The impact of sourcing enterprise system use and work process interdependence on sourcing professionals’ job outcomes

We examine sourcing professionals’ work context to conceptualize how they use sourcing enterprise systems (SESs) and to understand when SES use results in positive/negative job outcomes. We differentiate between SES use for supplier selection and supplier governance, identify sourcing professionals’ work process interdependence as a moderator for the impacts of SES use on job satisfaction, and suggest job satisfaction mediates the impacts of SES use on job performance. We conducted a field study of sourcing professionals’ SES use at one of the largest consumer product companies in the United States, which has implemented an SES to innovate its sourcing professionals’ work processes. Based on our analysis of the survey and qualitative data we collected, we found the impacts of both types of SES use (1) to be negative on job satisfaction when work process interdependence was high, (2) to be positive on job satisfaction when work process interdependence was low, and (3) to be mediated by job satisfaction for job performance. We discuss the implications of our findings for the literature at the intersection of information systems and operations management as well as for the information technology enabled innovation of sourcing processes and, more generally, complex business processes.     

Choosing between single and multiple sourcing based on supplier default risk: A real options approach

The selection of a given purchasing strategy is a central activity in risky environments. Single sourcing, a powerful approach in a stable environment, can amplify a firm's exposure to risk (e.g., supplier's default) in the presence of uncertainty. Multiple sourcing, however, presents higher costs due to the management of more than one supplier. A correct evaluation from a risk management perspective is needed. This paper proposes the Real Options approach for valuing the probabilistic benefits of multiple sourcing in managing the supplier default risk (to be compared with the related higher costs). A computational model, based on the Monte Carlo simulation, was developed. The results show the (probabilistic) advantages of adopting the multiple sourcing strategy in risky environments for a specific case. The proposed sensitivity analysis is aimed at identifying the impact of the most important transactional parameters on the differential benefits of the two sourcing strategies. Thus, the model and its managerial implications represent a valid support for the decision-making process in the presence of uncertainty.     

Rational and intuitive decision-making in sourcing teams: Effects on decision outcomes

According to dual process theory, individual decision-making can be based on rational procedures and experience-based intuition, and the decision-making approach can influence decision outcomes. We investigate how the application of rational procedures and experience-based intuition affects the outcomes of supplier selection decisions taken by cross-functional sourcing teams. Specifically, we examine whether the selected supplier׳s cost and quality/delivery/innovativeness performance is higher when more team members use a highly rational and/or a highly experience-based decision-making approach. From data on 54 teams, we find that the use of rational procedures enhances cost performance. Conversely, when sourcing team members use their experience-based intuition, the decision is more likely to result in satisfactory supplier performance along all tested performance dimensions.     

Information systems and technology sourcing strategies of e-Retailers for value chain enablement

In the e-Retail industry, a well-designed IT infrastructure is essential in creating a tightly integrated value chain and delivering high quality service. With intense competition for market share and profits, information systems and technology (IST) sourcing decisions are becoming increasingly important to e-Retail firms to support continued growth and market responsiveness. Drawing on the contingency theory, we examine organizational and environmental factors that influence an e-Retailer's IST sourcing strategy of make versus buy in enabling its value chain activities, and we also look at firm-level performance impacts of IST sourcing decisions that involve bundling across value chain activities. We test the proposed model and hypotheses using a panel data set of 307 firms over the period of 2006–2010. The results show that firms that make transformative IT investments tend to source a smaller portion of IST for their e-Retail value chain activities than firms that pursue automate or informate as their strategic role for IT investment. Capabilities are positively associated with IST sourcing. Firms experienced in e-Retail are more likely to build rather than buy their IST. In addition, we find mimicking behavior for IST sourcing among firms in the same merchandizer category. We find that IT strategic role is strongly associated with growth metric, whereas sourcing decisions predominantly impact operational performance measures. There is partial evidence that alignment between IT strategic role and IST sourcing decisions results in better performance effects. Moreover, complementary IST sourcing of synergistic marketing and sales activities positively impacts Web sales and conversion rate, but the sourcing combination of logistics, operations, and sales activities is associated with lower Web sales and conversion rate.     

