Strategic Sourcing

To make or Not to make

GROUP 3

 Focus on making products based on corecompetencies Outsource components where suppliers have a comparative advantage Use Outsourcing as a means of generating employee commitment Choosing between Time/Money spent and making the product better themself

 Make key strategic choices between a desire to preserve jobs or just outsource menial jobs These jobs tend to increase fixed cost and decreased product differentiation over time

 Create a hierarchy of strategic importance Avoiding confused thinking of bringing every other component in-house to increase : Comparative advantage Supplier management Economies of scale

Convert Strategic thinking theory -> actionable practice Main reasons for mismanagement of priorities
Conflicting priorities Suppliers bargaining power Opportunity cost Hollowing

 Start by clear demarcations between stratergic and Non-stratergic subsystems Prioritize the indispensable subsystems which are core-competencies Look for high impact components from customers perception, high specialized designs, skills and physical assets and technology Also prioritize on the basis of availability of time and funds

STRATERGIC SOURCING PROCESS

Key points in the case study

Companies often make parts out of a sense of corporate responsibility namely, a desire to preserve jobs. The main anxiety mentioned is that the companies had no firm basis for distinguishing core parts from commodities. Even after erosion of traditional competency of a company, it hates to outsource it. Preconceived notion among employees that hey would be laid off in bad and rehired in good times. Do not use the idea of outsourcing as a weapon to push the employees to submission.