Modelling of outsourcing decisions in global supply chains. An empirical study on supplier management performance with different outsourcing strategies

Outsourcing decisions in global supply chains are critical to a business’ competitiveness. This study investigates and compares the supplier management in Taiwanese enterprises under different outsourcing strategies. Base on an empirical study through questionnaires, we investigate the supplier management and critical success factors of the Taiwanese enterprises. It is shown that different outsourcing strategies should be deployed by different types of industries, and a good working relationship with suppliers and customers are paramount to success. The important issues related to supplier management include supplier capability to deliver on time, long term contract strategy with suppliers, supplier evaluation, and quality of material from suppliers.     

A dynamic sourcing strategy considering supply disruption risks

This study presents a formulation that supports decision-making by determining the optimal number of standby suppliers required to respond to supply failure risks. The problem of supply failure is modelled through a standby approach, in which failure is time-dependent. The probabilities of supply interruption, financial loss caused by supply failure, and operating cost of working with suppliers are modelled to yield the expected total cost, which enables organisations to determine the optimal number of suppliers. Two possible modes of substitution failure are considered in the standby model to enhance the analysis. A set of sensitivity analyses are performed for several input parameters to illustrate the model’s behaviour. The analysis provides an optimal sourcing strategy depending on a combination of supply risk, operational cost vs. loss ratio and length of the supply period. The proposed model indicates the benefits of cost savings, unlike other dynamic models that use multiple suppliers simultaneously.     

Strategic purchasing participation,supplier selection,supplier evaluation and purchasing performance

In this article, we examine how purchasing’s strategic participation influences supply management activities via the choice of appropriate operational and strategic criteria. Specifically, the study focuses on supplier selection and monitoring ongoing supplier performance evaluation based on operational and strategic criteria. A combination of choosing appropriate supplier selection criteria and monitoring supplier performance ensures that the benefits of purchasing’s participation in strategic planning translate into better purchasing performance of cost, quality, delivery, flexibility and innovation. We test the hypotheses using survey data collected from manufacturing companies in the US by means of a path model. Our results provide support for the tenet that purchasing’s participation in strategic planning influences purchasing performance directly as well as through the mediating effects of supplier selection criteria and supplier performance evaluation. We discuss the theoretical and managerial implications of the findings and propose directions for further research.     

Contextualisation of the complexity in the selection of developing country outsourcees by developed country outsourcers

Outsourcing research has recognised that selecting the right offshore supplier (outsourcee) in low-cost distant developing countries is complex, but central to outsourcing success. More specifically, the combination of outsourcee contextual internal factors (e.g. capabilities) with outsourced-to country contextual external factors (e.g. political, legal, economic, socio-cultural) as two fundamental and interconnected decisions firms make when outsourcing remains an underexplored research gap. Therefore, through a rigorous three-tier qualitative approach we, firstly, develop a contextual Environmental Separation Index (ESI) decision tool to help outsourcing firms in making more informed decisions when selecting outsourcees and outsourcing locations. Secondly, we operationalise the ESI as intuitive and easy to use decision tool, yet with a provision to deliver a truly context proof outsourcee selection decision. Thirdly, we adopt a complexity theory lens to explain that narrowing the contextual outsourcer–outsourcee gap facilitates a mind-set shift in outsourcing relationships from hierarchies to networks and from controlling to empowering developing country outsourcees. We show from a complexity theory perspective how contextual separation gaps between developed country outsourcers and developing country outsourcees can be an effective way to grasp the evolutionary path of outsourcing relationships.     

A simulation based continuous improvement approach for manufacturing based field repair service contracting

This paper develops and tests a novel extension to traditional supplier selection practice, with a particular focus on the concluding stages of a manufacturing-based field service. Action-based research was used to design and develop a discrete event simulation decision support for a large multinational manufacturing organisation with a significant after-sales service supply chain. The framework has been designed to identify and validate the value attributable to collaborative supplier contracting with built-in costed performance improvement targets. Use of the framework in the case organisation was found to produce greater cost savings over traditional practice, facilitating extended supply chain contracts. The results provide evidence of the high level of savings achievable while also improving customer delivery through targeted service improvements over the contracts life cycle. This framework advances beyond the prevalent practice of cost-focused short-term adversarial supply contracting and is innovative in terms of its continuous improvement simulation based framework design.     

