Contextualising the holistic cost of uncertainty in outsourcing manufacturing supply chains

Abstract

Uncertainty is hard to measure but often a central factor that influences outsourcing decisions. Assessing the holistic cost of uncertainty within the context of supply chain activities is the focus of this paper. The aim was to assess the holistic cost of uncertainty within outsourcing manufacturing supply chains, with a view to assisting firms to make more informed decisions when outsourcing. Our specific objectives were to understand and contextualise outsourcing uncertainty, assess the tangible and intangible costs that this uncertainty can bring and explore ways to manage this uncertainty. Stage 1 involved understanding existing outsourcing relationships through a questionnaire survey. Results from 107 questionnaires and 15 interviews with companies that outsource some aspect of their manufacturing were analysed. This revealed that the majority of companies felt that expected outsourcing benefits were not fully achieved, with cost uncertainty emerging as a major issue. Stage 2 involved carrying out in-depth case studies with five leading UK engineering firms, in order to better understand and contextualise the causes and consequences of cost of uncertainty during outsourcing. A resulting framework contextualises holistic costs of uncertainty in manufacturing supply chains.

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