Outsourcing Cost Research Articles

A branch-and-cut algorithm for the time-dependent vehicle routing problem with time windows and combinatorial auctions

The urban logistics industry typically faces traffic congestion problems that result in variation of travel times across the day and impose a great challenge in routing design. While companies may either use a private fleet of delivery vehicles or outsource the tasks to the third-party logistics (3PL) providers to fulfill their logistics demand, some companies might employ a combination of both when their resource is unable to cope with demand or if demand fluctuates significantly over time. To tackle both challenges, we focus on a new variant of the vehicle routing problem known as the time-dependent vehicle routing problem with time windows and combinatorial auctions (TD-VRPTWCA), which considers time-dependent travel times in the routing design of the private fleet while selecting competitive bids from the 3PLs to serve a subset of the customers economically. The goal is to minimize the sum of the travel cost incurred by the private fleet and the outsourcing cost charged by the 3PLs for the chosen bids. To solve this problem, we present an arc-flow model with nine families of valid inequalities to strengthen the linear relaxation of the model. Based on this, a branch-and-cut approach is developed and evaluated on instances adapted from the well-known Solomon’s benchmark data. Extensive computational results demonstrate the effectiveness of the proposed method.

A bi-evolutionary cooperative multi-objective algorithm for blocking group flow shop with outsourcing option

In this study, a multi-objective blocking group flow shop scheduling problem with outsourcing option (BGFSP_OO) is addressed, where three objectives, including makespan, total energy consumption (TEC) and outsourcing cost, are considered simultaneously. To solve the BGFSP_OO, a bi-evolutionary cooperative multi-objective algorithm (BECMOA) is proposed. First, a machine switching strategy based on machine idle and blocking time is used in the decoding part to optimize the objective value TEC. Then, an effective heuristic for classifying outsourcing groups is proposed. To balance convergence and diversity abilities, a bi-evolutionary mechanism is proposed. The particle swarm optimization algorithm based on the gravity factor (IPSO) is employed, which exploiting individual performance, can enhance the convergence ability. Cross evolutionary search (CES) strategy is developed which can improve search ability, aiming to ensure diversity of solutions and access to more non-dominated solutions. Finally, the experimental results show that BECMOA is effective in solving BGFSP_OO compared to the state-of-the-art methods.

Stock Levels and Repair Sourcing in a Periodic Review Exchangeable Item Repair System

Background: Exchangeable item repair systems are inventory systems. A nonfunctional item is exchanged for a functional item and returns to the system after being repaired. In our periodic review setting, repair is performed either in-house or outsourced. When repair is in-house, a repaired item is returned to stock regardless of the repair status of the other items in its order. In contrast, with outsourced repair, the entire order must be repaired for it to return to stock. Methods: We develop formulas for the window fill rate (probability for a customer to be served within a given time window) to measure the system’s performance and compute it for each repair model. The cost of outsourcing is the difference between the number of spares needed to maintain a target performance level when repair is internal and when it is outsourced. Results and Conclusions: In our numerical example, we show that the window fill rate in both models is S-shaped in the number of spares and show how the graph shifts to the right when customer tolerance decreases and order cycle time increases. Further, we show that the cost of outsourcing is increasing with customer tolerance and with the target performance level.

Heuristic approaches for scheduling of a two-machine flowshop with outsourcing lead-time

This article studies a scheduling problem of a two-machine flowshop , considering outsourcing lead-time, where outsourcing a job incurs outsourcing cost as well as outsourcing lead-time. Each job has an option of being outsourced, i.e. the first operation of the outsourced job is handled by an external subcontractor while the second operation must be processed in-house after its delivery. The objective is to find a schedule for minimizing the weighted sum of the outsourcing costs and the total completion time. For the problem, the subset of jobs to be outsourced and the processing order of jobs are interwoven, implying that decisions have to be made simultaneously. This study examines the properties of the optimal solution and proposes various heuristics based on iterative local search and the biased random-key genetic algorithm. Extensive computational experiments are carried out in various settings.

