Using system dynamics to study the logistics outsourcing cost of risk

Purpose – The purpose of this paper is to use systemic thinking to explain and predict the cost of logistics outsourcing, and to devise policies to minimize the cost of risk.Design/methodology/approach – A method of system dynamics is adopted to capture the dynamic interaction of logistics outsourcing systems and to analyze the impact of some factors in the system on policy decisions over a long‐term horizon.Findings – This paper illustrates the internal mechanism of the logistics outsourcing cost of risk systems by virtue of system dynamic principles, to develop a system dynamics model, and to give a quite detailed description of how the model could work.Practical implications – The results of the simulation analysis provide useful information for logistics outsourcing risk managers.Originality/value – This paper contributes to the discussion on the use of system dynamics for studying logistics outsourcing cost of risk.

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