A three-stage optimization model for production and outsourcing under China’s export-oriented tax policies

•This paper proposes a three-stage decision model on outsourcing and production.•The integrated model considers China’s export-oriented tax policies.•A cross entropy based solution method is developed for solving the model.•Numerical experiments are performed for investigating the model and the method.

This paper studies an integrated optimization problem on outsourcing and production decisions in the context of the global supply chain and China’s export-oriented tax policies. A three-stage decision model is proposed for this integrated optimization problem. A cross-entropy-based solution method is also developed to solve the three-stage decision model. Numerical experiments are performed to investigate the effectiveness of the proposed model and the efficiency of the proposed method. Additionally, some managerial insights are drawn from these experiments.