Cost Comparison of Highway Rest Area Operations: In-House Workforce versus Outsourcing Methods

State departments of transportation (DOTs) typically use one of three approaches to operate highway rest areas (RAs): in-house workforce, method-based contracting (MBC), and performance-based contracting (PBC). State DOTs spend over $600 million annually to maintain their facilities and often outsource their work to save costs. Although some studies have calculated the annual cost of facilities operated by the three approaches, their findings are not directly comparable. The primary objective of this study is to compute and compare the average annual operating cost of individual RA facilities and the cost of RA data samples (average annual operating cost of a group of facilities in a specific year under a specific approach in a state) produced from these three approaches to achieve a cost-effective alternative. To achieve the objectives, research hypotheses were developed which state there are significant differences in the average annual costs produced by these three approaches. For data analysis, 6,248 cost data were collected from 29 states. From those individual cost data, 198 data samples were generated. Data sets were not normally distributed; thus, nonparametric tests were conducted to determine the group differences. The results show that outsourcing costs under the MBC are significantly less, followed by in-house and the PBC in both cases. The difference between in-house and PBC is also statistically significant. As the primary contribution, this paper investigated the MBC approach as the cost-effective option, and DOT engineers can utilize this approach in operating regular RA facilities to save costs. Caution should be taken when using the study findings in other types of facilities.

A branch-and-price-and-cut for the manpower allocation and vehicle routing problem with staff qualifications and time windows

This paper addresses a manpower allocation and vehicle routing problem with staff qualifications and time windows (MAVRP-SQTW), which is an extension of the manpower allocation and vehicle routing problem. This problem focuses on developing an optimal schedule for integrated staff assignment and vehicle routing in transportation systems to minimize outsourcing costs and travel costs. We first formulate this problem as an arc-flow model. Then, we design a branch-and-price-and-cut (BPC) algorithm based on a set-packing model for MAVRP-SQTW. To accelerate the column generation process, we apply the bounded bidirectional search and the decremental state–space relaxation. Meanwhile, we utilize subset-row inequalities to tighten the master model. Numerical results based on the modified Solomon’s instances show that our set-packing model solved by the BPC significantly outperforms the arc-flow model solved by CPLEX. Sensitivity analyses show that the numbers of vehicles and staff members as well as the number of staff types have great effects on the performance of the BPC. Results also suggest that the BPC can be able to optimally solve some instances with 70 requests, but solving large-scale instances is still the limitation of the BPC. Thus, we further develop a primal heuristic to improve the efficiency of solving large-scale instances and obtain relatively good solutions.

Order planning with an outsourcing strategy for a make-to-order/make-to-stock production system using particle swarm optimization with a self-adaptive genetic operator

This paper proposes an order planning method for an MTO-MTS (make-to-order/make-to-stock) production system, where semi-finished products are produced in advance to shorten the fulfillment lead time for customer orders. The semi-finished products can be either produced in-house or outsourced from an outside supplier. To minimize the outsourcing cost and the total penalty cost for the order planning, we build an integer programming model to jointly optimize the inventory matching, multi-process production, and outsourcing for both finished and semi-finished product orders. Because the problem is NP-hard, we propose a heuristic algorithm, APSO-SGO, that combines particle swarm optimization (PSO) and a self-adaptive genetic operator (SGO) based on measuring the swarm’s degree of aggregation (“A”) to solve it. Specifically, we first define four metrics to calculate the swarm’s degree of aggregation and determine whether the PSO is trapped in a local optimum. Self-adaptive crossover and mutation operations are then applied to improve the algorithm’s global search based on the current state of the PSO and the particles’ quality. To assess the method, we conduct numerical experiments using multiple datasets from a steel factory. The results demonstrate the effectiveness of our model and algorithm. We also provide some management recommendations for relevant industries.

