Recommendation
The company should focus on strategic sourcing that runs from the periphery to the core. The strategy is vital since the novel age of capability sourcing will facilitate the redesign of organizations and require enhanced managerial skills since outsourcing has developed to become strategic (Kim & Chai, 2017). Due to the ever-changing global economy, the company needs to have the ability of forecasting changes in the landscape and economics of outsourcing. For instance, just recently, most large firms had to operate their own distribution systems and warehouses as third-party suppliers did not have the scale or skill to serve these functions. However, current third-party specialists are offering competitive wide range logistical systems, and even the largest firms can currently outsource distribution, warehousing, and related services (Kim & Chai, 2017). Such tendencies will only increase in the future, and the firms that have acknowledged and set themselves ready will be the first to take advantage of them.
Implementation
For the company to implement strategic sourcing, it needs to take into account the present situation and the alternative scenarios in the future. By doing so, the company will be encouraged to pursue a particular opportunity in regards to sourcing that might not seem attractive according to the current situation but could facilitate numerous benefits in the long run (Kim & Chai, 2017). Further, implementation may necessitate the company to reconsider short-term contracts to open up alternatives, instead of venturing into long-term contracts. In the end, the firm’s aptitude in hastily re-developing its sourcing contracts in reaction to market circumstances and the moves of competitors may be the biggest source of competitive advantage.
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Questions
Question One
The most challenging part was engaging in the research to determine the recommendation that will be the most suitable for the firm based on real life scenarios. To arrive at his conclusion, I conducted a multi-case analysis on companies that have the most effective sourcing strategies. Specifically, I examined each of the four elements of a successful sourcing strategy against companies that effectively use that element. By taking such an approach, I was able to demonstrate how the elements of a successful sourcing strategy can be utilized in a real-world situation.
I used a five-case analysis in his article. The first case involves a New York equipment manufacturer who applied a more analytical method to its supply-chain management with the objective of decreasing the cost of procuring filters. The manufacturer comprehensively studied the supplier’s operation to find the inefficiencies that led to high product costs; this led to 46% in savings. In the second case, manufacturers of scientific instruments based in Wisconsin and California were seeking to get electronic boards fitted at a cheaper price. As industry standards changed, the cost of the product increased and a few suppliers were left in the market. The Wisconsin manufacturer was slow to react to the market changes since its main supplier’s products became obsolete; eventually, the both companies seized operations. On the other hand, the California firm sought the services of a value-added supplier with an experienced research team; even though the product from this manufacturer was more expensive, the supplier was able to adapt to the changed industry standards thus keeping the boards of the California company in continuous production.
The third case involves an Ohio manufacturer and one based in Massachusetts. The Ohio producer constantly changed its suppliers while the Massachusetts competitor chose to stick with one trusted supplier. Due to commitment on the part of the Massachusetts firm, the supplier invested in new manufacturing equipment which led to greater savings. Consequently, over a period of six years, the Massachusetts firm was able to maintain a 16% cost advantage over the Ohio company. The fourth case study entailed two firms from Kentucky and Connecticut that purchase pumps from the same supplier. However, the Kentucky firm has an erratic ordering process while the Connecticut company has a good understanding of the supplier’s manufacturing process thus its ordering process is well-coordinated. Consequently, the Connecticut is able to realize 13% savings per unit. The last case involves two manufacturers of medical systems. The difference between the companies is that one has many suppliers for different components while the other has one supplier for the numerous components. Consequently, the firm with one supplier is able to realize a 28% cost difference since it has a less cumbersome ordering process. Overall, these rigorous process made the task challenging.
Question Two
Strategic alliances affect the procurement outsourcing strategies since to maximize the relationship between suppliers and customers, a firm needs have a mindset of commitment and coordination, along with cost-analysis. To achieve this, organizations need to rethink whom they purchase goods from, what they purchase, and the method of ordering and payment. On that account, firms are partnering with key suppliers to cut costs. Vendrell-Herrero, and colleagues (2018) refer to this phenomenon as “supplier partnerships.” To that extent, a firm needs to formulate a successful sourcing strategy to realize the benefits of supplier partnerships.
Vendrell-Herrero et al., (2018) assert that the most successful sourcing strategies are centered on four key factors; competitive suppliers, commitment, coordination, and a cost-analysis mind set. A cost-analysis mind-set is defined as a wider and more strategic method of reasoning about the economics that drive suppliers. These include; materials’ cost drivers, staffing patterns and production cycles, factors affecting inventory and other carrying expenses, and how product specifications and sourcing methods affect costs. By embracing this line of thinking, manufacturers can start to perceive suppliers as extensions of their manufacturing procedure.
In regards to competitive suppliers, Vendrell-Herrero et al., (2018) state that a company that sources goods and services from a few suppliers realizes a better cost benefit than one which squanders resources on many suppliers. Commitment involves a profound understating of the supplier’s organization to understand the supplier’s cost drivers. Coordination entails integration of the manufacturer’s and supplier’s processes to realize greater savings.
References
Kim, M., & Chai, S. (2017). The impact of supplier innovativeness, information sharing and strategic sourcing on improving supply chain agility: Global supply chain perspective. International Journal of Production Economics , 187 , 42-52.
Vendrell-Herrero, F., Gomes, E., Bustinza, O. F., & Mellahi, K. (2018). Uncovering the role of cross-border strategic alliances and expertise decision centralization in enhancing product-service innovation in MMNEs. International Business Review , 27 (4), 814-825.
