Sourcing Decisions Research Articles

Strategic sourcing of multicomponent software systems: The case of electronic medical records

AbstractThe significance of information technology (IT) to organizational performance is increasingly acknowledged by senior executives and scholars alike. However, an important aspect that is underdeveloped in the extant literature is whether and how an organization's IT sourcing strategy affects performance. We examine this dimension in the context of hospitals’ sourcing strategy for electronic medical record (EMR) systems. Leveraging the organization‐IT alignment principle grounded in contingency theory, we argue that the sourcing strategy chosen by hospitals impacts the quality of patient care rendered and that the nature of this relationship has changed over time. Using data on US hospitals that operated continuously from 2006 to 2013 and employing a multilevel longitudinal modeling framework to analyze change over time, we examine how a key dimension of the sourcing strategy for EMR systems—change in closeness to single‐sourcing—impacts conformance quality, a critical measure of hospital performance that assesses how frequently hospitals comply with evidence‐based practices. We find that a change closer to single‐sourcing is positively associated with conformance quality, but this positive effect is reduced over time, meaning that the benefits realized by hospitals using a single‐sourcing approach diminish toward the end of our observation period. As explicated in our discussion of results, findings from our research reveal critical insights about how sourcing decisions impact performance, and how these effects evolve over time due to changes in regulations, technology, and competition.

Being part of a winning team: a problem-based approach to teach sustainability adoption in collegiate athletic uniforms

ABSTRACT Sustainability adoption in the collegiate athletic uniform market, while gaining popularity, remains a significant concern. The purpose of this project was to engage students in a problem-based learning assignment focused on sourcing collegiate athletic uniforms and training gear from 100% sustainable or regional (within 100 miles) sources. Student teams selected a sport and met with coaches, equipment managers, and players to design and develop uniforms and training apparel to be sourced from Oeko-Tex certified manufacturers or regional producers. Post-production interviews were conducted with teams to evaluate their understanding of sustainability and its impact on sourcing decisions. Overall, student teams reported the difficulty with sustainably sourcing materials, which provides the industry an opportunity to ease this process. In doing so, future product developers will choose to source sustainably.

Post-COVID-19 strategic sourcing decisions for escorting stakeholders’ expectations and supplier performance in construction project works

PurposeThe occurrence of COVID-19 has impacted the wide-reaching dimensions of manufacturing, materials, procurement, management, etc., and has loaded disruptions in the wide range of supply chain (SC) activities. The impact of COVID-19 has twisted supplier performance and influenced stakeholders’ thinking towards selecting supplier sources and making strategic sourcing decision for convinced arrangement of construction management (CM) resources. Nowadays, suppliers are intently evaluated by stakeholders in post-COVID-19 phase to induce agile availability of CM resources. Accordingly, this paper aims to demonstrate competent CM dimensions under post COVID-19 scenario for ease managing construction projects by the stakeholders.Design/methodology/approachThe authors have implicated Grey Sets Theory along with decision-making trial and evaluation laboratory (DEMATEL) technique for understanding significant outcomes. Varieties of diverse decision aspects responsible for strategically influencing supplier sourcing decision is projected under post COVID-19 scenario for handling construction projects by the stakeholders.FindingsThis study investigated sustainable construction management dimensions (SCMD) at the stage of resource deliveries and client aspirations under post COVID-19 situation. The study demonstrated “Lead time” as the most crucial, “Product Range” as the second and “Customers dealings and relationship” as the third crucial aspect considering by the stakeholders for selecting supplier sources based on the attainment of performance score of 0.1338, 0.1273 and 0.1268, respectively. It is found that high lead time stimulates the stakeholders to divert their orders to other competent supplier sources holding a low degree of lead time as compared.Research limitations/implicationsThe present study rollovers its existence by serving critical thinking, conceptual modelling, criteria identification and evaluation under CM domain for drafting effectual strategies by the suppliers. The study investigated the impact of COVID-19 on stakeholders’ decision-making and enlisted SCMD that strategically stimulated them in choosing supplier sourcing decision.Originality/valueThe present study realizes the insights of stakeholders in the post COVID-19 scenario related to the supplier sources based on performance score. The study quantified sustainable supplier attribute for construction work and practices. The study analysed the expectations of the stakeholders purchasing different varieties of construction materials from supplier sources for civil works in the post COVID-19 scenario.

