© James Kroes 2006

Outsourcing of Supply Chain Processes: Evaluating the Synergy Between Strategic Outsourcing Drivers and Competitive Priorities

James Kroes

Georgia Institute of Technology

August 2006

© James Kroes 2006

Agenda

Goals Motivation Boundaries Theoretical Development Research Model and Hypotheses Research Design Summary

© James Kroes 2006

Goals

Competitive Priorities

Strategic Outsourcing

Drivers

Performance

Synergy

Assess strategic drivers of outsourcing Measure Outsourcing Synergy (Fit ) Impact of Outsourcing Synergy on performance

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Motivation

Growth of outsourcing Shift from periphery to core

(Chamberland, 2003; Gottfredson, Puryear, and Phillips, 2005; Insinga and Werle, 2000; Kakabadse and Kakabadse, 2000b; Venkatraman, 2004)

Growth across the supply chain (Adler, 2003; Chamberland, 2003; Gottfredson et al., 2005; Heikkila and

Cordon, 2002; Kirk, 2001; Nohria, 2005; Orr, 2001; Palvia, 2003; Quinn, Doorley, and Paquette, 1990; Ramsay and Wilson, 1990; Ross, Dalsace, and Anderson, 2005; Willcocks, Hindle, Feeny, and Lacity, 2004)

Anecdotal evidence of strategic mismatches Cost is the dominant driver

(Casale, 2004)

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Boundaries

Manufacturing business units operating in the United States Supply-Chain Council Operations Reference Model

Expanded view includes Product Development

Supply Chain Council. 2005. SCOR Overview, available at http://www.supply-chain.org.

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Theoretical Development

Competitive Priorities and Corporate Strategy

Krajewski, L.J., Ritzman, L.P., 1999. Operations Management : Strategy and Analysis (6th Edition ed.). Prentice Hall: Upper Saddle River, NJ.

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Theoretical Development

Corporate Strategy → Competitive Priorities

(Boyer and Lewis, 2002; Koufteros, Vonderembse, and Doll, 2002; Krajewski and Ritzman, 1999; Skinner, 1966, 1974; Ward, McCreery, Ritzman, and Sharma, 1998; Watts, Kim, and Hahn, 1992)

© James Kroes 2006

Theoretical Development

Strategic Outsourcing Drivers List determined from existing literature and feedback from supply

chain professionals Driver Mapping

We map the drivers to Competitive Priorities to measure which priorities are considered by a firm making an outsourcing decision (Non-Priority Drivers do not map to a Competitive Priority)

Three Options Develop Mapping from Theory Develop Mapping from Survey Responses Hybrid of the two approaches

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Theoretical Development – Driver Mapping

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Theoretical Development - Role of Synergy

Two types of mismatches (Poor Synergy). Overemphasis of a Competitive Priority

Not considering the relevant drivers Under-emphasis of a Competitive Priority

Wasting resources by considering non-priority drivers

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High Level Research Model and Hypotheses

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Detailed Research Model and Hypotheses

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Evaluation of Outsourcing Synergy (Fit)

Evaluation of Fit (Measuring Outsourcing Synergy) Venkatraman (1989) – Profile Matching

Venkatraman, N., 1989. The Concept Of Fit In Strategy Research: Toward Verbal And Statistical Correspondence. Academy of Management. The Academy of Management Review 14(3), 423-444.

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Evaluation of Outsourcing Synergy Example

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Research Design

Methodology Empirically measure Competitive Priority and Strategic

Outsourcing Driver weightings in manufacturing business units Calculate the level of Outsourcing Synergy in four supply chain

areas Gather subjective and objective performance data

Scale Development Existing measures were adapted for Competitive Priority and

Performance Constructs Refined instrument through multiple Q-Sorts

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Research Design

Survey Method Online survey website

Sample Population Request letters and follow up email message sent to 1,750

supply chain professionals working at domestic (U.S.) manufacturing firms

Instrument Validation CFA to examine the convergent and discriminant validity of the

measurement items Assess the Reliability of the multi-item constructs. CFA and Reliability results will be used to examine the scales of

the multi-item constructs

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Research Design

Driver Mapping Determine Approach and develop Mapping

Hypothesis Evaluation Evaluation of Fit (Outsourcing Synergy)

Venkatraman (1989) – Profile Matching Evaluation of Hypotheses

H1 – Regression H2, H3, H4, H5, and H6 – Structural Equation Modeling

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Research Design - Competitive Priorities

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Research Design - Performance Measurement

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Goals

Competitive Priorities

Strategic Outsourcing

Drivers

Performance

Synergy

Assess strategic drivers of outsourcing Measure Outsourcing Synergy (Fit ) Impact of Outsourcing Synergy on performance

© James Kroes 2006

Current Status

Completed Activities Q-Sort completed Online survey instrument created Survey participation request letters and emails sent to 1,750

supply chain professionals Data collection in process

231 survey responses received Next Steps

Scale validation Determine Driver Mapping (Theoretical or Survey based?) Finalize Performance constructs Determine appropriate methodology to evaluate the model

© James Kroes 2006

Questions and Comments?