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.
Highlights
The textile industry is a key manufacturing industry in the world
This paper evaluates outsourcing strategies based on operational costs, penalty costs, and outsourcing risks
In the weighted GP variant of goal programming, if approximately equal weight is given to each objective, operational costs tend to become higher because capacity flexibility and outsourcing risks move production contracts toward domestic destinations
Summary
The textile industry is a key manufacturing industry in the world. In the textile industry, supply chain globalization has brought numerous economic benefits. To increase sustainability in textile supply chains, production planning decisions that are based only on cost savings may not provide strategic benefits to the companies. In the example analysis a textile manufacturer reserves some capacity flexibility with domestic suppliers at the tactical planning stage. In uncertain situations, this capacity flexibility helps to sustain the business. This capacity flexibility helps to sustain the business Another way to achieve sustainability in the supply chain network is to manage outsourcing risks at international destinations. Making the right decisions at the tactical level allows greater flexibility for manufacturers to think about capacity allocation at production destinations across the globe. Product loss due to outsourcing risks creates several unsustainable patterns, such as customer dissatisfaction, economic loss, and solid waste management issues
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