Supplier Audit Information Sharing and Responsible Sourcing

We develop a game-theoretic model to study the incentive for competing manufacturers to share supplier audit information. Based on the audit information, each manufacturer decides whether to source from a common supplier who has uncertain responsibility violation risk or to switch to a backup supplier who has no responsibility violation risk but charges a higher price. When supplier responsibility violation occurs, some consumers boycott the manufacturers involved. Audit information allows a manufacturer to reduce the uncertainty about the risk of the common supplier. We show that audit information sharing may make the manufacturers’ sourcing strategies more or less differentiated. As a result, the information-sharing decision is not monotone in the model parameters. We fully characterize the manufacturers’ equilibrium audit information-sharing and sourcing decisions and establish conditions under which audit information sharing induces the manufacturers to adopt more or less responsible sourcing strategies. We also show that a manufacturer could be better off when the cost premium of sourcing from the backup supplier or the risk of the common supplier becomes higher or the audit information becomes less accurate. We consider several extensions of the base model and demonstrate that the main insights remain mostly valid.This paper was accepted by Charles Corbett, operations management.Funding: A. Y. Hawas supported by the Wei Lun Foundation. W. Shang was supported by the Research Grants Council of Hong Kong [GRF Project LU 13501415]. Y. Wang was supported by National Natural Science Foundation of China [Grant 71901209].Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4358 .

Strategic production and responsible sourcing decisions under an emissions trading scheme

Increased environmental awareness has resulted in consumers’ willingness to pay more for products with a smaller environmental footprint. Additionally, emissions trading schemes reward manufacturing firms who produce products with lower-than-average emissions rates. We examine how a manufacturer makes effective sourcing decisions, even if a supplier holds a responsibility certificate that only discloses partial information about a specific product. We also examine how a strategic production strategy (green versus traditional production) can be chosen so that the entire supply chain is motivated to become more sustainable. A game-theoretic model is developed to study the impact of an emissions trading scheme on the screening mechanism with asymmetric information and the production strategies of competing manufacturers. We first show that the performance-based contract plays an active role in driving sustainable improvements, which is consistent with practical activities occurring in the industry. We then show that a general supplier cannot receive patronage, even if the sourcing and production costs are less expensive for the manufacturer. Sourcing materials with a lower emissions rate are not a strictly dominant strategy. These findings further indicate that the equilibrium production strategy in chain-to-chain competition depends on the threshold of trading prices, the supplier’s effort, and the additional production cost per allowance saved. Moreover, even if the manufacturer has sufficient emission allowances, it still prefers to adopt the green production strategy rather than choose a cost-effective strategy to cut production and sourcing costs. The outcomes provide useful guidance for manufacturing industry practices in sustainable development.

Technology sourcing and the dark side of open innovation: Evidence from the biopharmaceutical sector

Firms in high-technology industries face a complex set of challenges to innovate successfully and continuously to gain a sustainable competitive advantage. Innovative new R&D project sourcing choices top this list of difficult and nuanced choices that firms must make in pursuit of innovation. Our research makes a significant and novel contribution to this interesting discourse and critically examines the sourcing decision (i.e., open vs. closed innovation) in the context of new product development in the biopharmaceutical sector. Specifically, we apply a project-level typology along the dimensions of new R&D project source and project familiarity. Drawing from transaction cost economics (TCE) and the knowledge-based view (KBV) theories, we empirically test our theoretically developed hypotheses on a dataset of 2,971 biopharmaceutical R&D projects spanning from 1985 to 2016. Results from our robust analysis show that both new R&D project source and project familiarity have significant direct effects on focal project performance outcomes (defined in this paper as likelihood of termination). We also determine that focal project familiarity has a significant moderating effect on the relationship between project source and performance outcome.