中国造船工业供应商评价指标体系与管理体制构建

对于中国造船企业，构建完整的供应商管理体系是其从分散型采购体系向一体化采购体系整合的关键步骤之一。本文主要针对中国造船工业供应商管理的特点以及所存在的不足，将质量、交付能力、价格、服务能力和持续改进这5个定量评价指标与供货商关系指标和供货商管理能力指标这2个定性评价指标相结合，运用AHP法，构建了造船行业的供应商评价指标体系，并依据这一指标体系，构建了与造船行业集中化采购体系相适应的供应商管理体制。     

Supplier relationship impacts on postponement strategies

The main purpose of this paper is to examine the impact of the supplier relationship on postponement implementation in the buying firm. The links between three supplier relationship constructs and three postponement constructs are hypothesised and tested through structural modelling. These hypotheses are then tested using empirical data of a sample of 219 manufacturing firms. The findings suggest that the ability of the buying firm to delay product design decisions (postponement in product design) is positively related to the level of supplier commitment, supplier expectation of a continuing relationship with the buyer, and level of joint buyer and supplier actions. However, the buying firm’s ability to delay purchasing decisions about which items to order or how many to order (postponement in purchasing operations) was only positively related to the level of joint buyer and supplier actions. By contrast, the buying firm’s ability to delay the final product configuration (postponement in production operations) was not directly affected by those aspects of the supplier relationship investigated. These findings give greater insight into how different aspects of supplier relationship impact different types of postponement than previous research and have significant implications for practice.     

Supplier selection for outsourcing from the perspective of protecting crucial product knowledge

This paper considers the supplier selection problem in terms of the characteristics of the products/processes to be outsourced. Emphasis is placed on the possible risk that may arise in sharing or transferring crucial product/process knowledge to suppliers during outsourcing. Two indices are employed to assess the suitability of a supplier for outsourcing a product/process. The first measures the supplier's capability for technological innovation in the products for which they offer outsourcing services, and includes investment in R&D projects and the ratio of R&D personnel to the total work force. The second index measures the supplier's practices in protecting its clients’ intellectual property rights, and includes corporate image, track record in protecting clients’ intellectual property rights, and compliance with internal and external requirements. These two indices are then used to classify suppliers into four major groups, which are in turn assigned to classes of components/processes depending on their strategic importance and vulnerability – a portfolio approach. The proposed portfolio approach has been validated via a substantial empirical study involving data for 401 parts, 216 suppliers, and 36 manufacturing companies operating in China.     

Coordinated replenishment systems with discount opportunities

In many practical situations, coordination of replenishment orders for a family of items can lead to considerable cost savings. A well-known class of strategies for the case where cost savings are due to reduced joint ordering costs is the class of can-order strategies. However, these strategies, which are simple to implement in practice, do not take discount possibilities into account. We propose a method to incorporate discounts in the framework of can-order strategies. A continuous review multi-item inventory system is considered with independent compound Poisson demand processes for each of the individual items. Discounts are offered by the supplier as a percentage of the total dollar value whenever this value exceeds a given threshold. Starting from the can-order strategy as a basic decision rule, we develop a simple heuristic to evaluate these discount opportunities. The performance of the can-order strategy with discount evaluation is compared with that of another class of discount evaluation rules as proposed by Miltenburg and Silver.     

Benefits of retailer–supplier partnership initiatives under time-varying demand: a comparative analytical study

This paper aims to help supply chain managers to determine the value of retailer–supplier partnership initiatives beyond information sharing (IS) according to their specific business environment under time-varying demand conditions. For this purpose, we use integer linear programming models to quantify the benefits that can be accrued by a retailer, a supplier and system as a whole from shift in inventory ownership and shift in decision-making power with that of IS. The results of a detailed numerical study pertaining to static time horizon reveal that the shift in inventory ownership provides system-wide cost benefits in specific settings. Particularly, when it induces the retailer to order larger quantities and the supplier also prefers such orders due to significantly high setup and shipment costs. We observe that the relative benefits of shift in decision-making power are always higher than the shift in inventory ownership under all the conditions. The value of the shift in decision-making power is greater than IS particularly when the variability of underlying demand is low and time-dependent variation in production cost is high. However, when the shipment cost is negligible and order issuing efficiency of the supplier is low, the cost benefits of shift in decision-making power beyond IS are not significant.