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Oxford: Oxford University Press. Set relations in social research: Evaluating their consistency and coverage. 2016). The natural question that follows, yet remains unclear in the literature, is what is required for firms to organize their global sourcing activities successfully. In this study, we examine dispersion both in terms of geographical distance and cultural distance. 2012). Global Strategy Journal, 1(12), 109126. Manag Int Rev 60, 723753 (2020). However, owing to the limitations of the data, we are unable to cross-validate the self-reported innovation outcome with other measures. Fiss, P. C. (2011). Currently, ICSD has nearly 1,000 members who are also Certified ESG Planner CEP. Journal of International Business Studies, 40(6), 969988. 4. Strategic Management Journal, 23(9), 817833. A decision on the disaggregation of activities is primarily informed by research attempting to classify value chain activities using various criteria including types of an activity (e.g., upstream, downstream), potential for competence creation (e.g., exploration vs. exploitation activity), and potential for being a source of competitive advantage (e.g., core vs. non-core activity). Although the phenomenon of global sourcing has been studied extensively in international business and supply chain research, the understanding of global sourcing strategy leading to high performance remains unfulfilled (Kotabe and Murray 2017; Leiblein et al. Academy of Management Journal, 57(6), 16811705. (tentative steps), Potential projects are selected as per UN 17 SDGs and other criteria, Signing collaboration agreement including the hold-harmless agreement, ICSD is the sponsor of the project and will monitor its implementation, Completion/renewal of the project and review. Pisani, N., & Ricart, J. E. (2016). Journal of Operations Management, 26(2), 164179. Schmeisser, B. Further, fsQCA approach is based on set-theoretic relations, rather than the traditional correlations, which make it more appropriate for examining causal relations. On the other hand, captive offshoring poses challenges as firms face a steep learning curve in navigating through offshore operations by themselves, which can become more intensified with a lack of local knowledge (Johanson and Vahlne 1977). We are facing an era of exponential change. At NIKE, Inc., we believe a world-class supply chain is grounded in respect for the people who make and move our product and help us care of the planet. . First, we extend Kedia and Mukherjees (2009) DLE framework and Contractor et al.s (2010) seminal work by providing a better understanding on how the combination of disaggregation, geographical and organizational dispersion of global sourcing configuration leads to differences in cost savings and innovation outcome of global sourcing activities. Organizational dispersion or governance mode is another crucial component contributing to the outcome and success of global sourcing (Kedia and Mukherjee 2009; Mudambi 2008; Pisani and Ricart 2016). LEARN MORE Based on the overlapping characteristics of the configurations, we identify two main groups among these four global sourcing configurations leading to high cost savings. Journal of Supply Chain Management: A Global Review of Purchasing and Supply, 44(2), 516. The concept of modularity was proposed in Baldwin and Clarks (1997) seminal work, which demonstrates the power of modularity in product design and manufacturing. CSI is your supply chain company for lowering your . Table 1 summarizes examples of research examining disaggregation, geographical dispersion, governance structure or a combination of these components on the performance of global sourcing. The analysis starts with transforming all variables into sets and constructing a data matrix (so-called truth table) with 2 k rows, where k is the number of causal (independent) variables. The new service will enable spend transparency, spend and cost analytics, and value-capture management. Designing Global Sourcing Strategy for Cost Savings and - Springer (2012). We argue that this issue is primarily explained by the misalignment between a firm's global sourcing strategy and value expected from its global sourcing activities. What is Global Sourcing? | Global Sources The ongoing global logistics disruptions stemming from the COVID-19 pandemic continue to impact businesses and consumers as the flow of consumer goods into key markets such as North America and Europe, South East Asia and India is restricted by the continued shutdowns of major global ports and airports, largely in China, South Korea, and the US. In 2022, you should expect to see an accelerated level of investment as businesses seek to enhance critical supply chain planning capabilities by adopting more advanced digital enablers, such as cognitive planning and AI-driven predictive analytics as well as adding greater integrity and visibility into secure supply chains by using advanced track and trace and blockchain technologies. 