Strategic logistics service procurement in shipping supply chains

This paper develops a game-theoretic model to explore the strategic procurement of logistics services in a shipping supply chain, where a freight forwarder canvasses orders and provides one-stop service to shippers. The forwarder faces a decision between in-house and outsourcing modes for inland logistics services, as well as the choice to purchase ocean shipping services through a forward agreement or in a spot market. The spot prices of inland logistics and ocean shipping services are positively correlated with shipper demand, meaning that changes in shipper demand can affect the spot prices. Our analysis indicates that the responsiveness of spot prices could be beneficial to the carrier but detrimental to the forwarder. Hence, the forwarder would adopt a forward agreement to purchase ocean shipping service even when the forward price is slightly higher than the expected spot price. Moreover, a forward agreement could be reached if the market size is relatively small. Finally, we show that the forwarder should adopt the in-house mode for inland logistics services, even when the in-house mode cost is higher than the expected outsourcing cost. This study contributes the literature by revealing how the correlation between shipper demand and spot prices for two types of logistics services affects the procurement decisions of a freight forwarder.

The high costs of outsourcing: Vendor errors, customer mistreatment, and well‐being in call centers

AbstractWe analyze the impact of outsourcing on the well‐being of internal call center employees in the U.S. telecommunications industry. Our findings draw on mixed‐methods data. The qualitative findings suggest that internal employees experienced escalating job demands connected to errors by third‐party call center vendors and their employees due to additional work and intensified customer frustrations. SEM results show sequential mediation between the time internal employees spent correcting vendor errors, customer mistreatment of employees, emotional exhaustion, job satisfaction, and absenteeism. Employee autonomy over customer‐related decisions appeared to help workers manage these job demands and their effects on well‐being.

Joint scheduling of spare parts production and service engineers based on progressive Pareto algorithm

ABSTRACT We analyse the joint scheduling of spare parts production and service engineers in a multi-site maintenance system. In the system, for each failure, a service engineer with the required spare part needs to be allocated for on-site maintenance. If one of the required resources is not readily available, the maintenance task can be satisfied via an external channel with quick responsiveness but high involved costs. Service providers need to make an efficient plan, including production scheduling of spare parts, allocation of service engineers and outsourcing strategy. First, a mathematical model with the objectives of minimum total outsourcing costs and minimum weighted tardiness is formulated. Then, a novel and knowledge-based heuristic algorithm is developed, namely progressive Pareto algorithm based on step-size (PPAS). To verify the performance of PPAS, it is compared against other well-known algorithms, including NSGA-II, MOEA/D, NNIA, RIPG, MMOIG and MNNIA. Finally, the effectiveness of the joint scheduling mode is demonstrated by comparing it with the separate optimisation mode of spare parts production and workforce allocation. Highlights Analyse the joint scheduling of spare parts production and service engineers Construct a bi-objective optimisation model Develop a progressive Pareto algorithm based on step-size Verify the superiority of the proposed algorithm and joint scheduling mode

Consignment and turnkey sourcing and outsourcing analysis for a three-player supply chain in various power dynamics

This paper investigates a supply chain consisting of three-players; an original equipment manufacturer (OEM), a contract manufacturer (CM), and a supplier. Using Cournot competition, we study the outsourcing decision between the OEM and the CM, both competing in the same market. We provide the optimal solutions and outsourcing strategies from which all three players may choose under various power dynamics. We identify Win-Win conditions in which both the OEM and the CM benefit, and Win-Win-Win conditions that all players benefit from outsourcing. If CM's product is a partial substitute to OEM's product, we find that the OEM always prefers consignment, and the CM prefers turnkey when the CM determines the outsourcing cost. However, when the OEM determines the outsourcing cost, counter-intuitive results may occur: the OEM prefers turnkey, and the CM prefers consignment are presented. Also, when the OEM determines the outsourcing cost, the CM's profit is capped at a level that the OEM is willing to share. But when the CM determines the outsourcing cost, the OEM can counteract to CM's outsourcing cost. While the supplier is always worse off in turnkey, the total profit of the supply chain is always worse off in turnkey when the outsourcing cost is determined by the CM (but not by the OEM). Numerical analysis and lemmas provide managerial insights on how a certain sourcing strategy is chosen by the OEM or the CM due to dynamics between optimal outsourcing cost, component price, and quantity decisions.

