A decision-making approach for investigating the potential effects of near sourcing on supply chain

Purpose - Near sourcing is starting to be regarded as a valid alternative to global sourcing in order to leverage supply chain (SC) responsiveness and economic efficiency. The present work proposes a decision-making approach developed in collaboration with a leading Italian retailer that was willing to turn the global store furniture procurement process into near sourcing. Design/methodology/approach - Action research is employed. The limitations of the traditional SC organisation and purchasing process of the company are first identified. On such basis, an inventory management model is applied to run spreadsheet estimates where different purchasing and SC management strategies are adopted to determine the solution providing the lowest cost performance. Finally, a risk analysis of the selected best SC arrangement is conducted and results are discussed. Findings - Switching from East Asian suppliers to continental vendors enables a SC reengineering that increases flexibility and responsiveness to demand uncertainty which, together with decreased transportation costs, assures economic viability, thus proving the benefits of near sourcing. Research limitations/implications - The decision-making framework provides a methodological roadmap to address the comparison between near and global sourcing policies and to calculate the savings of the former against the latter. The approach could include additional organisational aspects and cost categories impacting on near sourcing and could be adapted to investigate different products, services, and business sectors. Originality/value - The work provides SC researchers and practitioners with a structured approach for understanding what drives companies to adopt near sourcing and for quantitatively assessing its advantage

Outsourcing of Production:The Valuation of Volume Flexibility in Decision-Making

Background: Outsourcing remains a central mechanism for improving manufacturing supply chains, with volume flexibility being a frequently targeted objective. However, outsourcing decision-making remains focused on static cost estimations, while the value of volume flexibility is subject to managerial valuation, thus imposing a risk of estimation errors. This paper tests whether decision-makers systematically under- or overvalue volume flexibility when deciding on outsourcing. Methods: Four outsourcing decision made by an OEM operating with seasonality and boom and bust cycles are analyzed to assess if decision-makers' intrinsic valuation of volume flexibility is biased. This was done by utilizing a previously developed mixed integer linear programming model for tactical planning. The model jointly considers production planning, workforce adjustments and capital investment, while respecting upstream supplier constraints, thereby encompassing both positive and negative effects of production outsourcing on volume flexibility. Combining the model with detailed knowledge of how the production system would be impacted, enabled a quantification of the value from volume flexibility, which could then be compared to the decisions made. Results: Augmenting existing static cost estimations with the value of flexibility did not reveal systematic estimation errors. However, the results suggest that the value of volume flexibility is situational, and on average comparable to direct labor cost. Conclusions: The results emphasize the importance of accurately and case-specific valuation of volume flexibility in cost-driven production outsourcing.Wstęp: Outsourcing pozostaje głównym mechanizmem poprawy funkcjonowania łańcucha dostaw, przy szacowaniu elastyczności jako głównym mierniku oceny. Niemniej, proces podejmowania decyzji odnośnie outsourcingu jest głównie skupiony na estymacjach kosztów statycznym, podczas gdy szacowanie elastyczności podlega ocenie wartości zarządzania, a co jest z tym związane, ryzykiem estymacji błędów. Prezentowana praca przedstawia ocenę wyceny elastyczności procesu podejmowania decyzji w sprawach dotyczących outsourcingu. Metody: Poddano analizie cztery decyzji podjęte prze OEM przy występującej sezonowości, wzrostu oraz spadu w celu określenia istotności oszacowania podejmowanych decyzji z punktu widzenia elastyczności. Analizę tą wykonano przy zastosowaniu połączenia modelu zintegrowanego programowania liniowego dla planowania taktycznego. Model ten obejmuje planowanie produkcji, zarządzanie zasobami oraz inwestowania kapitałem przy uwzględnieniu ograniczeń w łańcuchu dostaw, co oznacza uwzględnianie wpływu zarówno pozytywnych jak i negatywnych efektów outsourcingu produkcji na oszacowanie elastyczności. Połączenie tego modelu z wiedzą dotyczącą prawidłowego funkcjonowania procesu produkcyjnego pozwoliło na skwantyfikowanie elastyczności. Otrzymane wyniki posłużyły do analizy porównawczej podjętych decyzji. Wyniki: Zwiększanie estymacji istniejących kosztów statycznych z wartością elastyczności nie wyjaśnia błędów systematycznych estymacji. Niemniej jednak wyniki sugerują, że wartość elastyczności ilości jest zależna od sytuacji i średnio porównywalna z kosztem bezpośrednim robocizny. Wnioski: Otrzymane wyniki wskazują na istotność dokładnej i precyzyjnej wyceny wartościowej elastyczności ilości w outsourcingowej produkcji w ujęciu kosztowym