2023 Li & Fung Limited. Our findings also contribute to the theoretical tension in global sourcing research and extend an understanding of heterogeneity in the performance of global sourcing activities. Future Development Reads: Impact investing, impact sourcing, and Apte, U. M., & Mason, R. O. Sourcing is tasked with carrying out research, creating and executing strategy, defining quality and quantity metrics, and choosing suppliers that meet these criteria. Peng, M. W. (2001). ; This brief explores some of these risks in detail and lays out the role foreign assistance can play in de-risking and diversifying supply chains by . Revamping fashion sourcing: Speed and flexibility to the fore Structure offshoring and returns on offshoring. Kogut, B., & Zander, U. Do not delete! Enabling speed in the product development cycle. Instead, firms need to first clearly identify the expected outcome of their global sourcing activities and design their global sourcing configuration that aligns with the expectation. Please see www.deloitte.com/about to learn more about our global network of member firms. COVID-19 has highlighted risks and resiliency gaps . Designing global strategies: Comparative and competitive value-added chains. International Business Review, 20(3), 314323. By defining their possession of resources and capabilities, firms distinguish core activities contributing to their core competencies and identify which activities must be performed in-house and which can be disaggregated and source globally from where it can be performed more efficiently (Espino-Rodrguez and Padrn-Robaina 2006). On the other hand, global dispersion of value chain activities allows firms to gain access to skills and knowledge sources available in various foreign locations (Lewin et al. (2011). Our offices and teams are based in all key production markets, giving us the expertise and extensive network of supply chain partners needed to meet the diverse needs of our global customers. Moving away from the net effects approach, fsQCA allows us to examine how the interdependent interplay of disaggregation, dispersion, and governance mode lead to differences in cost savings and innovation outcome of global sourcing activities. Journal of International Business Studies, 11(1), 931. This body is sponsored by the benefactor, Mr. Suetrong Mahaprukpong, who is a successful businessman in telecommunication. While most firms focus on potential value creation (through disaggregation and dispersion of activities) in their global sourcing decisions, they often fail to take into account value capture mechanism (i.e., governance structure or level of control over sourcing activities). The purpose of the ISO Procurement Policy and Procedures (Procurement Policy) is to structure ISO's purchasing processes and sourcing strategies to ensure that the services and goods we acquire are the result of transparent, objective, time- and cost-effective decision making and risk management. Strategic Management Journal, 31(2), 224236. These can include key areas such as selection, training . Services & Capabilities Our logistics team make the whole shipping process as easy as possible. Global outsourcing survey 2022: Navigating talent, technology, and new ways to outsource, Managing Director | Deloitte Consulting LLP, Telecommunications, Media & Entertainment, The gig economy and future of shared services and GBS delivery models, Impact of COVID-19 on shared services and GBS, Do Not Sell or Share My Personal Information. The hidden costs of IT outsourcing. Strategic Management Journal, 37(4), 793815. Organizations are leveraging spend analytics tools and software packages to increase visibility of where, how and when they spend. MIT Sloan Management Review, 42(3), 6069. Too much reliance on global sourcing also exposes firms to the risk of bullwhip or whipsaw effect (Lee et al. Strategic outsourcing. We take a blended approach to learning, combining assessments with online courses, classroom training, coaching, and group work to create targeted learning journeys for different cohorts. Chen, S., & Lin, N. (2018). Leiponen, A., & Helfat, C. E. (2010). Offshoring strategy: Motives, functions, locations, and governance modes of small, medium-sized and large firms. Global Sourcing Supply Chain Solutions. All rights reserved. The partnership will enable both companies to utilize their respective resources and global networks to create a comprehensive range of end-to-end global supply chain services. A collaborative approach to design and development steers the creation of new products, services, and software. Despite these risks, captive offshoring is shown to protect firms from service providers opportunistic behavior and knowledge leakage. Comparative economic organization: The analysis of discrete structural alternatives. Heijmen, T., Lewin, A. Y., Manning, S., Perm-Ajchariyawong, N., & Russel, J. How to Implement a Successful Global Sourcing Strategy Both geographical and organizational separation, discussed in the next section, make it even more complex and, hence, costly for firms to monitor the progress of a task and to take corrective actions. The average of these four items is used to construct the measure of innovation outcome of a firms global sourcing configuration. Offshoring of services: A review of the literature and organizing framework. The Academy of Management Journal, 44(6), 11491168. Management scholars have since applied the concept of modularity to further explain other complex systems including, for example, organization architecture (Schilling 2000; Schilling and Steensma 2001) and outsourcing (Sako 2003). Redisigning social inquiry: Fuzzy sets and beyond. The ORN is a global research network of scholars from North America, Europe, and the Asia Pacific who study a phenomenon of global sourcing both from the global sourcing firms (i.e., client) and service provider perspective. The emerging global race for talent. As the results illustrate, the outcome of global sourcing does not depend on the net effect of a particular factor but relies heavily on the complex combination of disaggregation, dispersion and governance mode of firms global sourcing activities. Given its minimal investment, outsourcing