Supply chain outsourcing under exchange rate risk and competition

This paper studies the impacts of foreign exchange risk and competition intensity on supply chain companies who are involved in offshore-outsourcing activities. In particular, we develop a variational inequality model that considers firms decision-making regarding pricing, offshore outsourcing, transportation, and in-house production under competition and foreign exchange uncertainty. We also use a series of simulation examples to answer questions regarding outsourcing and pricing strategies of supply chain firms with different risk attitudes, and explore numerically their associated profits and incurred risks.