Designing a manufacturing network with additive manufacturing using stochastic optimisation

Two of the major problems Traditional Manufacturing (TM) supply chains face are setting requisite reactive strategies to address the uncertainties in demand and the optimal placement of these buffering capacities in order to be both responsive and cost-effective. With Additive Manufacturing (AM) stepping into large-scale production at different firms, we address the aforementioned supply chain dilemmas by considering the potential role of AM in a TM supply chain network where AM facilities can act as a recourse to the TMs and, also, as a dedicated source providing responsive and cost-effective sourcing alternatives. We develop an analytical allocation rule based on cost differentials, which provides optimal sourcing decisions through sequential demand replenishment and facilitates an efficient performance evaluation of possible network configurations. We first model the scenario as a three-stage stochastic optimisation problem. We then solve it using the allocation rule and present an illustration of our analysis and the optimal supply chain network configuration. Furthermore, we derive some insights as to how different problem characteristics affect the value and usage of AM.

Responsible sourcing and supply chain traceability

This paper explores a buyer's tracing and its supplier's own sourcing decisions in a multi-tier supply chain. We explore what different stakeholders can do to achieve a more transparent and/or responsible supply chain. We establish that under rather general conditions, the two firms will adopt mixed strategies in equilibrium, a focal case of our analysis. The mixed-strategy results first explain at the micro level why many companies are not certain about whether their supply chains are ethical or not. At the more macro level, they also help explain why a significant proportion of the buyers did not trace or comply with transparency regulations. We then show that more responsible sourcing can be induced by lowering the buyer's tracing cost but not by reducing the supplier's own responsible sourcing cost. We also find that more transparency does not always imply more responsible sourcing. For the external stakeholders, more responsible sourcing may be obtained through lowering tracing costs, improving tracing or public discovery of violations, and imposing more significant reputational damage or penalties only on the buyer. For the internal stakeholders, a contract incorporating both responsible sourcing cost sharing and non-compliance penalty if found may be constructed for the first-best supply chain efficiency and likely social optimality under some simple sufficient conditions.

Rising to the Top: Motivational Forces Influencing Status Conflict in Sourcing Teams

Organizations often use cross‐functional teams to make key Operations and Supply Chain Management decisions, but doing so risks instigating conflict between team members since cross‐functional delegates often have opposing functional goals. While previous work has explored the effect of functional goals (i.e., external motivation) in cross‐functional team performance, we extend research in this area to incorporate individual team members' psychological needs (i.e., internal motivation). Specifically, we consider how the interplay of these motivational mechanisms can lead to status conflict within the team, and the ensuing implications on team performance. We conduct an experiment of 136 ad hoc team‐based sourcing decisions, complemented with a sequential qualitative study involving interviews with 37 practicing managers. The results show that functional goal misalignment leads to status conflict, as expected. Yet, counterintuitively, this effect can be mitigated with the team's composition in individual psychological needs for dominance, specifically with heterogeneously dominant individuals. Our study contributes to the behavioral operations management literature on sourcing teams and to the team motivation literature. We provide guidance on how managers can compose cross‐functional teams to improve decision outcomes considering the interplay of external and internal motivational mechanisms.