in most cases offers a quick cost reduction and access to potentially new set of skill and knowledge not available inside a firm, thereby benefiting both cost savings and innovation outcome of global sourcing activities. The curvilinear effect of manufacturing outsourcing and captive-offshoring on firms innovation: The role of temporal endurance. KPMG International entities provide no services to clients. Management International Review, 56(3), 385424. Sako, M. (2003). More importantly, the findings also reveal the equifinality of the global sourcing configurations, suggesting that firms are not restricted to a single template on how to design their global sourcing configuration but can adopt one that suits their context as there exists more than one possible configurations leading to the same outcome. Certain services may not be available to attest clients under . Orpheus elevates the focus of spend analytics to guide procurement strategy development and execution. In several cases, the dependence on a single region impacted business continuity. Globalisation of innovation: The role of multinational enterprises. Li & Fung announced the completion of the sale of LF Logistics, to A.P. First, we capture the breadth of disaggregation using the number of functions being offshored, which is a count of business service functions along a firm's value chain that are being sourced outside a home country. Slider with three articles shown per slide. Cambridge: MIT Press. The solution table from the fuzzy set analysis shows four global sourcing configurations leading to high cost savings with consistency0.80. International Journal of Production Economics, 141(1), 243254. Decisions to outsource information systems functions: Testing a strategy, theoretic discrepancy model. Table 5 shows two global sourcing configurations for high innovation with a high overall solution consistency of 0.80 and overall solution coverage of 0.562. Cost savings, which derive from the difference in labor costs between developed and developing countries, are the main incentive for early adopters of global sourcing of business activities (Manning et al. In both Configuration 2a and 2b, high cost savings in global sourcing require either high geographical or cultural dispersion of value chain activities, but not both at the same time. Cham: Springer. For a few decades, firms, especially in developed countries, have increasingly adopted the concept of global sourcing which allow them to slice up activities in their value chain (refer to Cohen and Mallik 1997 and Porter 1985 for the original discussion of global value chain) and globally distribute them to locations where they can be best sourced. (2013). International Sourcing Partners | The Sourcing Co Find out how we work on site with clients to help them achieve long-term improvement and measurable, bottom-line results. More specifically, we take a configurational approach to explicate the complex relationships among disaggregation, geographical dispersion and organizational dispersion (i.e., governance mode) of firms global sourcing portfolio and identify the combinations of these three components (i.e., global sourcing configurations) that lead to (1) high cost savings and (2) high innovation in global sourcing activities. These firms are drawn from the Offshoring Research Network (ORN) database. The offering is a powerful combination of Orpheus advanced platform technology with McKinseys industry experience and content-rich services in digital procurement. The contributions of qualitative comparative analysis (QCA) to international business research. A review of outsourcing from the resource based view of the firm. Find out more Given the equifinality in our findings, we suggest that future studies consider the effect of a governance mode not by itself but in combination with the degree of disaggregation and dispersion in order to determine the global sourcing configuration that yields the optimal expected outcome. What goes around, comes around: Effects of offshore outsourcing on the export performance of firms. Global Sourcing & Supply Chain | Component Sourcing International FIVE STEPS FOR BUILDING A GLOBAL SOURCING PROCESS 1 | BUILD A TEAM More and more companies are taking the team approach to making sourcing decisions. Toward an eclectic theory of international production: Some empirical tests. New York: Oxford University Press. International Chamber of Sustainable Development (ICSD) is a government-registered not-for-profit organisation (registration number: 0063358) based in Hong Kong. The concept of core competencies is among the most powerful frameworks researchers draw on to explain why a particular activity in a value chain can be disaggregated and dispersed to be performed in other locations (e.g., Gilley and Rasheed 2000; Teng et al. Studies have shown that in many cases firms utilize global sourcing as a quick fix to their operational issues (Heijmen et al. International Journal of Management Reviews, 8(1), 4970. (2020) strongly encourage international business scholars to adopt the configurational thinking in their studies of complex international business contexts and leverage the beneficial characteristics of fsQCA to overcome the common methodological issues (e.g., small sample size, multi-level variables) which cannot be addressed using traditional analytical techniques. Singapore's AI Verify is now available to the global open-source community to support the development of responsible artificial intelligence (AI) through the new AI Verify . Going far to go further: Offshoring, exploration, and R&D performance. Explore the Global outsourcing survey to learn how forward-thinking organizations are finding ways to boost innovation and competitiveness. >Donate to support the projects (financial or non-financial resources). Offshoring innovation to emerging countries: The effects of IP protection and cultural differences on firms decision to augment versus exploit home-base-knowledge. Management Science, 56(120), 23232349. 