Industry insight
Paper type Viewpoint 1. Introduction
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Week 5 framework
Paper type Viewpoint
1. Introduction In 2003, Boeing announced its new age aircraft, the 787 Dreamliner, involving significantly higher percentage of outsourcing than what it had used earlier ( Denning, 2013b ). The aim of lower costs and faster development were belied by a series of setbacks including delayed delivery, cost overruns, multiple “aviation incidents” on account of problematic components and grounding of the fleet by premier customers ( Denning, 2013a ). Nearly a decade after the launch, Boeing admitted that their outsourcing strategy had gone wrong ( Gates, 2011 ). In contrast, over the same time period, Cummins’ decade long outsourcing arrangement with HCL earned the duo the The current issue and full text archive of this journal is available at www.emeraldinsight.com/1753-8297.htm SO 7,3 226 Strategic Outsourcing: An International Journal Vol. 7 No. 3, 2014 pp. 226-252 © Emerald Group Publishing Limited 1753-8297 DOI 10.1108/SO-04-2014-0004 “Outsourcing Excellence Award”, with a Director commenting that “Throughout our 10-year partnership, HCL has helped us achieve operational efficiencies and provided access to specialty expertise, enabling us to focus on our core business” ( Outsourcing Excellence Award, 2014 ). The contrasting viewpoints notwithstanding, outsourcing is seen as an essential component of a firm’s competitiveness in the new millennium ( Broedner et al., 2009 ; Kroes and Ghosh, 2010 ). Decades of research have resulted in two broad strands of prescription. One segregating activities into classes of “to be outsourced” and “to be kept in-house” ( McIvor, 2008 ; 2010 ) and the other offering a long list of Do’s and Don’ts to mitigate outsourcing risks ( Belcourt, 2006 ; Lungescu et al., 2011 ; Wayman, 2013 ). I argue that we now need to move beyond the “whether” and “what” questions and instead treat outsourcing as an organizational capability of consequence, very similar to manufacturing, marketing and research capabilities. What constitutes this capability and how they manifest themselves in outsourcing performance is the subject of inquiry of this study. 1.1 The ubiquity of outsourcing In the early part of the twentieth century, the Ford Motor Company produced steel for internal consumption. It also owned and operated rubber plantations in Brazil to source raw material for car tyres. We are now in a contrasting age where various processes of functions like manufacturing ( Von Corswant and Fredriksson, 2002 ), R&D ( Jensen and Pedersen, 2011 ; Martínez-Noya et al., 2012 ), logistics ( Irina et al., 2012 ), selling ( Unal and Donthu, 2014 ), procurement ( Carbone, 1996a ; 1996b ) and human resources ( Belcourt, 2006 ; Caruth et al., 2013 ) are getting outsourced. Examples like Nike, which outsources its entire shoe manufacturing activity ( Leavy, 2005 ), not only abound but also prosper, setting global standards. Indeed, in the era of hyper-competition ( D’Aveni, 1994 ), where the basis of competition changes continually, outsourcing has emerged as a strategic necessity as can be gauged by the increasing size of the outsourcing industry ( TPI, 2011 ). That outsourcing is a strategic act can be gauged from the fact that at times, it is not just select processes but entire departments which are outsourced ( The Economist, 2011 ). The example of the 90-year-old brand of agricultural implements in India, Tata Agrico, owned by Tata Steel, where the parent company retains only the design and distribution functions, having outsourced the entire manufacturing function at the turn of the millennium is a case in point (“Tisco to wind up”, The Hindu, 2003 ). While popular outsourcing examples refer to large iconic firms, outsourcing is even more important for small firms ( Murphy et al., 2012 ), given their resource deficiencies. Despite its prevalence and recognition as a source of competitive advantage ( Wee et al., 2010 ), and increasing involvement of company CEOs ( Willcocks, 2010 ), Hatonen and Eriksson’s (2009) review of outsourcing literature found a lack of inquiry on effective management of outsourcing arrangements. It is with this concern that in this paper I delineate the concept of the outsourcing capability. In a study of US textile and apparel industry, Su and Gargeya (2012) investigate the role of sourcing capability towards firm performance and advocate the need for organizations to actively invest in developing sourcing capability just as organizations develop other functional capabilities. In a similar vein, I study the competence of outsourcing itself, and how it performs under various conditions. 227 Framework for performing outsourcing capability In the remaining paper, I begin with a critical examination of the key motives cited for outsourcing decisions. I look at the associated perils of outsourcing and outline the dilemma that organizations face in balancing it’s benefits and risks. Next, I develop a matrix designed to aid the practising manager in overcoming this dilemma. Finally, I develop guidelines for identifying and managing the points of emphasis in the outsourcing of different class of processes, each of which present unique opportunities and demands on the focal firm intending to outsource them. Download 329.89 Kb. Do'stlaringiz bilan baham: |
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