ISO 37500 – Comparing outsourcing life-cycle models

Purpose This paper aims to illustrate the value of the outsourcing life cycle, as described in several industry models, including ISO 37500. Design/methodology/approach The authors present a comparison of outsourcing life cycles to provide an overview of current practices in the global outsourcing industry. Findings Several outsourcing life cycles have been defined by industry associations such as the International Association of Outsourcing Professionals (IAOP) and the National Outsourcing Association (NOA). Academic research has created several outsourcing life cycles, notably the model from the London School of Economics (Cullen and Willcocks, 2005). Finally, commercial models have been defined, for example the Vendor and Sourcing Management model from IDC (2014). Research limitations/implications Researchers will find the overview of different life cycles useful in assessing maturity of outsourcing organizations. Practical implications Practitioners will find the detailed description of ISO 37500 and the comparative life cycles to be illustrative of different approaches to managing outsourcing transactions. Both buyers and providers will be able to compare their own life cycle to industry standards. Originality/value Little or no research has been conducted on how outsourcing life cycles contribute to effective outsourcing. This paper provides a foundation for such research.

Local industry technological capability development using outsourcing opportunities

Purpose Technological outsourcing requires possessing the technological capability level by enterprises taking the outsourced activity and further mandates build-up capabilities. Small and medium enterprises (SMEs) in developing nations such as Ethiopia are usually equipped with low level of technological capability and could benefit from government-supported or government-initiated outsourcing networks. The current study aims to preliminarily assess performance of outsourcing initiative taken by the Hibret Manufacturing and Machine Building Industry, a subsidiary of a national corporation, in developing technological capability of SMEs in Ethiopia. Design/methodology/approach The study used a qualitative research approach through interviews with the parent company officials and owners of SMEs and site visit to these SMEs. Findings are organized in a way to draw lessons to be learned from technological outsourcing examined. Findings Technological learning, acquisition of new technologies, market access and process innovation are few capabilities achieved by the involved SMEs. To facilitate and harness these opportunities and further assist in policy ratification, a conceptual framework has been presented and elaborated. Research limitations/implications Further investigation into outsourcing procedure and biases are expected to shed further light onto the outsourcing initiative by the parent company. This study drew results from investigation of the SMEs involved. Additional investigation of other SMEs is expected to reveal additional insights. Originality/value There is a dearth of literature focusing on exploration of technological outsourcing in low-income developing countries, such as Ethiopia, to build SMEs’ technological capabilities. This research presents insightful contribution to strategic outsourcing to build local technological capability in developing economies.

Determinants of ICT outsourcing among the locally-owned manufacturers in Malaysia

Purpose This paper aims to examine the level of information and communication technology (ICT) outsourcing and its determinants in the Malaysian locally owned manufacturing firms. Drawing on the transaction cost theory and the resource-based theory, four determinants – asset specificity, uncertainty, business skills and technical skills – were hypothesized to influence ICT outsourcing. Design/methodology/approach Data were collected using a questionnaire survey from 104 manufacturing firms listed on the Directory of Federation of Malaysian Manufacturers. Data were then analyzed using R package partial least squares path modeling. Findings The study reveals that slightly over two-thirds (68 per cent) of the surveyed manufacturers either fully or partially outsourced their ICT services. Asset specificity and uncertainty are found to be positively related to the level of ICT outsourcing, which contradict the prediction of the transaction cost theory. On the other hand, business skills and technical skills are not significantly related to the level of ICT outsourcing, which also conflict the resource-based arguments. Research limitations/implications The small sample size would not be able to make meaningful conclusion for the population; the small R2 value indicates that other important determinants of ICT outsourcing were not tested in this study, and the transaction cost theory and the resource-based theory do not adequately predict the level of ICT outsourcing in the Malaysian locally owned manufacturers. Originality/value The study serves as one of the first studies that tested the determinants of ICT outsourcing using the transaction cost theory and the resource-based theory in locally owned manufacturing firms of a developing country.