2010). Journal of Management Studies, 56(1), 203233. A high value of this captive ratio measure represents a high level of a firms control over its global sourcing activities (i.e., lower degree of organizational dispersion). Location, control and innovation in knowledge-intensive industries. Different governance modes and the mediating role of innovation. A set-theoretic approach to organizational configurations. There are many reasons a company would need to manufacture or produce their products overseas versus in their own countries, such as raw materials, labor, quality, product development requirements, the quantity they need to purchase, and the price. 3d prototyping . Finding the right materials and factories that share our commitment to quality, compliance and sustainability is a fundamental activity. Journal of Knowledge Management, 13(1), 2741. Economic Journal, 82(327), 883896. Industrial Marketing Management, 33(1), 714. Indian, Chinese and Malaysian government, for example, have actively promoted their global service-provider industry by creating investment-friendly policies, improving national infrastructures, and offering high-quality and affordable labor to attract global sourcing activities from foreign firms (Kearney 2014; Lewin et al. As the findings show, a carefully considered combination of degree of disaggregation, dispersion, and governance mode will enable firms to achieve the expected outcome from their global sourcing. Macquarie Business School, Macquarie University, Sydney, NSW, Australia, You can also search for this author in Research further points out that apart from geographical distance offshoring firms need to consider also cultural distance, referring to differences in norms, values, and beliefs across countries (Hofstede 1983). Knowledge spillovers and the assignment of R&D responsibilities to foreign subsidiaries. 2013), especially activities with high interdependence. Given the promised benefits, we have recently observed a rapid increase in the number of studies in international business (e.g., Fainshmidt et al. These firms have their headquarters located in various regions including 54.2% in North America, 37.5% in Europe, 7.5% in Asia and Australia. This line of argument is consistent with Hymers (1976) early work suggesting that multinational firms internalize activities involving high bonding and monitoring costs while relying on the market structure to perform activities with low bonding and monitoring costs. Journal of International Business Studies, 14(2), 7589. Companies tend to focus on their top-tier suppliers, but the real risks come lower down. The crucial element in global sourcing is the efficient planning and coordination of globally distributed activities in order to reduce friction and transaction cost and, at the same time, to gain access to diverse sources of knowledge, skill, and talent available in various locations. : An international study. The results, however, do not show interesting or significant differences because the global sourcing configurations leading to high cost savings and high innovation in each industry group are consistent with the findings from the overall sample. IEEE Engineering Management Review, 38(3), 93102. 2010) and encourage scholars to examine the effect of reintegration on the outcome of global sourcing in their future research. Global sourcing strategy and sustainable competitive advantage. Designs and leads major operational transformations for basic materials clients; brings extensive expertise in procurement. Journal of International Management, 20(1), 3854. However, despite the advantage of labor arbitrage and economies of scale, outsourcing faces challenges in communication and coordination across the firm and geographical boundaries, which might outweigh the benefit of cost savings (Chen and Lin 2016; Lin et al. The disaggregation of value chains (also called disintegration of value chains) refers to a phenomenon when one or more components in the value chain are decomposed into discrete modules and dispersed to be performed by different parties (Contractor et al. 2009a; Pisani and Ricart 2018). Find out more Today, supply chain and procurement professionals are expected to have much more knowledge of categories rather than just being negotiators. Merchandisers, designers, quality engineers and product development experts work with factories to ensure products meet the requirements. Offshore outsourcing: Implications for international business and strategic management theory and practice. 2017 is the only study we know of that examines the effect of these three components but on reshoring decision). The effect of inter- and intra-organizational distances on success of offshored outsourced innovation: A configurational approach. Lumineau, F., & Qulin, B. V. (2012). 