A managerial application of system dynamics modeling to outsourcing

The purpose of this paper is to use modeling and simulation to investigate the puzzling performance problems that plagued the project outsourcing in term of poor quality and delivery delay, and apply the appeal and power of system dynamics modeling as a managerial approach to improve learning and intervention in complex situations to South African context where little or no such attempt had been made.

This work is based on exploratory use of system dynamics modeling to study a web of quality and productivity problems that plagued a company as a result of adopting outsourcing as a policy to bolster productivity and service delivery.

A significant finding from this research is that outsourcing has the propensity to perpetuate any trend it dominantly generates as a result of strong positive feedback loops. It also made explicit the dynamic processes that lead to certain observations that have been made in conventional management literature about the effects of outsourcing.

The major limitation to this study is availability of information in form of certain operating data need for calibration thus imposing few aggregations on the model.

The authors believe that this work has a degree of originality as it applies system dynamics modeling to public sector outsourcing which not being done before. It also made a significant finding by uncovering possible counteractive effect of outsourcing on internal staff.