To fill this gap, we analyze a two-period game involving a firm that has the opportunity to outsource some portion iii of its volume to a contract manufacturer.
Effect of outsourcing strategies on the performance of small and medium scale enterprises (SMEs)
Both firms can reduce their production cost through learning-by-doing. When the contract manufacturer is the Stackelberg leader, we obtain several interesting results. These include showing that the contract manufacturer's learning can benefit the buying firm, but only if the buying firm also learns.
We also show that learning by the buying firm can either help or hurt the contract manufacturer. In addition, we find that below-cost transfer pricing by the contract manufacturer will occur. We also analyze alternative bargaining arrangements.
This essay analytically shows the importance of considering both learning-by-doing and possible future opportunism when deciding whether or not to outsource. In the second essay, "Outsourcing of Manufacturing Resources: The Effect of Manufacturing Capabilities and Priorities" we empirically analyze relationships between operations capabilities and priorities quality and cost and a firm's plans to outsource.
This essay extends the existing research on antecedents of outsourcing in two ways. First, we make theoretical arguments about specifically which firm-specific operations capabilities and priorities relate to plans to outsource. This is different from the extant literature which looks at a single capability proxy, if capabilities are considered at all. Second, we develop operational metrics and test the hypotheses using structural equation modeling.
We find, as expected, that cost capability and importance impact outsourcing plans. Surprisingly, we find that quality capability and importance do not matter. The third essay is entitled "Buyer Beware? Quality Risk in Manufacturing Outsourcing.
We draw from literature in supply chain management, total quality management, and economics to argue that outsourcing production to contract manufacturers does pose a quality risk. We draw from similar literature to also propose that ISO does little to mitigate this risk.
We interview a panel of industry experts using the Delphi process to transform the raw data to a usable "quality risk" score. After classifying plants from the database as either "contract manufacturer" or "internal plant," we use ordered logit regression on our quality risk score to show that outsourcing to contract manufacturers does pose a quality risk; and that being ISO certified does not alter a firm's quality risk. Language English Access Open access.
Free general motors outsourcing Essays and Papers page 4
Parents: This work has no parents. Tweet Share. Master's Papers Deposit your masters paper, project or other capstone work. Scholarly Articles and Book Chapters Deposit a peer-reviewed article or book chapter. Undergraduate Honors Theses Deposit your senior honors thesis. Our goal was to identify these problems and then "work backward" to identify actions that could prevent or mitigate these problems. Just released and available to you now! Get the report HERE. We defined "outsourcing implementation" to be the first months that a change occurs in an outsourcing relationship.
The outsourcing implementation is when "the rubber meets the road. The final result of our efforts is a "Top 10" list of client problems with outsourcing implementations. Simply put, clients and service providers are not operationally prepared to work together after contract signing. Having processes and decision rights rated as the biggest problem may seem surprising given the possibility for high emotion and behavioral change that comes with outsourcing.
The problem occurs if new processes and decision rights have not been well-designed or socialized. For instance, who in the client's organization can request services with the new outsourcing model?
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Does it go directly to the provider, and if so, how? What documentation or justification is required for the service request? Are any new approvals required either within the client organization or by the service provider? Who decides? What about "emergency" change requests — are these acted on immediately, and what constitutes an "emergency"? These and a host of other questions about financial, contractual, and service delivery processes and decision rights must be answered and communicated to appropriate stakeholders in the client and service provider organizations.
The outsourcing contract is not intended to be nor should it be an operations manual; therefore additional work is required to design and communicate changes. Another significant problem that exists in many outsourcing implementations is the lack of buy-in from senior client leaders who will be recipients of the outsourcing services. This can result in active or passive resistance to the entire outsourcing model; create the desire for "special treatment" or opt-out from the outsourcing services, and results in business case deterioration.
Many times leaders who will receive future services do not actively participate in the outsourcing evaluation or receive proactive communications regarding its status. This lack of participation has two detrimental impacts:. After signing the initial contract, both the client and service provider have multiple team members who are trying to manage the initial implementation activities and ongoing operations. The client has staff who are just learning the details of the agreement, may be emotionally charged regarding the decision to outsource and also have a personal view of what the service provider should and should not perform.
The service provider has team members who are also new to the transaction, and sometimes bring a view of "this is what we did in my last deal" without fully understanding nuances of the specific agreement that has been negotiated. This causes issues in implementation because there is no one "directing traffic" or the team is too small to handle both the volume and complexity.