Single machine SLK/DIF due window assignment problem with general job-dependent positional effect and outsourcing operations

This paper considers the SLK/DIF due window assignment problems on a single machine with a general job-dependent positional effect, where the actual processing time of a job is subject to a job-dependent and positional effect. Production schedulers may decide to outsource/reject some jobs by paying the corresponding costs. Based on whether to accept the tardiness jobs, we consider two different objectives under slack and different due window assignment, respectively. The first objective function is to minimize the weighted sum of earliness, tardiness, due window starting time, due window size, and outsourcing costs, while the second objective function is to minimize the cost function that includes earliness, due window starting time, due window size and outsourcing costs. We study the structural properties of two due window assignment methods and develop polynomial-time solution algorithms for the considered problems. A numerical example proves the advantage of the outsourcing decision and the distinction between two different objectives.

Assessment of facilities management sourcing approaches in hotels in Ghana: a study of selected hotels in Wa

PurposeThe study aims to assess the sourcing approaches used in providing facilities management (FM) services in hotels. It further explores the factors that influence hotels' choice of sourcing approach and the challenges.Design/methodology/approachThe study used a case study design. Simple random, census and purposive sampling techniques were used to select the hotels and respondents. Data were collected using interviews and analysed thematically. The data were presented in narration and direct quotes from the respondents. The critical factors influencing outsourcing decisions were ranked using the relative importance index. This study is based on a single case. Therefore, further research should be conducted to expand the scope of study nationwide as a step toward making the results more robust.FindingsBoth in-house and outsourcing sourcing approaches were used to provide FM services. In-house FM services mainly focused on cleaning, security and aspects of maintenance. Internet and information technology related services and other maintenance activities were also outsourced. Outsourcing decisions in the various hotel categories were mostly guided by the cost of outsourcing, core business, lack of in-house skills and hotel size.Practical implicationsFM strategy can be developed to guide the management of FM activities in hotels. An approach that adds value and enhances the activities of hotels and provides convenience to customers must be adopted by hotels. Further studies should be conducted on the cost implications of the two main sourcing approaches, as well as the impact of sourcing approaches on customer satisfaction. An additional study should focus on the driving factors influencing the cost and quality of outsourced FM services in hotels. This will help provide comprehensive information on effective FM sourcing approaches and the operations of hotels.Originality/valueThe study focused on the sourcing approaches used by hotels to provide FM services. It also explored the influencing factors and challenges of FM practices in hotels.

Lagrangian Heuristic for Multi-Depot Technician Planning of Product Distribution and Installation with a Lunch Break

In this paper, we consider a technician planning scheme stemming from product distribution and installation in a manufacturing enterprise that considers factors such as soft time windows, skill areas, lunch breaks, and outsourcing options, among others. The goal is to identify the optimal partition of technicians into groups and assignment of customers to technician groups and find the optimal routes for technician groups to minimize the sum of the travel cost, soft time window violation cost, and outsourcing cost. To address this problem, the study develops a tailored Lagrangian heuristic that incorporates several strategies to speed up convergence and produce sharper bounds. Computational comparisons between the developed heuristic and MIP solver are presented. The results reveal that the bounds found by the developed algorithm outperform those found by CPLEX for large instances, and it is capable of identifying high-quality feasible solutions to large-scale problems.

The Outsourcing Cost Defrayment Act of 2022

The Outsourcing Cost Defrayment Act of 2022

An Approximate Analysis of Dynamic Pricing, Outsourcing, and Scheduling Policies for a Multiclass Make-to-Stock Queue in the Heavy Traffic Regime

A new study by Ata and Barjesteh proposes an effective joint dynamic pricing, outsourcing, and scheduling policy for a multiclass make-to-stock manufacturing system. The authors approximate this control problem with a Brownian control problem. They solve the Brownian problem explicitly by exploiting the solution to a Riccati equation and propose a policy for the manufacturing system based on its solution. The proposed policy is a two-sided barrier policy. Outsourcing and idling processes are used to maintain the workload above the lower and below the upper barriers, respectively. Dynamic prices are used to control the workload process between the two barriers. The authors show using a simulation study that the optimality gap of the proposed policy is small, and their proposed policy outperforms a long list of static pricing policies. Moreover, the gap between their proposed policy and the static pricing policies increases with the server utilization and the outsourcing cost.

