The economics of partnership sourcing versus adversarial competition: a critique

In the strategic procurement management literature two general forms of purchasing arrangement feature—‘partnership sourcing’ and ‘competition’. Usually partnership sourcing is said to be superior because it leads to long-term collaboration based on trust between buyer and supplier. One product is a reduction of the supplier base with firms perhaps relying on a single source of supply or a small number of preferred suppliers. The paper reconsiders procurement methods in terms of a continuum using the economics of transaction costs. The paper then illustrates the economic issues discussed by considering procurement in the defence sector. Defence is taken as an example of public procurement with experience and opportunities for competition, partnership sourcing and long-term buyer-supplier relationships. The paper concludes that the case for partnership sourcing over competition is not clear cut.     

Opportunity‐Based Strategic Orientation,Knowledge Acquisition,and Entrepreneurial Alertness: The Perspective of the Global Sourcing Suppliers in China

Taking the perspective of global sourcing suppliers in China, this paper investigates how the supplier firms acquire market and technical knowledge from the outsourcing partnerships differently based on their strategic orientations regarding the exploitation of opportunities versus resources. We find that suppliers whose strategy formulation is driven by the aggressive pursuit of valuable opportunities tend to be able to learn more from the outsourcing partners. Our results also show that market and technical knowledge acquisition of the supplier firms has a positive effect on employees’ alertness to opportunities. In addition, organizational innovativeness plays an important role in determining how effectively knowledge can be utilized by employees to identify novel opportunities.     

Lean supply and price-based global sourcing — the interconnection

Just-in-time delivery, design for manufacturing, and early supplier involvement based on frequent and close interactions between buyers and suppliers are some of the basic conditions of lean supply in the automotive industry. Many of these conditions appear to be difficult to achieve in global purchasing. This is because global purchasing has mostly been seen as a means of putting price pressures on suppliers. The aim of this paper is to highlight the interconnection between global purchasing and lean supply. A strategic project “live or die” was chosen within a major global auto original equipment manufacturer (OEM) located in North America. To get as complete a picture as possible of the context and causal conditions, and to be able to make coherent benchmarks with objectives, global purchasing was followed across one major project rather than across different ones. The data was collected through interviews both in the OEM and in six suppliers and validated by triangulation and internal seminars. The analysis was done by screening data into some of the conditions identified in lean supply, which were observed to be the most relevant in the case company. We found that lean supply is affected negatively by global purchasing based on price and thus, price-based global purchasing should not be used for sourcing complex components that require early supplier involvement and intensive engineering collaboration between OEMs and suppliers. Instead, it could be proactively used in the sourcing of less complex modules and simple components.     

Cooperation versus competition: do buyers and suppliers really see eye-to-eye?

Purchasers have used a variety of tools to help improve the performance of their suppliers’ processes and products. Results of two large-scale surveys that compare buyer and supplier perceptions of a common customer firm's supplier development and its supply base's adoption of total quality management are reported here. One customer, known for its cooperative (partnership-like) approach to supplier relations, is contrasted with another firm that uses supplier switching to meet its procurement needs. Analysis of the survey data indicates that buyers and suppliers have a better “shared understanding” (smaller satisfaction gap) within the “competitive” relationship than within the “cooperative” relationship.     

Do Firms Spend More on Suppliers That Have Environmental Expertise? An Empirical Study of U.S. Manufacturers’ Procurement Spend

Stakeholders expect focal firms to improve their environmental performance. While firms may be able to accumulate the environmental expertise needed to achieve this goal internally, doing so may require significant time and resource commitments. Alternatively, buyer firms can leverage their suppliers’ existing environmental expertise and gain access to such expertise when they purchase products and services from these suppliers. The purpose of this study was to develop and test theory regarding under what conditions suppliers’ environmental expertise influences a buying firms’ procurement spend with these suppliers. We ground our study in transaction cost economics and agency theories and empirically test our hypotheses using a unique buyer–supplier dyadic data set. We find that buyer firms are willing to increase their overall business spend with suppliers that have strong environmental expertise, particularly when the buyer firms are more profitable and have higher levels of absorptive capacity. However, we find the opposite effect when the buyer firm’s executive compensation is linked to the firm’s environmental, social, and governance (ESG) performance. Likewise, we also find that the buyer firm’s environmental concern ratings negatively moderate the relationship between the supplier’s environmental expertise and the buyer’s procurement spend with the supplier.     