Servitization in contract manufacturing – evidence from Polar business cases

Purpose This paper aims to contribute to the scholarly debate on the origins and nature of industrial servitization. By resorting to contract manufacturing (CM) as an empirical case, it is posited that any product-service solution that a manufacturing firm is capable of delivering on a competitive basis mirrors its goals in value creation and capture, positioning within its value networks and the pool of assets and competences it holds. Design/methodology/approach To support this argument, a comparative case study of two CM firms that represent polar cases in the industry was conducted. The primary data were collected through participatory methodology, observations and semi-structured interviews of company representatives. The business experiences of an industry practitioner provided a distinct contribution to the content analysis and modelling. Findings It was concluded that servitization becomes endogenous as contract manufacturers aim for higher profitability through the insource of customer activities and hence extend their offering downstream in the supply chain. The findings suggest that the way out of the servitization trap is a shift toward original design and manufacturing business, where high value-adding modules are insourced and integrated into replicable solutions for various types of customers and market segments. Research limitations/implications The generalization of the conclusion is constrained by the limited focus on two cases only. More industry and company data are therefore required to further validate this argument. Particularly valuable will be the data on the intermediate business models between the two polar cases. Originality/value Building on contested business practices, this paper outlines the logic of competitive strategy in CM on the basis of specific characteristics and implications of the various business concepts. In this case, the principal drivers of servitization are the acquisition of supporting capabilities and insourcing of customer activities. The case study method integrates theory with academic observation and managerial experiences.

An exploratory study on the impact of recruitment process outsourcing on employer branding of an organisation

Purpose This paper aims to focus on “Recruitment Process Outsourcing” (RPO) as a key element of improvement in corporate brand of organisation through using the talent and capabilities of employees. This research explores the linkages and interconnection between the concepts of RPO and its contribution towards the employer branding process. The review of the literature on RPO and employer branding identifies an emergence of conceptual framework based around outsourcing effectiveness and its impact on employer branding. Design/methodology/approach Exploratory research was carried out using case study analysis to give clear and deep understanding of the RPO and its impact on employer branding. This was conducted by using the semi-structured interviews with the HR and marketing managers using the qualitative method. The findings propose a conceptual framework which is representative for the organisations engaged in RPO. Findings The key findings include talented employees’ role in improving the brand image of any organisation; the development of customers’ perceptions through their attitude and behaviours; the reduction in the HR costs through RPO Services, the responsibility of the organisation taken by RPO which provides the chance for HR professionals and top management to focus on core activities; and the organisational care in selection of the RPO service provider as per their criteria. Research limitations/implications This research has been limited to assessing the impact of RPO on the employer branding of manufacturing organisations purely due to access issues. The research clearly establishes a good link between the operationalisation of RPO and its direct influences on an organisation’s employer branding through its outsourced employees. The research clearly highlights the importance of and the vital role played by the outsourced employees and how they need to be nurtured through a strong corporate culture and make them great brand ambassadors. Practical implications At the practical level, this study has several managerial implications, as the findings provide a good understanding of the concept of RPO and how it impacts the employer brands of the organisation. The research gives confidence to the HR managers and directors on the importance of outsourced staff members and the need to address the issues concerning the employee branding of an outsourced member of staff. The outcome of the research gives a conceptual model which represents the impact of an outsourced employee on the employer branding process of the organisation. This conceptual model highlights the many different factors that need to be addressed by a HR manager to keep consistency in employee branding of the organisation. Social implications The social implications of this research relate to the wellbeing and motivated staff members of an organisation, even though they do not work directly under the brand of the company they serve in. As mentioned in the research findings, the complications of the RPO process usually has drastic and serious impacts on employee attitudes and feelings when it comes to issues like change management, job satisfaction and the sense of belonging to the organisation. By addressing the different factors explored in the conceptual model of this research, an outsourced employee can feel equally motivated and belonging to the organisation they serve in, just as any other permanent member of staff who acts like an ideal brand ambassador for the employer branding of the organisation. Originality/value This research is original and adds value to the dynamics of RPO processes by exploring the impact of the process on employer branding of the organisation through its brand ambassadors. This research paves way for further research to be carried out within service organisations where employees play a vital role in being the brand ambassadors of their employer brands.