Scope and scale of technology challenge and MNE subsidiary knowledge sourcing in host countries

Research emphasizes the role that industry characteristics and knowledge bases play in MNE subsidiaries' knowledge sourcing decisions. This article extends the knowledge sourcing literature by examining how technology challenges themselves help determine both the geographic location—local or distant—and the actor from which the knowledge will be sourced. Using a study of MNE subsidiaries' knowledge sourcing in a peripheral region without a preexisting industry-specific knowledge cluster, we find that MNE subsidiaries’ decisions on where and from whom to source knowledge vary in accordance with the geographic scope and complexity scale of the technology challenges being faced. In peripheral regions, MNE subsidiaries tend to source knowledge from established parties (i.e., the subsidiaries of other MNEs or their headquarters) for localized small-scale technology challenges and for global and large-scale ones. In contrast, localized large-scale technology challenges and global small-scale technology challenges result in more knowledge sourcing from host region actors or from within the subsidiary. This understanding helps clarify the forces behind MNE knowledge sourcing decisions and how multiple sourcing approaches may be simultaneously deployed.

Sourcing motives behind sourcing decisions exposed through the Sourcing Decision Framework

There is no doubt that information systems (IS) are the backbone of today’s organizations. Having an initial inspection on sourcing motives in the financial sector it can be stated that resources used in development of information systems (IS) are seen as an important factor for sustained competitive advantage. However, it can be claimed that it depends to a high extent on the application of different sourcing modes. This leads us to a closer inspection on sourcing motives through selected case studies and the following research question: How can motives for sourcing options of IS-development be explained? The empirical investigation on sourcing decisions and the motives behind, in addition to a literature review on sourcing decisions and sourcing options ends in four propositions. These propositions are then used in tandem with the findings from the empirical data for initial development of the Sourcing Decision Framework (SDF). Ultimately, what is at stake here is our framework (SDF) that from the initial development and the first test has shown to be purposive and could be further developed to a useful framework for analyzing sourcing decisions and as a guiding tool for decision-makers when deciding on sourcing options for IS-development.

A comprehensive framework and literature review of supplier selection under different purchasing strategies

Supplier selection has received substantial consideration in the literature since it is considered one of the key levers contributing to a firm’s success. Selecting the right suppliers for different product items requires an appropriate problem framing and a suitable approach. Despite the vast literature on this topic, there is not a comprehensive framework underlying the supplier selection process that addresses those concerns. This paper formalizes a framework that provides guidance on how supplier selection should be formulated and approached for different types of items segmented in Kraljic’s portfolio matrix and production policies. The framework derives from a thorough literature review, which explores the main dimensions in supplier selection, including sourcing strategy, decision scope and environment, selection criteria, and solution approaches. 326 papers, published from 2000 to 2021, were reviewed for said purpose. The results indicate that supplier selection regarding items with a high purchasing importance should lead to holistic selection criteria. In addition, items comprising a high complexity of supply and production activities should require integrated selection and different sources of uncertainty associated with decision scope and environment, respectively, to solve it, as well as hybrid approaches. There are still many research opportunities in the supplier selection area, particularly in the integrated selection problems and hybrid solution methods, as well as in the risk mitigation, sustainability goals, and new technology adoption.

To make or to buy from a common supplier? Strategic considerations and welfare consequences

AbstractConsider two downstream firms that each can either produce an input in‐house or purchase it from an upstream supplier. We show that depending on the difference between the supplier's and the downstream firms' in‐house production costs, outsourcing by both firms could help them achieve a Pareto improvement or leave them trapped in a prisoner's dilemma. Furthermore, we find that two downstream firms may play a chicken game in which each makes a sourcing decision different from its rival if the input supplier is not as efficient as in the previous cases. The welfare implications of various sourcing outcomes are explored.

A new dimension in global value chains: Control vs. delegation in input procurement

We study the optimal organizational structure of a firm in a sequential supply chain when investments are relationship specific and contracts are incomplete. The market structure for the final product is monopolistic competition. Production follows a preordered sequence and exhibits high complementarity between stages. There are three types of actors: upstream suppliers, downstream suppliers and final-good producers (firms). In designing their organizational structure, firms in each stage choose not only the ownership structure, i.e., vertical integration versus outsourcing, but also the input-procurement strategy, i.e., delegation versus control. The separation of asset ownership and input-procurement rights leads to a novel organizational mode, which we call ‘outsourcing with delegation.’ We determine the implications of this new organizational mode in firms’ global sourcing decisions.