Electronics international procurement offices in Singapore

With rising cost from the scarcity of materials, original equipment manufacturers (OEMs) are increasingly turning to international sourcing as a key strategy to stay globally competitive. To achieve this objective, OEMs, particularly those in the highly competitive, low margin electronics industry, have been establishing international procurement offices (IPOs) in strategic locations around the world. A survey of 65 electronics IPOs in Singapore reveals some profiles, structures, and functions of electronics IPOs. The results further reveal that availability of suppliers and good quality parts are important considerations for electronics IPOs.     

Supplier diversity and supply chain management: A strategic approach

Although purchasing trends are moving toward consolidation, a strong economic argument can be made for supplier diversity. In fact, most Fortune 500 companies currently employ supplier diversity initiatives. If integrated into the overall corporate strategy, supplier diversity can become a source of competitive advantage for corporations. In order for such integration to successfully occur, however, the initiative must have top management commitment, a supportive culture, and the availability of champions to promote the proposal. Minority suppliers, in turn, need to realize that their failure or success in this highly competitive environment depends on their ability to continually develop overall competences, to be learning organizations, and to become increasingly attuned to and adept at building strategic alliances amongst themselves and with their corporate customers. In these respects, they can make use of intermediary organizations (such as local supplier councils) to improve their competences and competitive edge.     

Gender diversity issues in the IT industry: How can your sourcing group help?

In the information technology (IT) industry, women constitute only 33% of employees at the entry level and 17% at the leadership level. In this article, we outline the status of women in the workforce and discuss issues that affect their participation, with a specific focus on the IT sector. We claim that U.S. corporations can influence gender diversity in the IT industry by leveraging their relationships with IT suppliers. To this end, we propose the application of Nudge Theory during the strategic sourcing of IT services. We begin our narrative by describing the current state of gender diversity initiatives. Then, we detail gender diversity initiatives in the sourcing process as revealed by a survey on the topic related to IT suppliers. We then briefly define Nudge Theory and provide examples of this theory as applied to an organization’s supplier base. Finally, we present the details of our recommendation, which suggests that sourcing groups should include questions regarding women’s participation in the IT supplier’s workplace during competitive market events. We conclude with a call to action and a call to research.     

Holding up the mirror: The impact of strategic procurement practices on account management

Procurement has grown up. It is now a strategic business function that increasingly recognizes the importance of strategic supplier relationships, a reflection of key account management. It is time to assess the impact of this shift on the profession and practice of account management. This paper examines customer adoption of strategic procurement and then discusses the implications this has for account managers at the suppliers serving these customers. New techniques are emerging in these special relationships, including the use of psychological contracts and co-measurement and monitoring. Perceived fairness will also have a major impact on the customer's view of their suppliers. Account managers must recognize these changes or fall victim to supplier delusion: the belief that they are performing better than they really are.     

Towards more effective sourcing and supplier management

While most acknowledge the cost savings associated with more efficient buying, lower purchase costs alone are not an adequate measure of world-class procurement management. To focus solely on cost savings, we believe, falls short of excellence in sourcing and supplier management. Firms that buy “smarter” achieve lower costs and leverage supply market opportunities to accomplish corporate goals. While the importance of cost savings is acknowledged, this paper argues that other “above the line” metrics deserve attention. This paper accomplishes two related goals. First, 10 principles that lead to effective sourcing and supplier management are presented and discussed. Second, a set of parallel data is used to add credibility to our normative presentation. The findings suggest that high performing supply chains do, in fact, support the tenets of more effective sourcing and supplier management. Implications for managers are presented as well.     

