Year
Purchasing Management
Summaries of the following articles:
1. When manufacturing moves back: concepts and questions (Fratocchi et al.)
2. Achieving excellence in global sourcing (Trent & Monczka)
3. Services supply management (Ellram et al.)
4. Transaction cost theory in ITO (Alaghehband et ...
Purchasing Management – Articles SUMMARY
1. When manufacturing moves back: concepts and questions (Fratocchi et al.)
2. Achieving excellence in global sourcing (Trent & Monczka)
3. Services supply management (Ellram et al.)
4. Transaction cost theory in ITO (Alaghehband et al.)
5. Extending the offshore outsourcing service portfolio (Beulen et al.)
6. Gartner’s 30 Leading locations for offshoring (Marriott)
7. Lessons from Dutch IT outsourcing (Delen et al.)
8. Revisiting the interplay between contractual and relational governance (Cao & Lumineau)
9. Buyer-Seller interaction for cleaning services (vd Valk & Wijnstra)
10. Portfolios of buyer-supplier relationships (Bensaou)
11. Dependence asymmetry and joint dependence (Gulati & Sytch)
12. Developing buyer-seller relationships (Dwyer et al.)
13. Testing a life-cycle theory of cooperative interorganizational relationships (Jap & Anderson)
14. Developmental process of cooperative interorganizational relationships (Ring & vd Ven)
15. IMP-based research (Johnsen et al.)
1. When manufacturing moves back: concepts and questions (Fratocchi et al., 2014)
Problem: Lack of academic papers on the back-reshoring trend
Solution: Shared definitions including extent and causes of types of shoring
Conclusion: why, where, what, how wrt back-reshoring still to be investigated
The reversal of off-shored decisions are growing. However, in the academic world there is a lack of a shared
definition, full understanding of the extent and causes, and a model to predict future trends.
Manufacturing back-reshoring = decision to relocate in the firm’s home country production or supply that was
previously offshored.
Reshoring = a generic change of location with respect to a previous offshore country.
Further offshoring = widening the geographic scope of off-shoring
Near-shoring = locate production in a foreign country in the same region
Near-reshoring = transferring production to another country that is geographically closer to the home country
Motivations for back-reshoring: loss of flexibility, ability to deliver on time → supply chain issues, quality, “error
view” (deterioration of initial advantages), government trade policies.
Further research should focus on: WHY (motivations for back-reshoring), WHERE (home vs foreign locations
advantages), WHAT (back-reshored activities), HOW (entry/exit modes)
2. Achieving excellence in global sourcing (Trent & Monczka, 2005)
Problem: Most organizations do not have well-developed global sourcing strategies in place.
Solution: Key features that characterize leading global sourcing organizations
Conclusion: Executive commitment, processes, resource availability, IT integration, organizational design,
communication and measuring savings.
Global sourcing = an advanced approach to sourcing and supply management that involves integrating and
coordinating common materials, processes, designs, technologies and suppliers across worldwide buying, design and
operating locations.
Five levels of sourcing: a continuum
Level 1: Domestic purchasing
Level 2: International purchasing only as needed
Level 3: International purchasing as part of sourcing strategy
Level 4: Global sourcing strategies integrated across worldwide locations
Level 5: Global sourcing strategies integrated across worldwide locations and functional groups
→ fundamental difference between ‘international purchasing’ (commercial transaction) and ‘global sourcing’
(integration and coordination of common materials/processes/tech/suppliers worldwide)
1
, Characteristics of global sourcing excellence
1. Executive commitment
2. Rigorous and well-defined processes (→ ones that requires participants to establish goals, meet milestones
and report progress as well as ‘lessons learned’).
3. Availability of needed resources
4. Integration through IT (data warehouses, intranet, contract repositories)
5. Supportive organizational design (executive steering committee, cross-functional project teams, separation of
strategic/operational activities)
6. Structured approaches to communication (face2face, electronic, strategy sessions, progress reports)
7. Methodologies for measuring savings (support calculation of companywide savings from global agreements,
ROI, ROA, impact on performance)
3. Services supply management (Ellram et al., 2007)
Problem: Cost and value within the service industry should be improved, but there are some barriers
Solution: Overcome the barriers by understanding services spending, segmenting, allocating proper resources,
increasing professionalism and using business controls.
Conclusion: Improved services supply management by dedicating more + the right resources is a new frontier.
Developing an outstanding capability for managing the purchase of services could truly be the next frontier for
improved organizational performance.
Supply managers can improve cost controls, minimize value leakage, and assure that firms are receiving more value as
well as competitively priced offerings.
Barriers to be addressed to improve services purchasing
➢ Lack of resources focused on services. Although there is a focus on cost management when buying materials,
this is not the case for services.
➢ Lack of IT support
➢ Knowing when to outsource (TCE)
➢ Limited understanding of cost drivers and structures
➢ Fragmented spending: services purchasing is often decentralized, which leads to lack of clear SLA and scope
creep.
➢ Growing supply base: rather than a supply base reduction (which shows to be a better solution: leverage costs,
improvement opportunities, relationship building and less administrative burden), the opposite is recorded.
Outcomes of poor management of purchased services
➢ Financial implications
➢ Opportunistic supplier behavior: high level of complexity and loopholes in services contracts + hard to detect
and prevent changes in delivery vs contract.
➢ Process flaws: no objective, physical evidence in summary invoices
What to do about it?
➢ Understand the magnitude of the services purchasing spending
➢ Segment the purchasing spending based on value and risk. Not all purchases should receive equal attention.
➢ Allocate appropriate resources relative to economic return. Take a spending category that is large, fragmented
and not very controversial to start your services supply management transformation.
➢ Increase the professionalism of the services purchasing area. This takes time.
➢ Measure effectiveness and ensure proper business controls. Getting the right tools developed and in place.
This includes periodic supplier audits, installing control systems and developing better services contracts.
➢ Put the best people in services supply management. Commitment!
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