Sourcing decision under interconnected risks: an application of mean–variance preferences approach

Supply chains are customarily associated with multiple interconnected risks originated from supply side, demand side, or from the unanticipated background uncertainties faced by a firm. Also, effective functioning of supply chain hinges on sourcing decisions of inputs (raw materials). Therefore, there is a striking need to analyse the risk preference of the decision maker while going for optimal sourcing decision under varying degree of interconnected supply chain risks. This study addresses this issue by analysing the comparative static effects under interconnected supply chain risks for a risk averse decision-maker, manufacturing and selling products in a regulated market under perfect competition. The decision-maker faces not only supply-side risk (due to random input material prices) but also interconnected risks arising out of background risk (setup costs risk) and demand-side risk (output prices risk). With preferences defined over the mean and standard deviation of the uncertain final profit, this study illustrates the effects of the changes in the pairwise correlations between the three above mentioned risks on the optimum input choice of the manufacturer. To contextualise this study, an India-based generic drug manufacturer cum seller has been considered as a case in the parametric example of our model. Adaptation of the mean–variance framework helps obtaining all the results in terms of the relative trade-off between risk and return, with simple yet intuitive interpretations.

The Impact of the COVID-19 Pandemic on Global Sourcing of Medical Supplies

We provide evidence that the COVID-19 pandemic has incentivized U.S. firms to rebalance the trade-off between manufacturing cost efficiency and supply chain resilience in their sourcing decisions. Over the past few decades, companies have been outsourcing production to low-cost countries such as China in pursuit of cost-efficiency. However, the risk of supply chain disruptions has been receiving heightened attention recently, as countries strive to prioritize scarce resources for domestic needs during the global pandemic. Our research shows that while China’s supply chain has proved resilient, U.S. companies have increased their access to medical supplies through domestic production. As a result, COVID-19 has highlighted the importance of local capacity and changed the traditional perception of outsourcing from a purely economic efficiency focus to one emphasizing the need to balance risks in global exposures.

Decision Support Framework for Insourcing and Outsourcing Building Maintenance Activities in Tertiary Institutions

The making of an appropriate decision on either to insource or outsource maintenance services in a tertiary institution is strategic in nature. Also, the decision-making process is usually complex and often constitutes a difficult task to decision makers. This is because different sourcing option suits different scenarios. The process of developing a decision-support framework for building maintenance insourcing and outsourcing decision-making in tertiary institutions is the aim of this study. Through a cross-sectional survey, data were collected from maintenance staff and building users using two sets of self-administered questionnaires. The results revealed the factors influencing decision to insource or outsource maintenance services in universities and polytechnics in South-West, Nigeria. The study develops a decision-support framework to assist policymakers and maintenance managers on insourcing and outsourcing decisions for building maintenance services in tertiary institutions. It recommends that decision in tertiary institutions should adopt the proposed maintenance sourcing decision-support framework as a tool for driving building maintenance sourcing decisions.

Strategic sourcing model for green supply chain management: an insight into automobile manufacturing units in India