Even if a client puts a retained team in place to manage the outsourcing implementation and ongoing operations, the team may not have the right skills required for their new roles. However, these people sometimes have a hard time making the switch between performing or managing the day-to-day work and holding the service provider accountable. Outsourcing creates uncertainty for existing employees and contractors who provide services to the client organization. The uncertainty can cause this staff to look elsewhere for employment and leave either before or during the outsourcing implementation, causing a need to either backfill the resource or reduce the amount of work performed by the organization.
Thesis on outsourcing of leaders
In addition, some of the client staff is temporarily engaged for knowledge transfer to the service provider during the implementation. If the staff is not properly motivated or if the service provider does not do a good job with knowledge transfer, this can cause decreased efficiency in service delivery and possibly introduce operational risk.
These two issues can be significant problems if not addressed. However, it is in the middle of our rankings because clients and service providers both recognize the importance of these issues and generally make a reasonable attempt at mitigation. Prior to an outsourcing implementation, the client organization may curtail big projects and non-essential spending. This is for two reasons:.
However, the ways in which the new initiatives are prioritized, estimated, evaluated, approved, scheduled and performed may all be in the midst of change during transition to the new outsourcing model. This results in "a pig trying to fit through a garden hose"; only a trickle of demand is fulfilled until the new model is in place. Oftentimes, a third-party service provider is brought in to be a "change agent. However, for many outsourcing services, the provider is not in complete control of the end-to-end result.
Thesis on outsourcing of leaders
The users on the receiving end of new methods can inhibit the achievement of business objectives through lack of compliance, strategy disagreements or delays in executing their required responsibilities. In terms of corporate culture, the client and service provider may have different norms in terms of speed, style, decision making and organizational structure. Another aspect of potential corporate culture clash is the fact that outsourcing represents a commercial relationship between two separate entities.
Sometimes both organizations can take extreme, inflexible positions that serve to create tension or distrust e. Also, expectations regarding the level of open debate, acknowledgement of potential problems, and willingness to veer from the defined process in order to complete work may vary between regions and nationalities. Old habits die hard. Even for organizations that initially change behaviors and processes to achieve success with outsourcing, there can be a significant tendency to revert to old ways of doing things.
TPI sees clients start to cut back on dialogue with their business stakeholders and service providers, reduce governance staff and reduce process rigor over time. This retrenchment usually occurs because the client believes benefits will continue to occur automatically, and therefore "we can eliminate unnecessary cost. Our findings indicate that unmanaged changes are the biggest problems clients face in outsourcing implementations — not issues related to specific contract terms, pricing or technology.
The sum total of these problems causes significant degradation in the expected business case during implementation and beyond. While the problems listed above may seem significant at first glance, they can be readily overcome with awareness, attention and focus. In fact, by recognizing these issues in advance, clients and service providers are ahead of the game and can drive early — and lasting — success. In our work with client organizations and through our liaison activities with service providers, TPI has identified a set of drivers for the entire outsourcing Change Management process.
Outsourcing Final Dissertation | Outsourcing | Qualitative Research
These drivers provide a framework for developing specific actions and techniques, help categorize issues to mitigate problems and enable the realization of intended benefits created by the change implementation. By themselves, the drivers do not represent groundbreaking innovation — the principles and techniques associated with Change Management are well-known to experienced practitioners.
However, it is the application of the drivers and overall commitment to Change Management by client sponsors that is required to make an actual impact. The lack of sponsorship and commitment is the reason that issues related to Change Management and governance are so prevalent on our Top 10 list. Change Management may sound like a "nice to have," but — as evidenced by our Top 10 list — it is essential to achieving expected results.
To demystify the concept of Change Management, the following drivers provide a framework to lay out a vision, make sure everyone understands their roles and goals, develop a road map to make it happen and then execute. Leadership Vision and Commitment: client and service provider leaders must be clear about the future state and drive the changes required to get there through words, actions and commitment of appropriate resources.
The client sponsor must be aware of the need to design new processes, and assign necessary resources and importance to these activities. The client sponsor for outsourcing must hold substantial one-on-one discussions with each key leader during the pre-contract stage and during implementation.
At the appropriate stage, the service provider executive responsible for delivering the outsourcing services should also meet with the client sponsor and business unit leader.