#1 Schmenner & Swink (1998). On theory in operations management.
The DISCIPLINE OF OPERATIONS MANAGEMENT has, over the years, developed a set of laws that have
a bearing on the phenomenon of differential factory productivity:
Law of variability: The greater the random variability, either demanded of the process or inherent in the
process itself or in the items processed, the less productive the process is.
Law of bottlenecks: An operation’s productivity is improved by eliminating or by better managing its
bottlenecks.
Law of scientific methods: The productivity of labour can be augmented in most instances by applying
methods such as those identified by the Scientific Management movement.
Law of quality: Productivity can frequently be improved as quality.
Law of factory focus: Factories that focus on a limited set of tasks will be more productive than similar
factories with a broader array of tasks.
The Theory of Swift, Even Flow holds that the swifter and even the flow of materials through a process,
the more productive that process is:
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The first concepts are value-added and non- value-added work. According to the theory, all work
can be divided into either value-added work or non- value-added work. Work that transforms
materials into good product is considered value-added, while work that moves materials,
catalogues them, inspects them, counts them, or reworks them is not regarded as value-added.
Anything that adds waste to the process is non-value-added.
Similarly, materials can move swiftly only if there are no bottlenecks or other impediments to
flow in the way.
For materials to flow more evenly, one must narrow the variability associated with either the
demand on the process or with the process’s operations steps.
The Theory of Swift, Even Flow thus provides a broad explanation that unifies the variously identified
probabilistic laws of scientific methods, quality, and factory focus and shows how they work. It is
consistent, as well, with the deductive laws of variability and of bottlenecks.
An example of what is not a theory: Hempel 1965. and Bacharach 1989., among others, point out the
need to distinguish description from theory. The product–process matrix depicts a relationship
between product volume\mix and process character (not theory). Safizadeh et al. 1996. provide a step
in this direction using the product–process matrix. They suggest and provide some limited support for
three propositions connected to the matrix.
The propositions of the matrix are:
1. process choice for the primary product line produced in a plant falls on or close to the diagonal
2. competitive priorities are consistent with the plant’s process choice, and
3. firms positioned on or close to the diagonal outperform those choosing extreme off-diagonal
positions.
A more general phenomenon addresses: why it is that some manufacturing plants appear to
outperform their rivals in many dimensions of performance, not only productivity, while other plants
appear to be faced with strategic ‘either\or’ choices about what to do? A grand debate has erupted in
this matter, a debate that pits ‘trade-offs’ vs. ‘cumulative capabilities’:
Law of trade-offs: A manufacturing plant cannot simultaneously provide the highest levels among all
competitors of product quality, flexibility, and delivery, at the lowest manufactured cost.
Law of cumulative capabilities: Improvements in certain manufacturing capabilities e.g., quality are basic
and enable improvements to be made more easily in other manufacturing capabilities e.g., flexibility.
These two laws are not competing rivals, as many see them, but are instead complements that are
subsumed by a broader theory, the Theory of Performance Frontiers. To resolve the conflict between
the two laws some clarification:
Clarification 1: The laws of trade-offs and of cumulative capabilities are of two distinct types (needs to
understand the type of law they each represent).
Clarification 2: The law of trade-offs is reflected in comparisons across plants at a given point in time,
whereas the law of cumulative capabilities is reflected in improvement within individual plants over
time. The two laws are not in conflict.
The theory of performance frontiers: A performance frontier is therefore defined by the maximum
performance that can be achieved by a manufacturing unit given a set of operating choices. Frontiers
are formed by choices in plant design and investment as well as by choices in plant operation. There
are thus two frontiers. We call one an asset frontier. The other we term an operating frontier. The asset
frontier is altered by the kinds of investments that would typically show up on the fixed asset portion
of the balance sheet, whereas the operating frontier is altered by changes in the choices that can be
made, given the set of assets that the plant management is ‘dealt’ .
It is important to differentiate between two types of beneficial movement within the performance
space: improvement and betterment. Improvement is defined as increased plant performance in one or
more dimensions without degradation in any other dimension. Betterment, on the other hand, is about
altering manufacturing operating policies in ways that move or change the shape of the operating
frontier.