PurposeSupplier selection (SS) is one of the prime competencies in a sourcing decision. Taking into account the key role played by suppliers in facilitating the implementation of green supply chain management (GSCM), it is somewhat surprising that very little research attention has been imparted to the development of a strategic sourcing model for GSCM. This research aims to develop a strategic sourcing framework in which supplier organizations are prioritized and ranked based on their GSCM performance. Accordingly, the benchmark organization is identified and its strategy is explored for GSCM performance improvement.Design/methodology/approachThe research develops an innovative GSCM performance evaluation framework using six parameters, namely, investment in corporate social responsibility, investment in research and development, utilization of renewable energy, total energy consumption, total carbon-di-oxide emissions and total waste generation. An integrated multicriteria decision-making (MCDM) approach is proposed in which the entropy method calculates criteria weights. The Complex Proportional Assessment (COPRAS) and the Grey relational analysis (GRA) methods are used to rank supplier organizations based on their performance scores. A real-world case of green supplier selection (GSS) is considered in which five leading India-based automobile manufacturing organizations (Supplier 1, Supplier 2, Supplier 3, Supplier 4 and Supplier 5) are selected. Surveys with industry experts at the strategic, tactical, and operational levels are carried out to collect relevant data.FindingsThe results reveal that total carbon dioxide emission is the most influential parameter, as it gains the highest weight. On the contrary, investment in research and development, and total waste generation have no significant impact on GSCM performance. Results show that Supplier 5 secures the top rank. Hence, it is the benchmark organization.Research limitations/implicationsThe proposed methodology offers an easy and comprehensive approach to sourcing decisions in the field of GSCM. The entropy weight-based COPRAS and GRA methods offer an error-free channel of decision-making and can be proficiently used to outrank various industrial sectors based on their GSCM performances. This research is specific to the automobile manufacturing supply chain. Therefore, research outcomes may vary across supply chains with distinct characteristics.Practical implicationsThe basic propositions of this research are based on a real-world case. Hence, the research findings are practically feasible. The less significant parameters identified in this study would enable managers to impart more attention to vulnerable areas for improvement. This research may help policymakers identify the influential parameters for effective GSCM implementation. As this research considers all aspects of sustainability, the strategies of the benchmark supplier have a direct impact on organizations' overall sustainability. The study would enable practitioners to make various strategies for GSCM performance improvement and to develop a cleaner production system.Originality/valueThe originality of this research lies in the consideration of both economic, social, environmental and operational aspects of sustainability for assessing the GSCM performance of supplier organizations. Quantitative criteria are considered so that vagueness can be removed from the decision. The use of an integrated grey-based approach for developing a strategic sourcing model is another unique feature of this study.

Sourcing human capital for organizational effectiveness: sourcing strategy, determinants, and alignment

Human capital sourcing is a major determinant of firm effectiveness. We develop logic that favors a specialized sourcing strategy in which organizations emphasize one type of sourcing, focusing either on developing or acquiring human capital, as opposed to a balanced approach. We then identify characteristics and capabilities that lead firms to adopt one sourcing type over another. Additionally, we examine whether aligning sourcing decisions with organizational characteristics and capabilities relates to better performance. We use panel regression to examine how sourcing decisions ultimately impact performance. Results suggest that specialized sourcing relates to improved performance more strongly than does a balanced approach, that certain organizational capabilities are advantageous for specific types of sourcing, and that aligning sourcing strategy with organizational fit partially relates to greater organizational performance.

The effect of coordination requirements on sourcing decisions: Evidence from patent prosecution services

AbstractResearch SummaryAlthough the link between coordination requirements and vertical integration is theoretically well established, empirical tests of this relationship are hard to implement due to the simultaneous determination of both variables. In this study, we take advantage of regulatory changes in patent prosecution in the United States to provide plausibly causal evidence linking increases in coordination requirements with insourcing. Moreover, we examine the role of plural sourcing, that is, simultaneously making and buying, when responding to changes in coordination requirements. We find that the move toward insourcing is more pronounced for plural‐sourcing firms as compared to firms relying on outsourcing. These results are consistent with the view that plural sourcing provides firms with flexibility to switch between sourcing modes when facing changing coordination requirements.Managerial SummaryWe study the sourcing of patent prosecution services in large innovative companies and show that in‐house production is more beneficial when coordination requirements between inventors and attorneys increase. Importantly, we find that plural‐sourcing firms, that is, firms that work with both internal attorneys and external law firms, are more likely to respond to these increases and move toward insourcing as compared to firms relying only on outsourcing. This suggests that plural sourcing can be regarded as a strategic investment in sourcing flexibility, allowing firms to respond to changing coordination requirements. This is an adaptive capability which is especially useful in knowledge‐intensive sectors.