Supply Portfolio Concentration in Outsourced Knowledge-Based Services

In the extant vertical integration literature, the question of how the firm's portfolio of outsourced work is managed across suppliers has been relatively understudied. We seek to advance this area of research by examining factors that influence how concentrated the firm's outsourcing is among its set of suppliers. Using data on the outsourcing of patent legal services, we find empirical evidence that outsourced knowledge-based service work is concentrated in the hands of fewer suppliers when: (1) it requires greater firm-specific knowledge; (2) there is a higher level of interrelatedness across outsourced projects; (3) the firm's reliance on outsourcing is high; (4) its outsourced projects are focused on a narrower (capability) domain; and (5) the technological dynamism of this domain is low. Our study suggests that examining portfolio-level phenomena in outsourcing is a useful complement to the predominant focus on transaction-level outcomes in prior research because it provides insights into how firms manage tradeoffs across their entire set of outsourced projects.

The Structural Crisis of Labor Flexibility

Paper evaluating the CCC’s aims, strategies, and activities. It includes an analysis of the persistence of poor working conditions in the garment industry; an overview of CCC strategies and the debate over codes of conduct, monitoring, and verification; and the description of three broad strategies for future action aimed at increasing the impact of voluntary, private instruments on working conditions

East and Southeast Asia Regional Labor Research Report

CCC_East_and_South_East_Asia_Regional_Research_Rep.pdf: 2398 downloads, before Oct. 1, 2020

Outsourcing, firm size, and product complexity: evidence from credit unions

Outsourcing business services is a key concern in the modern economy. Focusing on data processing services for credit unions from 1994 to 2003, the authors find that both credit union size and the diversity of their product offerings influence the propensity to outsource. The results suggest that simple scale-economy-based explanations for outsourcing may be inadequate.Contracting out ; Credit unions

Assessing consequences of low cost sourcing in China

Purpose – The purpose of the paper is to develop a framework for low-cost sourcing assessment and to explore the consequences of low-cost sourcing in China for a European manufacturer.<p>Design/methodology/approach – The low-cost sourcing framework generated from literature and the consequence analysis is based on a case study of a European company that has outsourced part of its casting processes to Chinese suppliers.<p>Findings – Characteristics of low-cost sourcing are based on a literature review divided into three categories: country characteristics, supply network structure, and supply network relationships and the case study shows that these three categories of characteristics jointly create negative effects. A two-directional cause and effect relationship is proposed between the characteristics and the operational supply chain performances. The presented low-cost sourcing assessment framework should be a good starting point for low-cost sourcing assessment, including mapping a firm’s total characteristics, and for analysing their performance impact.<p>Research limitations/implications – The conducted single case study is not enough for identifying, formulating, and validating all existing relationships between the low-cost sourcing characteristics. The present study has identified the existence of the relationships but has not evaluated their levels of impact.<p>Practical implications – Managers should be aware of how suppliers in low-cost countries may affect the structures, relations, and operational supply chain performances of the supply network. This paper presents a sourcing assessment framework enabling describing what dimensions of the sourcing characteristics would be affected by sourcing to a specific area of the world and what consequences and performance effects this would have.<p>Originality/value – Few prior studies have focused on companies with already established relationships with low-cost-country suppliers and how these companies should make the best out of these supply chains. This study takes a holistic perspective on low-cost sourcing and identifies several streams for further research

An exploratory study of factors influencing make-or-buy of sales activities

Purpose This paper aims to explore how sales managers make resourcing decisions with particular focus on their perceptions of outsourcing. Design/methodology/approach This paper is based on in-depth interviews with 29 senior sales managers from a variety of industry sectors based in the UK. All had more than five years’ experience of making resourcing decisions. Findings The findings are that resourcing decisions are prompted by cost pressure, the need to access skills or to improve flexibility. Outsourcing preferences are strongly moderated by perceived reputational risk. Availability of suitable suppliers and the ability to manage outsourcing are also practical moderators. Research limitations/implications The sample was purposeful in identifying and accessing senior respondents in substantial companies with extensive experience, but it was not random. Practical implications Respondents reported a lack of information available when making resourcing decisions; the model proposed provides a framework by which sales managers can identify the factors which should be taken into account and the information they need to make objective evaluations of resourcing options. Originality/value It has been acknowledged in prior literature that there is relatively little outsourcing of sales activities. This is the first exploratory study of the perceptions of sales managers about resourcing options and the first conceptualisation of how sales resourcing decisions are made