Human resource barriers to partnership sourcing in China

Building on previous research on both buyer–supplier relations and human resource management in the PRC, interviews with managers in each of 47 UK-owned PRC subsidiaries were undertaken. The majority of firms are actively pursuing close and cooperative relationships with local suppliers, but there are substantial human resource barriers to the establishment of partnership sourcing arrangements. Grounded analysis reveals key HR barriers to partnership sourcing in the form of difficulties in staff recruitment and retention, problems in cross-cultural communication, poor working practices in supplier firms, and corrupt staff behaviour. This paper describes and analyses these problems, discusses measures that are being taken in an attempt to overcome the problems, and comments on the progress being made towards ‘ideal type’ partnership sourcing arrangements.     

The mediating role of speed in the global sourcing decision process

The principal aim of this study is to provide theory and testing to elucidate the role of decision-maker's decision process and speed during the global sourcing decision-making process (GSDP). In order to achieve this goal, we examine the behavior of a sample of 202 decision-makers belonging to Italian SMEs in the manufacturing sector. Our main finding suggests that faster decisions during the GSDP process lead to superior financial and non-financial performance of the selected supplier. Moreover, we find support for dual processing theory wherein rationality and intuition of the GSDP are associated with increased supplier performance both directly and through their effects on decision speed. Results are discussed in terms of the GSDP, SME and strategic decision-making literatures and practical implications for managers in SMEs.     

Making sustainable sourcing decisions: practical evidence from the automotive industry

Achieving environmental and sustainable performance within an organisation’s supply chain and manufacturing operations will be feasible if upstream supply partners have the same commitments in performing their operations in a sustainable manner. Given the debate above, we propose a comprehensive framework to address the sustainable supplier selection and order allocation (SSS&OA) problem. The framework developed is practical, that starts by using an audition check-list specific for each sustainability dimension (environmental, economic and social), from which the weighted values of its comprised criteria are obtained. The weighted scores of the selected sustainable suppliers are utilised by a proposed bi-objective order allocation model in order to make sourcing decisions. The strength of the proposed framework is its practical applicability to provide a solution for SSS&OA problems which is validated through a real-world application. Finally, research findings, theoretical and managerial insights and also directions for additional research are presented.     

An empirical examination of strategic sourcing dominant logic: Strategic sourcing centricity

Recently, much of the thought in strategic sourcing, i.e., dominant logic, has shifted away from the exchange of tangible goods and toward the exchange of intangibles, specialized skills and knowledge, and processes. This study refers to strategic sourcing dominant logic as strategic sourcing centricity (SSC) and describes it as a sourcing management′s mindset based on learning, performance, planning, and relational orientations and manifests itself in the implementation of SS to meet supply management objectives and satisfy stakeholder requirements. Building on insights on intangibility derived from resource-based theory (RBV), the study proposes and empirically tests strategic sourcing centricity (SSC). The authors test the operational measures of SSC dimensions and its impact on performance on a sample of 174 supply management executives. The results indicate strong support for the theorized framework. Managerial implications and future research agenda are provided.     

Strategic sourcing and corporate social responsibility: Aligning a healthcare organization's strategic objectives

Strategic sourcing has long been utilized by organizations to maximize budget efficiency. The process includes a spend analysis, which historically has been performed by identifying the commodities and services purchased that resulted in the greatest spend, and establishing contracts with suppliers for these items in an effort to decrease the overall price through quantity discounts. This process restricts the data used in the spend analysis process to basic transactional information, and has not considered corporate social responsibility objectives as part of the strategic sourcing process. This paper modifies an existing spend analysis process framework, and applies the framework in a case study that uses additional data points to identify opportunities that allow an organization to simultaneously achieve both strategic purchasing and social responsibility objectives. The case study uses healthcare purchasing data from eight Department of Veterans Affairs medical centers. The goal of the model generated using regression analysis in the case study is to determine the buy characteristics that are most likely to generate mandated savings within the medical centers, in conjunction with achieving sustainability goals. The extensions of the regression model were examined to determine how collaborative buyer/supplier relationships can achieve organizational strategic objectives.     

