A Sustainability Based Framework To Make A Strategic Outsourcing Decision For Warehouses In The Electronics Industry

Abstract

Over the course of last decades, sustainability matured from an abstract concept to an important source of corporate legitimacy. Supply chain management plays an important role in shaping and framing sustainability, due to the high level of external value added in many industries (Hofmann, Busse, Bode, & Henke, 2013). It is critical to accurately monitor and determine inventory holding costs and its impacts on decision making as it can be a representation of almost half of the overall assets of an organization. The concept of outsourcing stems from the traditional make-or-buy and subcontracting questions that companies have dealt with for centuries. Research suggests that, instead of outsourcing functions or activities (tasks within a functional area) one by one, they should be outsourced in clusters if they are connected through flows of goods or information (Biehl & Prater, Outsourcing Multiple Business Functions: A Theory Building Investigation, 2003). Simultaneously with increased demands on strong economic performance based on the effectiveness of these supply chains, organizations are now held responsible for the environmental and social performance of their suppliers and partners (Editorial, Sustainability and supply chain management - An Introduction to the Special Issue, 2008). The goal of this research is to provide an economic and sustainability analysis on a decision criterion whereby organizations can determine whether to continue operations of their warehouse(s) or to close the warehouse(s) based on the carrying cost ratio. If a shutdown is determined as the best solution, then the benefits of outsourcing multiple functions of a supply chain together must be considered. This thesis provides a framework for outsourcing.