Analysis and management of risks associated with outsourcing in China

Purpose The purpose of this paper is to analyse the risks associated with outsourcing production to emerging countries with lower labour costs, namely China, and study actions and plans used to reduce the influence of factors/drivers that induce these risks. Design/methodology/approach This research uses a multiple case-study methodology, involving seven Canadian manufacturing firms that have chosen an outsourcing strategy in China. It is based on a particular approach of classifying factors/drivers that may generate risks related to this strategy and on interviews with two managers per firm to reduce personal bias. Findings In each of the seven cases studied, outsourcing was chosen to take advantage of lower labour costs in China, but in reality, costs were higher than expected due to unforeseen factors inherent to the risks involved. This study reveals that risks generated by factors/drivers such as lack of experience, reduced control over foreign operations and cultural differences are of major concern for managers outsourcing part of their production to China. However, according to some executives that were interviewed, certain actions can be taken by firms to overcome the negative influence of these factors/drivers. Furthermore, some risks may have multiple causes or be induced by other risks. Research limitations/implications The sample of this study was composed of firms from different industrial sectors, and the authors were therefore unable to analyse sector-specific risks. As the industrial sector has an impact on the technical complexity of the products and their components, it would be appropriate to reconduct our research using samples drawn from similar sectors. Practical implications These findings can help guide the decisions of managers wishing to outsource some of their activities to China and other emerging countries. They will contribute to the success of outsourcing strategies to these countries, as they reveal the risks associated with these strategies and the ways to deal with factors/drivers that can induce them. For example, building long-term relationships with Chinese partners based on collaboration, trust and mutual benefit as well as conducting a rigorous prospecting phase and taking time to select the right subcontractor can have a major impact on reducing risks. Originality/value The main contribution of this work is the analysis of risks associated with outsourcing to China, based on a categorisation of factors/drivers that can generate these risks, and the study of how firms manage these factors/drivers and control their negative effects. The nature of the practices and actions used to manage important risks depends on the characteristics of the companies, their size, resources and the products they outsource.

A modified ANP and fuzzy inference system based approach for risk assessment of in-house and third party e-procurement systems

Purpose The increasing complexity and dynamism of new technology implemented or to implement have imposed substantial uncertainties and subjectivities in the risk assessment process. This paper aims to present a risk assessment methodology for e-procurement implementation based on modified analytic network process (ANP) coupled with fuzzy inference systems. Design/methodology/approach ANP is modified in such a way that the experts can provide necessary data precise numerical value, a range of numerical values, a linguistic term or a fuzzy number. The proposed methodology incorporates knowledge and judgements obtained from experts to carry out identification of risk factors and to assess the risk magnitude of the identified risk factors based on factor index, risk likelihood and risk severity. Findings Risk magnitude of third party systems are found to be minor with a belief of 100 per cent, and for in-house systems, the risk is found to be between minor with a belief of 30 per cent and major of 70 per cent. The results indicate that by using the proposed methodology, the technological risk assessment of new technology can be done effectively and efficiently. Research limitations/implications Using the results of this study, the practitioners can better know the pros and cons of implementing both in-house and third party e-procurement systems. Originality/value The modified ANP is used mainly to structure and prioritize the diverse risk factors. Finally, an illustrative example on technological risk assessment of both in-house and third party e-procurement systems is used to demonstrate the applicability of the proposed methodology in real life situations.