Improving sourcing decisions in NPD projects: Monetary quantification of points of difference

During new product development (NPD), firms make critical design and sourcing decisions that determine the new product's cost, performance, competitive position, and profitability. The purchase price of materials and components for the new product provides only part of the picture for design and sourcing decisions. All-encompassing analyses of cost and performance, such as total cost of ownership, are extraordinarily difficult to implement because they are demanding in terms of time, data and cooperation. We study monetary quantification of points of difference, which enables an NPD team to base its decisions instead on more focused, strategically-pertinent analyses of costs and performance. We propose a substantive model of its antecedents and consequences. We then test this model with data from matched samples of 144 project leaders and 144 cost analysts who participated in the same NPD projects. Using structural equation modeling, we also test hypothesized differences in perspectives between project leaders and cost analysts. Results demonstrate the pivotal role of monetary quantification of points of difference among the sourcing alternatives being considered, especially for cost analysts. Results also demonstrate that Decision Justification to senior management drives the NPD team's decision-making process. Finally, monetary quantification of points of difference leads to Uncertainty Reduction, which is found to be the primary antecedent of the judged success of applying analysis of cost and performance.     

Affective diversity and emotional intelligence in cross-functional sourcing teams

In cross-functional sourcing teams, differences in goals and personality traits can lead to tensions and reduced effectiveness. Diversity in teams can be conceptualized as surface-level diversity (e.g., gender, nationality) or as deep-level diversity (e.g., personality, attitudes). This study investigates the potentially negative effects of one category of deep-level diversity – namely, affective trait diversity – on sourcing team performance and how such negative effects might be mitigated through team members' emotional intelligence. The study analyzes a sample of 88 sourcing teams (234 team members) using moderated regression analyses. Sourcing team cohesion is found to fully mediate the relationship between affective diversity and team performance, while the collective emotional intelligence of the sourcing team positively moderates the diversity-cohesion relationship (moderated mediation). Thus, this study provides insights into both the mechanics of team diversity and the critical role of collective emotional intelligence in sourcing teams and thereby enables supply managers to better understand cross-functional team setups and effectiveness.     

Low cost country sourcing and its effects on the total cost of ownership structure for a medical devices manufacturer

In this paper, we describe a total cost of ownership (TCO) method as an activity-based costing (ABC) application along the value chain to measure and analyse the costs of international sourcing activities. We further describe the method's implementation for a manufacturer of high-tech medical devices. For this case study, we analyse the effects of shifting purchasing volume from traditional procurement market suppliers to low cost country suppliers on the cost structure of purchasing projects. We find that particularly costs at component and supplier level gain importance over traditionally dominating unit level costs. Furthermore, we identify low cost country sourcing as a decision with extensive impact on value chain entities other than purchasing. Finally, a considerable part of costs in low cost country sourcing accrue at the beginning of a purchasing project due to problems stemming from unsatisfactory initial quality, language barriers and intercultural communication.     

Antecedents and relative performance of sourcing choices for new product development projects

Given the complexity of sourcing choices in R&D, driven by conflicting points of difference, scholars have struggled to formulate clear theoretical predictions about which sourcing choices lead to superior performance. Our study contributes to the elucidation of this question by studying both the antecedents and performance consequences (project cost and duration) of alternative sourcing choices in the context of new product development, thus bridging two rarely intersecting streams of research to discover unique insights. We draw from the transaction cost economics (TCE) and organizational learning theory to account for the interdependence of cost- and non-cost related factors in firms’ sourcing choices. Results from our empirical analysis, using data on clinical trials in the global biopharmaceutical industry, show that greater project complexity, project stage uncertainty, and prior sourcing experience determine the sourcing choices a firm makes. We also establish that alternative sourcing choices vary in their ability to minimize project cost versus project duration, and show that prior experience with a sourcing choice is an important moderator of project performance, in addition to being one of the determinants of sourcing choice.     

An optimization approach to strategic sourcing: A case study of the United States Air Force

The DoD annually procures billions of dollars worth of systems, supplies, and services in support of the national military strategy. Faced with budget cuts and other resource constraints, the DoD must transform its procurement process to ensure cost-effective sourcing of critical supplies and services. One aspect of current transformation in the DoD is the use of a strategic sourcing approach for the procurement of services at military installations. Using the Air Force's strategic sourcing process as our context, we developed an optimization model for selecting a set of proposals from among multiple offerors for services to be performed at multiple installations. The selection achieves the most favorable objective by balancing the confidence level in an offeror's past performance with the cost of services to the Air Force. The research findings, which are based on a realistic scenario, demonstrate improvements over the current sourcing process in both overall performance and cost.     

