Managing Value in Supply Chain – Case Studies on the Sourcing Hub Concept

Abstract

In this paper, we postulate that a firm's sourcing knowledge can be a strategic resource for the firm, and explore how firms can capture and build on their sourcing knowledge. We examine the sourcing experiences of four firms in four different countries in the automotive industry, who are in the process of improving their supply-chain partnerships. We study upstream sourcing of these firms: their suppliers and their suppliers' suppliers, and focus on identifying the sourcing knowledge and sourcing cost related parameters with appropriate theoretical explanations. Synthesizing the learnings from these case studies, we propose the concept of the Sourcing Hub, a collaborative center involving the firm, its suppliers and raw material suppliers, as the principal alignment mechanism for managing value in upstream sourcing. Our research shows that deploying a sourcing hub can help firms create value by better management of upstream sourcing related knowledge and costs.