Strategic manoeuvers in outsourcing arrangements

Purpose Adaptation is often seen as a key competitive advantage for outsourcing vendors. Outsourcing research has often assumed that vendor capabilities are static. However, as a result of uncertainties and/or changes in the client environment, vendors need to be able to adapt their outsourcing capabilities. The aim of our research is to compare two contrasting outsourcing approaches and illustrate how an adaptive approach may deliver better results for clients in the long term. Design/methodology/approach The paper uses a combination of literature and case study research. A retrospective case study approach was adopted, using interviews, observations and analysis of reports. Two case studies utilizing contrasting clients approaches were investigated and compared. In one of the case studies, the client reorganized activities first and then outsourced them, while in the other, the client did the reverse – outsourced first and then reorganized. Findings The findings indicate that reorganizing first and outsourcing afterwards contributes to a more controlled implementation, which results in a more defined and stable set of vendor outsourcing capabilities that contributed to short-term success. In contrast, outsourcing first and reorganizing later demonstrates a less controlled redesign of the client’s organizational structure, which requires a malleable set of outsourcing capabilities to accommodate future change. The latter strategic manoeuver results in an extended adaptation period, as some capabilities need to be developed over time. However, it may improve success over time as subsequent changes in the client environment can be catered for in a better way. Research limitations/implications Only two explorative case studies were performed, limiting confidence in the degree of generalization of the results. We plea for more research on the effect of context dependency as various contingencies may impact the adaptation of outsourcing capabilities; for example, the volatility of the client’s market or the stability of the technology concerned. Practical implications When a client applies a proactive manoeuver, reorganizing first and then applying outsourcing, the number of adaptive capabilities required of the outsourcing vendor is reduced, limiting the risk for the client in the short term. In the longer term, however, subsequent change requirements may be less well-accommodated. Originality/value Strategic manoeuvers within an outsourcing context have received limited attention in research. As far as we know, this is the first empirical research that investigates the benefits of vendors having adaptive capability.

Strategic sourcing business models

Purpose The purpose of this paper is to describe how seven sourcing models operate along a continuum depending on the complexity of the marketplace and the strategic needs of buyers and suppliers. Studies of business procurement and sourcing practices reveal that collaborative and holistic approaches will increase efficiencies and value in strategic outsourcing relationships. Design/methodology/approach The design is based on research and fieldwork from the University of Tennessee and vetted with the Sourcing Industry Group, the Center for Outsourcing Research and Education and the International Association for Contracts and Commercial Management. This work provided the basis and framework for the 2015 book, Strategic Sourcing in the New Economy: Harnessing the Potential of Sourcing Business Models in Modern Procurement. Findings Most organizations operate under conventional transaction-based models that are constrained by a formal, legally oriented, risk-averse and liability-based culture. There is growing awareness that transactional-based approaches do not always give each party the intended, or best, results. University of Tennessee research shows how organizations apply alternative output- and outcome-based approaches for complex contracts. That experience demonstrates that alternative Sourcing Business Models are viable approaches to the conventional transactional methods[1]. As senior leaders see positive results from carefully crafted collaborative agreements, momentum grows for both output- and outcome-based approaches. Practical implications Education on sourcing business models. Originality/value Collaborative outsourcing.

Implementing environmental sustainability in logistics operations: a case study

Purpose The purpose of the study is to develop an in-depth understanding of how supplier–buyer relationships, particularly in operational coordination, are affected when a company introduces an environmental sustainability target (CO2 emissions reduction) into its supply chain operations. The investigation focuses on the joint activities of the logistics function of the company (buyer) and the third-party logistics providers (3PLs) (suppliers). Design/methodology/approach This single-case study takes the perspective of a sustainability-conscious Danish company that outsources logistics services to 3PLs but maintains internal logistics as a boundary function. The value offering point/order penetration point (VOP/OPP) methodology is used. Findings The results showed that the introduction of sustainability led to the emergence of multiple decoupling points in both the demand and the supply chains. The logistics function therefore began to play the role of “integrator” across both the functions in the company and the organizations in the supply chain. The findings indicate the need to develop clear cross-functional and inter-organizational coordination mechanisms. Research limitations/implications This is a single-case study in a Danish context. Practical implications The study provides rich insights into managing the implementation of sustainability in supply chain operations, and it exemplifies how the VOP/OPP tool can be applied by 3PLs to develop sustainable offerings. Originality/value The current research on sustainable supply chain management takes into account the entire supply chain. In contrast, this study focuses on the logistics function. The VOP/OPP concept is used to capture the processes used in actual practice, and both the buyer and the supplier are considered potential co-producers of value.