中国企业应对全球采购的策略研究

随着全球贸易自由化程度的不断加深,全球经济日益趋于一体化,企业更加倾向于在全球范围内寻求最佳供应商,采购品质优良、价格合理的物料,以实现资源的有效配置。中国以其巨大的生产能力、充裕的劳动力、较低的生产成本、便宜的产品价格受到了国际市场的青睐,中国产品正"诱惑"着各国采购商。本文在阐述全球采购聚焦中国的原因和现状的基础上,客观分析了全球采购对中国企业的影响,并且提出了中国企业应对全球采购的具体策略。     

Small local firms inside the supply chain: Challenges and perspectives

The authors provide the results of an empirical research carried out in north-east Italy and completed in 1992, which was aimed at investigating the rapport between large manufacturers operating on the multidomestic and global markets and the small local supplying concerns. This research identifies that the globalization process has had a strong impact in the relations with suppliers. The purchasing firms have adopted a particular approach when selecting the suppliers. This has involved widening their previous geographic areas of contact, even making use of foreign sources. Consequently, the local micro units either will become excluded from future business relations with the purchasing organizations, or will be relegated into lower levels of the supply chain. Today small and very small units working as suppliers with direct link with large-scale clients, face many challenges: they should now renew their know-how and skills, develop a new managerial and organizational sense, and recognise the need to invest in new forms other than machinery and processes. The empirical study clearly showed both the limits and the structural weakness of such small units and provided some indications for growth in their technical-productive potential.     

Understanding supply chain improvement

This article sets out to explore one particular aspect of partnership sourcing: how suppliers cope with the demands of multiple customers, each of whom has a different style of partnership. The article begins by describing the rationale behind the move to customer-supplier partnership. It then moves on to present and discuss a case study of how one supplier transformed itself to cope with the competitive pressures of the modern business environment and, in so doing, developed the ability to deal effectively with the differing purchasing styles and needs of its customers. The article then proposes three complementary models of supply chain improvement which, taken together, allow for a more differentiated analysis of the phenomenon, and provide a more robust basis for theoretical development. The article concludes that those suppliers who seek/achieve world class status are not only in a position to accomodate the differing approaches of their customers but can also, to a limited extent, choose which customers to supply.     

Implementing reverse e-auctions: A learning process

Reverse e-auctions, which enable suppliers to compete on-line in real-time, are changing the way organizations select their suppliers. We explore how five large firms in different industries learned to use e-auctions, and how e-auctions were integrated into their purchasing processes. To successfully implement e-auctions, organizations should: (1) build e-auction competencies; (2) organize for knowledge management; (3) create a holistic sourcing process; (4) focus on the total cost of ownership; and (5) experiment with e-auction designs. Key observations are drawn from the case studies, and implications for supply managers are presented.     

Responsible supply chain management in the Asian context: the effects on relationship commitment and supplier performance

Responsible supply chain management (SCM) in the era of expanding global sourcing can play a critical role in diffusing corporate responsible practices throughout the emerging Asian economies. Thus, this paper aims to examine how responsible SCM can contribute to supplier performance, including environmental, social and operational performances through the improvement of relationship commitment in the Asian context. The hypotheses of this study were tested with the data from 187 South Korean suppliers and 193 Vietnamese suppliers. The paper finds that responsible SCM enhances relationship commitment as well as improves the sustainability performance of suppliers in Asian countries. Relationship commitment plays a critical and mediating role in the relationships between responsible SCM and environmental, social and operational performances. This study also finds that there is a contextual difference between South Korea and Vietnam. The findings of this paper provide implications for supply chain members to integrate environmental and social issues into their SCM practices so as to foster stronger sustainability performance in the global supply chain.     

Supply Relational Risk: What Role Does Guanxi Play?