The Challenges Faced by Manufacturing Companies in Implementation of Green Supply Chain: Evidence from the Bakhresa Food Products Limited in Dar es Salaam – Tanzania

Northwistanding the role played by manufacturing companies in implementation of green supply chain, it seems that, this role has not been fully practiced by manufacturing companies in ensuring green supply chain. Taking Bakhresa Food Product LTD as a case study. This paper is intended to get a better understanding of the challenges faced by manufacturing companies in understanding green supply chain and recommending strategies for improving this role. Based on the qualitative appraoch and a purposive sample of 60 respondents, data were collected using in-depth interview, focus group discussion, indirect observation and analysis of secondary data. Data were analysed based on the thematic analysis strategy through the aid of MAXQDA 10 software. Findings of the study revealed that, manufacturing companies faced a number of challenges towards implementing green supply chain. At the green sourcing and purchasing level, the company was confronted with lack of sustainable practices in the organization vision and mission, poor commitment by top management to source environmental friendly materials and high operational costs. Moroever, challenges related to green manufacturing were lack of knowledge by the staff on environmental practices and impacts as well as lack of demand for green manufactured products due to their expensive nature. Challenges related to green transportation and distribution included irregular transportation by the vehicles, poor maintenance of the vehicles and poor infrastructures. Finally, challenges related to green disposal and reverse logistics were lack of information sharing between the firms and suppliers, inadequate legal enforcement by the government specifically to protect environment, shortage of equipment, lack of knowledge of the workers about disposal processess and also manufacturing companies failure to control customers after selling the products. Hence, to improve this situation, we recommend that; to improve green sourcing, use of modernized machines and provision of relevant traing. For the green transportation, manufacturing companies are required to conduct maintanance fot motor vehicles, making consolidation of materials so as to reduce number of trips per day. Finally, to improve green disposal, manufacturing companies are required to establish the program of waste collection from the residential areas as well as purchasing disposal equipment so as to avoid costs of outsourcing

Algorithms for Multi-Customer Scheduling with Outsourcing

There are two customers and two uniform machines. Each customer has a set of jobs. These jobs may be processed on a uniform machine or may be outsourced with an outsourcing cost. Every customer has an objective function for his jobs. Manufacturers want to find the best scheduling scheme for both customers. We present algorithms for these problems for the first time.

Scheduling of two-machine flowshop with outsourcing lead-time

This paper considers a two-machine flowshop scheduling problem with outsourcing lead-time. While the first operation of jobs can be either processed in-house or outsourced to subcontractors, the second operation of jobs must be processed in-house. Outsourcing a job incurs a job-dependent outsourcing cost as well as outsourcing lead-time, which implies that the outsourced job becomes available for the second operation after its outsourcing lead-time. The objective is to minimize the weighted sum of the outsourcing costs and the scheduling costs which is either makespan or total completion time. The problems are shown to be NP-hard, and both exact and heuristic algorithms are developed for the problems. Finally, computational experiments show that the proposed algorithms provide efficient and effective solutions.

두 단계 흐름생산라인에서 가중완료시간을 최소화하기 위해 아웃소싱 전략을 활용하는 일정계획문제

This paper researches a two-machine flowshop scheduling with an outsourcing strategy. In the flowshop, the first processing of jobs is either managed in-house or outsourced to outside suppliers, the second processing is processed in-house only. When a job is outsourced, the company pays outsourcing cost for each job, and considers outsourcing lead-time implying that the second processing can start after the lead-time. The objective cost function of this paper is the sum of the total weighted completion time and the outsourcing costs. This paper derives a branch-and-bound algorithm and some heuristics for the problem. From the computational experiments, we can observe that the performance of the derived algorithms is effective and efficient.