Incorporating risks and costs into global sourcing decisions

Abstract

The aim of this research paper is to develop a cost model that incorporates the minor cost factors that are often ignored while making major sourcing decisions. Literature review and excerpts have been studied in detail showing the progress in research over the years. An appropriate methodology was designed to do so. Several subjective factors were also quantified in order to calculate the costs. The DEA approach was used to calculate the weighted sums of inputs and outputs and hence the efficiency rate. Based on the rate, the beneficial supplier was chosen. The company allocated 200 million INR for outsourcing. The method figured out that even with the best choice being selected, approx 112 million INR would actually be consumed, taking into account many factors. A well developed approach and strategy for offshoring greatly affects the total cost of outsourcing.