The topics of supply chain risk and global sourcing have garnered significant attention in recent years. Although there is ample circumstantial evidence of global sourcing risk, especially from the western‐firm perspective of sourcing from China, few published studies have investigated the root causes of this risk. In this paper, we argue that much of the risk associated with sourcing from China stems from the differences associated with institutional norms and philosophical orientation between western and Chinese thought and culture. Based on an in‐depth literature review and case analysis, we compare western forms of supply chain relationship management with Guanxi, the Chinese form of relationship management and propose a framework of how western firms are exposed to supply relational risk when sourcing from Chinese suppliers. The framework proposed in this article sheds light for supply chain managers with regard to the potential pitfalls facing firms when working with Chinese suppliers, and provides the groundwork for future research regarding supply chain practices and Guanxi networks.     

Strategy and structure of service multinationals and their impact on linkages with local firms

Drawing on case studies of two leading UK service firms in five host countries (Argentina, Brazil, China, Korea and Malaysia), we examine how the strategy and organization of service multinationals shape the development of linkages with local firms in host economies. We find that there is reduced autonomy of subsidiaries to engage with local firms as a result of relatively centralized strategies of multinationals. Because of global policies ensuring consistency of services or global sourcing policies to reduce costs, service multinationals tend to prefer global suppliers. Backward linkages occur in a few cases when the relationship can be a vehicle for market expansion for the multinational in a particular host market. Local governments play an important role in the cases where backward linkages are developed.     

Innovation sourcing excellence: Three purchasing capabilities for success

Innovation sourcing has become more critical across many industries. As global value chains have become more fragmented, change and opportunity comes from all sides. As a result, companies need to excel at capturing innovation opportunities with existing and potential supply chain members. This article describes a simple framework with three essential innovation sourcing capabilities needed to excel in purchasing: (1) Purchasing needs to explore unmet needs and anticipate future competitive advantages by working closely with other functions and clients; (2) it needs to explore external opportunities beyond first-tier suppliers; and (3) it needs to involve suppliers in innovation projects that consistently deliver results over time. Our framework has been developed based on a combined qualitative and quantitative research methodology that takes into account practices and results at the purchasing and company levels. The framework will help C-level managers and purchasing teams benchmark their progress in innovation sourcing and understand what steps need to be taken to achieve excellence.     

Global sourcing of complex production processes

We develop a theory of a firm in an incomplete contracts environment which decides on the complexity, the organization, and the global scale of its production process. Specifically, the firm decides i) how many intermediate inputs are simultaneously combined to a final product, ii) if the supplier of each input is an external contractor or an integrated affiliate, and iii) if that input is offshored to a foreign country. Our model leads to a rich set of predictions on the internal structure of multinational firms. In particular, it provides an explanation why many firms choose hybrid sourcing and have both outsourced and integrated suppliers.     

Procurement auctions and negotiations: An empirical comparison

Real-world procurement transactions often involve multiple attributes and multiple vendors. Successful procurement involves vendor selection through appropriate market mechanisms. The advancement of information technologies has enabled different mechanisms to be applied to similar procurement situations. However, advantages and disadvantages of using such mechanisms remain unclear. The presented research compares two types of mechanisms: multi-attribute reverse auctions and multi-attribute multi-bilateral negotiations in e-procurement. Both laboratory and online experiments were carried out to examine their effects on the process, outcomes, and suppliers’ assessment. The results show that in procurement, reverse auctions were more efficient than negotiations in terms of the process. Auctions also led to greater gains for the buyers than negotiations, but the suppliers’ profit was lower in auctions. The buyer and the winning supplier jointly reached more efficient and balanced contracts in negotiations than in auctions. The results also show that the suppliers’ assessment was affected by their outcomes: the winning suppliers had a more positive assessment toward the process, outcomes, and the system. The findings are consistent in both the laboratory and the online settings. Finally, the implications of this study for practitioners and researchers are discussed.