The “ugly twins”: Failed low-wage-country sourcing projects and their expensive replacements

International sourcing and sourcing from low-wage countries remain topics of high priority for firms in industrialized countries. Lower factor costs, particularly in low-wage countries, have led to high expectations of savings from both managers and academics. All too often, scientific and particularly practitioner publications present international sourcing as a conditio sine qua non for becoming a (more) successful company. However, research has shown that these extensive savings do not materialize automatically, particularly when sourcing customer-specific items, such as automotive components. This paper analyzes the operational and financial implications and real effects of cost-oriented sourcing from China, based on the specific example of a European automotive OEM. Furthermore, it sheds light on the ambivalent and often overrated savings impact of sourcing from low-wage countries. Our analysis of a comprehensive set of secondary data from a company data warehouse reveals that more than three quarters of the analyzed China-sourcing projects do not reap the expected benefits. Moreover, each failed low-wage-country sourcing project has its so-called “ugly twin”, the need to resort back to suppliers from high-wage countries at a higher cost. Implications for managerial practice include the suggestion to employ extended calculation methods, entailing influence factors other than from procurement, particularly for low-wage-country sourcing. Furthermore, we recommend creating an awareness of potentially biased decision-making among purchasing personnel who follow standard industry recipes.     

Managing sourcing team effectiveness: The need for a team perspective in purchasing organizations

To meet today’s high demands on the purchasing function, sourcing teams have become the standard in contemporary corporate purchasing organizations. Sourcing teams are often started with high expectations. However, after making a promising start many of these teams appear to be unable to operate effectively and to meet management expectations. This study shows that sourcing team effectiveness is particularly hindered by a lack of team perspective in many purchasing organizations. In this paper, the results of a large-scale, cross-sectional survey to address the success factors for sourcing teams are discussed. We aim to clarify the factors behind sourcing team performance, taking into account the specific task and organizational context. It is concluded that purchasing executives should shift their focus towards employee involvement and team processes, to enable teams to actually meet and even surpass the expectations placed on them.     

Opportunism or strategic opportunity seeking? Three approaches to emerging country sourcing

The current interest in low-cost or emerging country sourcing (ECS) has inspired a multitude of empirical studies. These studies are based on varying methodological approaches and have come to somewhat different conclusions regarding the motivations for and outcomes of ECS. This paper argues that the overall approach to the new markets, especially the strategic network context surrounding each buyer-supplier relationship in the ECS setting, impacts on the prerequisites for success.The aim of the paper is to identify and discuss approaches to ECS. It begins with a review of recent empirical studies, scrutinising research interests and the approaches applied by the companies studied. It suggests and illustrates three broad categories of approaches: (1) the transactional approach focusing on individual sourcing in the emerging country, (2) the supply base approach focusing on establishing a set of supplier relationships in the emerging country, and (3) the network positioning approach in which both supplier and customer relationships are developed in the emerging country. The paper also discusses the three approaches as stages in an internationalisation process.The paper concludes that of the three strategic approaches the viability of two – the transactional approach and the supply base approach – can be questioned on several grounds, but that when seen as a process directed towards developing a network position in a new (emerging) market all three approaches make sense as different stages in a process moving towards achieving that goal. An explanation for the process of increasing commitment in emerging markets, relying on learning in interaction and on relational investments beginning with suppliers and continuing with customers, is also discussed.     

Notes and debate paper: Should merchandising and sourcing be worlds apart? The opportunity for more integrated strategic sourcing research

Whereas retailers are some of the biggest buyers that have some of the highest percentages of external spend as a share of revenue, they are not typically included in strategic sourcing research. Strategic sourcing research originated with a focus on supplies for manufacturing. But the strategic sourcing of merchandise by retailers is not as commonly studied. Merchandise sourcing is often approached very differently from manufacturing sourcing and often different teams of buyers with different roles and responsibilities are involved. Leveraging author industry experience and interviews with strategic sourcing executives in manufacturing and merchandise sourcing this notes and debate paper compares strategic sourcing across these domains and identifies fruitful research opportunities for developing a more comprehensive supply chain approach to strategic sourcing research.     

Foreign direct investment and global sourcing choices of firms in the US

This paper investigates factors affecting the global sourcing choices of firms in the US: (1) US investment abroad; (2) foreign direct investment in the US; (3) wage–productivity ratio; and (4) transaction cost. I found that there is a statistically significant association between the country of sourcing choices and foreign direct investment. Both the wage–productivity ratios and transaction costs are not statistically significant at the conventional significance level, but their regression coefficients show proper signs. The paper also examines the patterns of foreign direct investment among countries and compares transaction costs by income group. Copyright © 2000 John Wiley & Sons, Ltd.