This website uses cookies to ensure you have the best experience. Learn more

Sourcing Strategy Essay

1602 words - 7 pages

Summary of ArticleOutsourcing is the practice of contracting an outside third party agent to take over specified functions. As Jones (2006) suggests, the potential benefit of knowing when to outsource is a very high return on investment, however, a company should understand the strategic rationale for outsourcing through the sourcing model, pursue a sourcing strategy that aligns with the company strategy and acknowledge the scenarios under which outsourcing is undesired.In order to understand the strategic rationale for outsourcing, Jones (2006) urges that the company should consult the sourcing model. The sourcing model consists of five focuses and they are :1. Company Strategy2. Function ...view middle of the document...

Most importantly, the documentation in this focus assists executives in making business decisions. It also allows the potential third parties to understand the functions within the company and to determine the necessary components when responding to an outsourcing request for proposal. The rationale in this focus is to know the company's own capabilities and understand its skills and knowledge. By doing so, the company is able to construct a productive and efficient outsourcing strategy that can result in cost reduction and a higher return on investment.The third focus in the sourcing model is sourcing strategy and the decision matrix. The creation of decision matrix links the company strategy and current capabilities together. The company should use a decision matrix to evaluate and prioritize sourcing goals against its company strategy and currently capabilities to lay out the decision points, which are then used to construct the sourcing strategy. On the other hand, the company must identify and communicate potential risks to executive management which allows them to expect the downside effects of the strategies. The rationale in this focus is to construct a sourcing strategy through carefully laying out decision points, identifying downside factors and aligning sourcing strategy to company strategy.The fourth focus in the sourcing model is sourcing requirements and the request for proposal (RFP). As companies choose to outsource more, the outsourcing requirements and request for proposal must be simple and flexible because outsourcing involves significant change in the organizational structure of the company. A flexible approach will enhance the opportunity to achieve a successful outsourced solution. To create a flexible approach, the company must be able to manage some of the procurement issues, such as those presented in the following list :1. Separating commodity content from strategic content2. Guarding against a common commodity bias among buyers and sellers; relying on volume and term as the primary pricing levers3. Avoiding the use of boilerplate language and terms that could dilute focus of true accountabilities across the company and outsource provider4. Considering the upside and downside implications of strategic alliances and partnerships5. Considering the implications of multi-suppler mix and associated interdependencies6. Considering the upside and downside implications of sole sourced negotiations with any incumbent outsource provider7. Addressing the change factors throughout, especially in the area of price sensitivityThe rationale in this focus is to have the company retain the ultimate ownership and clearly define the accountabilities when posting the request for proposal to ensure the success of outsourcing. The company must also be flexible and not to use the a standardized approach to avoid the dilution of true accountabilities.The fifth focus in the sourcing model is solutions inventory which determines the company's...

Other Papers Like Sourcing Strategy

Operating Business Successfully In The 21st Century: Supplier Development Of Northrop Grumman

2654 words - 11 pages - ongoing management of the supply base,* Supplier development and improvement - taking actions to improve supply base performance , and* Supplier integration into ongoing processes - involving suppliers in new product and new process development.There are many benefits to strategic sourcing. It focuses attention on the company mission and links procurement decisions to the overall corporate strategy. Strategic sourcing also helps design future

Operation Strategies to Achieve a Competitive Advantage. Essay

1062 words - 5 pages . This response will outline relevant business case studies, to explain how a business can obtain its competitive advantage through global sourcing, economies of scale, inventory management and outsourcing. * Global sourcing Global sourcing is a strategy that can be adopted by operations management in order to sustain a competitive advantage. It refers to the practice of sourcing goods and services from the national boundaries. Global

Sap Overview

1613 words - 7 pages SAP’s Approach to Sourcing and Procurement Strategies in Today’s Economy; MARKET ? Global Trends are Driving Change in Procurement Practices Economic Downturn Focus on Efficiency Globalization Sustainability Increased Focus on Costs New approaches to savings Pressure to increase spend visibility and management Growing Supplier Risk Supply base becoming more global Need to effectively manage risk and provide insights

M&S Solutions

533 words - 3 pages Joel A Alvarado Perez 1. Why are M&S in this predicament? Has increased overseas sourcing helped or hindered their marketplace performance? Business was only getting worse for M&S through the 1990’s. The company started off on top of the department store chain, but by 1998, sales began dropping. By 1998, sales had dropped by 6%. As oppose to helping themselves by increasing the sourcing overseas, they spread out too fast and

