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.