Study On Risk Control Of Outsourcing Vendor Selection And Supervision

Service outsourcing is a modern and workable way to improve company's core competence. However the success of service outsourcing needs unique preconditions which involve outsourcing business, market environment and corporations participating into the business. The practical researches disclose that the success rate of service outsourcing is not high. 60% companies are not satisfied with outsourcing results and 40% companies want to terminate outsourcing contracts. These phenomena arise from asymmetric information between clients and vendors which result clients couldn't select out suitable vendors and supervise them effectively.This Thesis identifies the risk factors located in vendor selection and supervision process, confirms their weight and designs risk aversion mechanism aiming at vendor selection and supervision process. The thesis explores innovation both on theory and practice to guide company improving outsourcing management level. Based on the comprehensive theory frame the thesis including 5 parts, studies how to control outsourcing risks lied in vendor selection and supervision process.Part 1. Firstly we conclude and summarize the definition and related researches about service outsourcing and point out its future research trend. Then we define service outsourcing risk and sum up the main risks faced by outsourcing as well as introduce main studies about service outsourcing risk factor. Finally we summarize related researches about asymmetric information as it is the main reason resulting unsuccessful vendor selection and supervision.Part 2. According to the characters of outsourcing two-stage risks we draw out 6 risk factors, professional level of client, outsourcing business standardization, business scalability, communication, contract integrity, collaboration, to study their impacts on outsourcing risk and relationship among themselves through empirical survey research methods and structural equation model. The results testify that professional level of client, outsourcing business standardization, communication and contract integrity have direct impacts on service outsourcing risks while professional level of client, outsourcing business standardization and business scalability have indirect impacts on service outsourcing risks through contract integrity.Part 3. Through establishing vendor selection model based on service quality we find that client couldn't distinguish exact quality of service but its distribution. Then client infer that the service level will not exceed that corresponding to expect price, which results escaping of high level vendors thus debases service quality in the market. To avoid the risks arising from asymmetric information we bring out capability certification method provided by third party. Not like traditional theory model we make the assumption that vendor may not judge their abilities properly thus results choosing unsuitable certification level. Based on this assumption we establish game model which proves two finding. Firstly the role of capability certification has two aspects, transferring signal about vendor ability and improving vendor ability. Secondly with the increase of vendors who possess unsuitable judgement about their abilities the certification level and payment level between different vendors become closer and closer and finally the effect of certification disappears.Part 4. In the process of supervising vendors clients need to design reasonable incentive and supervision mechanism to ensure vendors fulfilling service outsourcing in accordance with client's requirements. Through establishing prime incentive model and supervision model this thesis points out that incentive mechanism and supervision mechanism will work together under asymmetric information. In designing contract payment if both incentive mechanism and supervision mechanism are taken into account the conflict between client and vendor could be overcome to a great extent. Moreover through this way the reliance on information will be enhanced and the output percent of payment contract could be interlinked with supervision signal. In managing service outsourcing risks the effort level of vendors have nothing to do with fixed payment and client overdue supervision will produce negative effect on vendors.Part 5. We provide management measures aiming at controlling risk factors in the process of vendor selection and supervision. These management measures include improving business standardization and business scalability, improving professional level of client, enhancing communication and signing perfect outsourcing contract. Around the main content the thesis tries to innovate in below 3 aspects.(1) Based on literatures trimming and qualitative analysis we draw out service outsourcing factors and establish service outsourcing two-stage rick models to do empirical study on risk factors located in service outsourcing vendor selection and supervision process. Though this method we get the loaded weights on risks by risk factors and the weights between pairs of risk factors.(2) Differing from traditional quality asymmetric information model in service outsourcing vendor selection we assume service quality meeting normal distribution and establish vendor selection model accordingly. With the assumption that vendor possessing complete information while client only possessing part information we analyze the effect of asymmetric information on service outsourcing market efficiency. Not like traditional model, under the premise that third party providing capability certification to pass service quality information we take the condition into account that vendors couldn't judge their abilities properly and analyze the effect on market coming from participants with wrong beliefs.(3) Aiming at asymmetric information in service outsourcing market we start from the characters of service outsourcing market and establish prime incentive model and supervision model. It's the first time that risk control mechanism is analyzed from two opposite dimensions.We find that in designing contract payment if both incentive mechanism and supervision mechanism are taken into account the reliance on information could be enhanced greatly and the output percent of payment contract could be interlinked with supervision signal.