wide focus on economic benefits only. Cost saving is a basic reason for international outsourcing while domestic outsourcing provides capacity flexibility. Moreover, outsourcing risk has a major impact on strategic location of the production destinations. Therefore, the merging of capacity flexibility and outsourcing risk comprises a sustainable outsourcing strategy. This paper suggests a sustainable outsourcing strategy in which a textile manufacturer outsources to international markets for cost savings and outsources to the domestic market for capacity flexibility. The manufacturer reserves some capacity with domestic suppliers, and pays a unit penalty cost if this capacity flexibility is not utilized. The manufacturer seeks minimum risk in international markets. Operational cost, penalty cost, and outsourcing risk are considered to be objective functions. Decisions include the assignment of contracts to suitable facilities, the quantity of each contract, and allocation of reserved capacity flexibility among domestic suppliers. Multi-objective problem of this research was solved using three variants of goal programming. Several insights are proposed for outsourcing decision making in the current global environment.