Media Management

1283 words - 6 pages Supply Chain Management  Establish a governing supply chain council. A governing council's purpose is to give direction and help align supply chain strategy with the company's overall strategy. The council's membership should include the leader of the supply chain organization as well as corporate executives, business unit managers, and other influential company leaders. Ideally the council should hold regularly scheduled meetings. But even if

Eagle Machine Case Study

522 words - 3 pages goods. Burt et al (2010, Page 6) claim that Strategic Sourcing if formalized into three activities. What is purchased and from whom (Spending), wh0 offers what and the changes that pertain to the supply world (Analysis of the supply Market), and the development of a sourcing strategy. This planning strategy minimizes risk and costs by pre-determining a more profitable route by eliminating the variables that could end up being costly to the

Internal & External Sourcing Strategies Paper

1348 words - 6 pages Running Head: Internal & External Sourcing Strategies Internal & External Sourcing Strategies Paper University of Phoenix March 7, 2011 The decision whether and organization chooses to source internally or outsource depends on the overall need of the organization. Many of these goals reflect achieving high quality, low cost, on-time delivery, and satisfactory cooperation and from suppliers. The two main key factors that drive the

Vf Brands: Global Supply Chain Strategy

548 words - 3 pages VF Brands: Global Supply Chain Strategy Historically, VF had been an apparel manufacturer, so it was proud of the internal manufacturing capabilities and believed that those capabilities offered the company a significant competitive advantage. For VF’s heritage businesses, jeanswear and imagewear, 60% of which production was mainly targeted at the US market. Hence, the company should focus on quick response, rapid replenishment, and low cost

Li and Fung

964 words - 4 pages , Gymboree, the Limited * Global sourcing network quite important * The company has a really strong leadership. The fact that Li & Fung was and is still, in a way, a family business make the leader strongly committed to the success of the firm. Plus both of the current directors are really well publicly traded * Both of the Brothers educated at Harvard Business School * Victor completed his Ph.D and Taught at Harvard for

Tqm and Qfd and Purchasing

885 words - 4 pages comprehensive and useful management of supply channel quality would increase manufacturing flexibility, reasonable protection from price competition in finished goods and an advantage in lead-time-based competition. TQM would become a practical competitive strategy if the company invests more in customer service improvement side. The Profit Impact of Market Strategy (PIMS) data has proven that in long term quality is the main key factor in

Scm 5831 Midterm

1082 words - 5 pages | | | | | * Question 12 | | | The best way to evaluate price in the sourcing process is:Answer | | | | | | | Correct Answer: |  e.  Total cost of ownership | | | | | * Question 13 | | | The _________ stage of the product design process may include early supplier involvement:Answer | | | | | | | Correct Answer: |  a.  Idea development | | | | | * Question 14 | | | One of the key

Related Essays

What Should Us Tech’s Sourcing Strategy Be?

1705 words - 7 pages What Should US Tech’s Sourcing Strategy be? US Tech is considering discontinue the cooperation with its primary product supplier: TaiSource. The two main reasons that drive the company for doing so are (1) reducing cost and broaden the market by collaborating with a new Chinese supplier; (2) eliminating the threat of a future strong competitor who knows almost everything about US Tech’s products. After carefully examining the entire situation

Mexico Or China, Managing A Global Network

564 words - 3 pages EXECUTIVE SUMMARY FOR MEXICO OR CHINA, MANAGING A GLOBAL NETWORK CASE Introduction – A US manufacturer of wireless transmission components sources its components from two assembly plants, one in China and another in Mexico. Sourcing the components from China is cheaper but has a lead time of 4 weeks whereas sourcing from Mexico is expensive with a lead time of 1 week. A Dual-sourcing strategy or a policy has to be developed for a wireless

International Purchasing And Supply Chain Management

4020 words - 17 pages as a centralized procurement strategy for a multinational company. Trent and Monczka (2005, p. 24) defines Global Sourcing as ‘‘proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations’’. When large Multinational retailers like Wal-Mart, GAP, Next are outsourcing their products or services mainly from low cost countries

Mattel’s Global Sourcing In China Essay

736 words - 3 pages Mattel's global sourcing in China, like all other toy manufacturers, was based on low-cost manufacturing, low-cost labor, and a growing critical mass of factories competitively vying for contract manufacturing business. Do you think the product recalls and product quality problems are separate from or part of pursuing a low-cost country strategy?Mattel adalah perusahaan nomer satu dunia yang memproduksi mainan untuk anak-anak, dengan produk