2005; Hutzschenreuter et al. The resource-based view and international business. Management International Review, 51(1), 6592. Lee, H. L., Padmanabhan, V., & Whang, S. (2015). At Deloitte, our purpose is to make an impact that matters by creating trust and confidence in a more equitable society. With the onset of the COVID-19 pandemic and the resulting supply chain disruptions, many businesses that relied on a supplier based in China experienced unforeseen disruption. Table 2 provides details on the distribution of firms in the sample in terms of firm size, operating industry, and headquarters. Various benefits including cost reduction (Ellram et al. >Participate as a volunteer to provide advisory or share the work of the projects on this platform. Journal of Business Research, 89(C), 265272. Journal of International Business Studies, 26(2), 343360. Narula, R., & Zanfei, A. Journal of International Business Studies, 30(1), 124. Through awareness, and necessity to maintain a competitive edge, industry is being propelled to address many long-standing supply issues, re-engineer products' specifications, leading to more resilient and cost-effective supply chains that can position their respective organizations as leaders in this new normal. Global Services Location Index 2014. We measure the degree of organizational dispersion by calculating the ratio of global sourcing projects with captive governance mode to a total number of global sourcing projects. 2009a). Download the full report to explore detailed findings and analysis, insights from executives, and takeaways on how you can enhance your sourcing model to unlock immediate and long-term business value. In this study, we draw on these three components of global sourcing configuration suggested by Contractor et al. The impact of culture on creativity: How cultural tightness and cultural distance affect global innovation crowdsourcing work. Invisible costs in offshoring services work. Global disaggregation of information-intensive services. Toward a model of strategic outsourcing. Hutzschenreuter, T., Kleindienst, I., & Lange, S. (2014). Global Strategy Journal, 4(3), 181199. our sourcing & design capabilities help our customers in many markets and . The cultural relativity of organizational practices and theories. Supply Chain Management, 19(3), 258274. 2017; Larsen et al. Hence, the minimum value of this variable is 1 (firms without any offshore functions are not included in the sample), and the maximum is 11 functions. 2012; Lewin et al. Journal of Operations Management, 25(2), 464481. Global supply chains: Research and applications. PubMedGoogle Scholar. As suggested by the internationalization theory, access to knowledge and skills across national boundaries allows firms to take advantage of complementary location-specific advantages (Feinberg and Gupta 2004), which are not available or cannot be easily obtained in their home country (Doh 2005; Lewin et al. Dispersion of value chain activities follows the process of disaggregation as firms reallocate discrete tasks in their value chain to be performed by internal and external parties (i.e., governance choice) across geographical boundaries (location choice). The cases in the sample are then sorted into the rows of the truth table based on the value of their causal variables. We are continuously seeking the best talent at all levels and for all types of roles, and are particularly keen to talk to experienced professionals looking for their next challenge. Lewin, A. Y., & Peeters, C. (2006). 2023. Average firm employment is 37,489 employees, and median firm employment is 7000 employees. What Are The Reasons For Global Sourcing? | Mondoro Journal of Product Innovation Management, 28(1), 4862. With a heritage dating back more than 110 years, Samsonite International S.A. ("Samsonite" or the "Company", together with its consolidated subsidiaries the "Group"), is a leader in the global . Business process outsourcing (BPO) is a classic example of global sourcing. This level of control allows firms to closely monitor and mandate how an activity is performed as well as its quality. We, hence, measure two aspects of global sourcing outcome using ORN data: cost savings and innovation. Journal of Management Studies, 47(8), 14171433. It is testing the commercial, operational, financial and organizational resilience of the majority of companies across the globe. Kotabe, M. (1989). Academy of Management Journal, 53(5), 11941209. Governance mode decision is a firms choice to vertically integrate (so-called captive offshoring) or outsource value chain activities to external service providers (so-called offshore outsourcing). Consolidation of spend enables improved buying leverage and negotiating power to help drive value or push for improvements. Using a fuzzy set qualitative comparative analysis on 235 firms engaging in global sourcing of business service activities, we identify configurations of global sourcing strategyconcerning (1) disaggregation, (2) dispersion of activities and (3) governance structurethat lead to high financial and innovation performance. ), Advances in global marketing (pp. DTTL and each of its member firms are legally separate and independent entities. Questions about our business, our services or our websites? Operational leads have been required to shift their focus from large change projects to keeping the business running day-to-day and ensuring both staff and customers immediate needs are satisfied. The process of value chain disaggregation requires firms to carefully examine activities along their value chain to assess both the feasibility as well as costs and benefits of modularizing the whole process into separable discrete activities. Our goal is to fully digitalize each step of the global supply chain so that data can flow seamlessly, providing end-to-end visibility for our customers, suppliers and other stakeholders. Do supply management and global sourcing matter for firm sustainability performance?

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