Outsourcing to a Powerful Contract Manufacturer: The Effect of Learning-by-Doing

• 成果类型: Article
• 署名作者: Gray, John V.; Tomlin, Brian; Roth, Aleda V.
• 署名单位: University System of Ohio; Ohio State University; University of North Carolina; University of North Carolina Chapel Hill; Clemson University
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/j.1937-5956.2009.01024.x
• 发表日期: 2009
• 页码: 487-505
• 关键词: Outsourcing; learning-by-doing; game theory

摘要

The contract manufacturing industry has grown rapidly in recent years as firms have increasingly outsourced production to reduce costs. This growth has created powerful contract manufacturers (CMs) in several industries. Achieving a competitive cost position is often a primary motive for outsourcing. Outsourcing influences both the original equipment manufacturer's (OEM) and the CM's production levels, and, therefore, through learning-by-doing renders future costs dependent on past outsourcing decisions. As such, outsourcing should not be viewed as a static decision that, once made, is not revisited. We address these considerations by analyzing a two-period game between an OEM and a powerful CM wherein both firms can reduce their production costs through learning-by-doing. We find that partial outsourcing, wherein the OEM simultaneously outsources and produces in-house, can be an optimal strategy. Also, we find that the OEM's outsourcing strategy may be dynamic-i.e., change from period to period. In addition, we find both that the OEM may engage in production for leverage (i.e., produce internally when at a cost disadvantage) and that the CM may engage in low balling. These and other findings in this paper demonstrate the importance of considering learning, the power of the CM, and future periods when making outsourcing decisions.