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

The Impact of E-Procurement on the Number of Suppliers: Where to Move to?

This paper examines how electronic procurement influences the organization of economic transactions. It seeks evidence for ICT-induced changes in how companies organize their activities and whether ICT lead to more competitive and transparent markets. Testing the relationship between the effect of electronic procurement on procurement cost and sourcing strategy, I provide new evidence that electronic procurement leads to more market transactions. This leads to the conclusion that electronic procurement increases market transparency, lowers search and supplier switching costs and improves the management of supply chain and contradicts the predictions that ICT will lead to a dominance of network-like organizational form and an increasing reliance on hybrid forms of organizing economic transactions. Two implications emerge from these results. The first one is relevant for companies engaging in ICT projects. ICT combined with changes in business strategy leads to a reduction of market transaction costs and, as a result, opens up new possibilities in terms of how business activities can be organized and/or how to structure competition in upstream markets. This effect of new technologies is of clear benefit to companies successfully implementing and using new technologies. The second implication is of great importance for companies whose customers implement ICT to intensify competition among suppliers. Changing environment forces them to adapt to new market conditions and look for new ways of maintaining profitability.information technology and firm boundaries, markets vs. hierarchies, sourcing strategy, electronic procurement

A Continuous Review Inventory System with Lost Sales and Emergency Orders

We analyze a continuous review lost sales inventory system with two types of orders—regular and emergency. The regular order has a stochastic lead time and is placed with the cheapest acceptable supplier. The emergency order has a deterministic lead time is placed with a local supplier who has a higher price. The emergency order is not always filled since the supplier may not have the ability to provide the order on an emergency basis at all times. This emergency order has a higher cost per item and has a known probability of being filled. The total costs for this system are compared to a system without emergency placement of orders. This paper provides managers with a tool to assess when dual sourcing is cost optimal by comparing the single sourcing and dual sourcing models

Supplier base management : the contrast between Germany and the UK

Supplier base management is an important aspect of the management of manufacturing operations, as reducing the number of suppliers – the supplier base – is a key approach in many companies including the US and the UK. By having fewer suppliers, manufacturers have more time to work closely with each remaining supplier, for instance, on improving quality and product innovation. However, is this approach being adopted in Germany as fast as it has been in the UK? This paper describes research which addresses this question and which also investigates how German companies are managing contacts with their suppliers. The study was conducted in two stages. Firstly, a survey of manufacturers in Germany and the UK identified the trends in the supplier base of companies in each country. Secondly, a follow-up telephone survey was carried through with purchasing managers at a random sample of 34 German plants to identify, for example, the advantages experienced by manufacturers, which had reduced their supplier base. The findings show that German manufacturers have not reduced their supplier base by as much as companies in the UK. The second part of the research showed that German manufacturers, which have reduced their supplier base, perceive the benefits of this. However, other companies appear to have failed to take the opportunity to gain advantages from a reduced supplier base

Simulation of learning in supply partnerships

This paper introduces a general, formal treatment of dynamic constraints, i.e., constraints on the state changes that are allowed in a given state space. Such dynamic constraints can be seen as representations of "real world" constraints in a managerial context. The notions of transition, reversible and irreversible transition, and transition relation will be introduced. The link with Kripke models (for modal logics) is also made explicit. Several (subtle) examples of dynamic constraints will be given. Some important classes of dynamic constraints in a database context will be identified, e.g. various forms of cumulativity, non-decreasing values, constraints on initial and final values, life cycles, changing life cycles, and transition and constant dependencies. Several properties of these dependencies will be treated. For instance, it turns out that functional dependencies can be considered as "degenerated" transition dependencies. Also, the distinction between primary keys and alternate keys is reexamined, from a dynamic point of view.

Outsourcing, Supplier Relations, and the External Span of Control

The outsourcing and supplier relations literature focuses primarily on initial designs while ignoring how superior implementation skills can drive competitive advantage. The concept of external span of control, defined as a firm’s overall capability to manage multiple and varying relations with outside suppliers, is put forward to capture implementation differences. Its antecedents are described and strategies are provided for improving it involving growth, alignment, internal development, and inter-firm learning.

Why do Firms Engage in Multi-sourcing?

We provide an explanation for multi-sourcing, which is often found in the real world and refers to the situation where a final goods producer acquires homogenous components from different suppliers. In the presence of imitation under outsourcing, multi-sourcing helps to deter entry by the suppliers into the final goods market and enhances profitability of the outsourcing firm.Entry, Imitation, Multi-sourcing

The long term evolution of vertically-related industries

The paper develops the argument that the long-term structural evolution of an industry depends on the evolution of a vertically-related, downstream industry. We analyse two pairs of vertically-related industries, the jet and turboprop aircraft and engine industries, since the first introduction of the jet and turboprop technologies to 1998. The paper shows that the evolutionary dynamics of the downstream industry, in terms of number of firms and products, entry, exit and concentration, is transmitted to the upstream industry via the structure of the network of vertical exchange relations. We identify two network configurations, partitioned and hierarchical, and show that they are responsible for sharply different transmission effects. An econometric analysis is carried out to demonstrate this difference in the turboprop and jet markets.vertically-related industries; network; industrial concentration; entry; exit.