[We posit that these effects are also subject to certain limitations, which are captured in the following
familiar laws adapted from microeconomic theory. Law of diminishing returns: As improvement or
betterment. moves a manufacturing plant nearer and nearer to its operating frontier or its asset
frontier., more and more resources must be expended in order to achieve each additional increment
of benefit. Law of diminishing synergy: The strength of the synergistic effects predicted by the law of
cumulative capabilities diminishes as a manufacturing plant approaches its asset frontier]
Any predictions generated by the theory must take into account the relative positioning of plants with
regard to each other and to their frontiers. Consider the following factors:
- benchmarking
- metrics
- variation by industry
- competitive strategy
#2 Skinner, Wickham. (2007). Manufacturing strategy: the story of its evolution.
His thesis focused on U.S. companies manufacturing abroad.
Industry was awash with problems—quality and productivity, labour morale, the growing loss of
markets to foreign competitors, equipment and process technology puzzles
The lesson learned: infrastructure is as important as new technology and must be designed to fit and
support whatever is new.
I saw that the companies had gotten into trouble in manufacturing because experienced production
executives had applied their hard-earned wisdom and conventional premises of their profession to
reach fundamental manufacturing policy decisions that were just plain wrong. The class saw that the
wisdom of industrial engineering, of control and scheduling experts, and of labor economics, did not
always work since they could interfere with one another. And they saw that economists and
accountants and financial experts pushed production managers toward decisions, which looked like
good business but often simply did not meet the company’s strategic realities. How was top
management doing it now? They weren’t. They were concentrating on the big, strategic problems of
finance and products and markets and marketing. Production was technical, engineering, routine,
standardized, repetitive, lots of people, training, grievances, inspection, inventories. . .none of this was
top-management stuff. Everyone was trying to ‘‘optimize’’ their own parts of the puzzle.
What was the central premise? It was that low cost and high productivity are always the key success
criteria. But what about delivery reliability, or quality, or short lead times for new product introductions,
or minimizing investment—all criteria which had emerged in one or more cases. It was suddenly clear:
there were trade-offs! A given manufacturing system could not perform equally well on all success
criteria: someone had to decide.
A Manufacturing Strategy is a set of manufacturing policies designed to maximize performance among
trade-offs among success criteria to meet the manufacturing task determined by a corporate strategy.
Top management’s job is to ensure that there is a coherent manufacturing strategy in which all
manufacturing policies are designed as a whole to support or lead the corporate strategy. The worst
ones were those that tried to do everything and did nothing well.
Then came the notion of the focused factory.
#3 Dabhilkar M. and Svarts, A. (2019). From general to specialty hospitals: operationalising focus in
healthcare operations
This study proposes an operationalization of the term focus in healthcare operations. We develop a
configuration model consisting of six interrelated dimensions that can be used to characterize hospital
focus. The proposed dimensions of focus are (focus as narrowing):
- Knowledge areas: Medical specialty is a related term  a lower number of medical specialties
corresponds to a higher level of focus.
- Procedures
- Medical conditions
- Patient groups
- Planning horizons
- Levels of difficulty
Trend to turning general hospitals into new types of (focused) specialty hospitals  focused
factories This transformation relates to two key operations management theories: Swift, Even Flow
and Performance Frontiers.
This article shows how the concept of focus in healthcare can be operationalised.
hospital in the case study by assessing the degree of focus in the six proposed dimensions.
Case Sweden
Stockholm County Council (SLL)
SLL launched a project to plan and implement this transformation and explicitly defined three
performance objectives for the future healthcare delivery structure:
- high accessibility
- high quality and patient participation
- high efficiency.
In sum, three new configurations of specialty hospitals are emerging within SLL:
- NKS, which is a highly specialised care unit
- elective specialty care units that accommodate non-urgent elective care being relocated from
(Sabbatsberg)
- former general hospitals that are transformed into emergency care units for secondary care
(Danderyd hospital)
While Mukherjee and colleagues list as dimensions of focus,:
- Product
- Process
- Customer market segment
- Geographic market region
- Volume homogeneity
- Suppliers
Product and Process in manufacturing resemble Knowledge areas and Procedures in hospital
operations.
So instead of the manufacturing dimensions Geographic market region, Volume homogeneity and
Suppliers, we propose Planning horizons and Levels of difficulty
#4 Porter M. and Lee T. (2013) The strategy that will fix health care
The value agenda
Problem: Health care worldwide is struggling with rising costs and unsatisfactory quality.
The model: The strategic agenda for moving to a high- value health care delivery system comprises six
interdependent components and mutually reinforcing:
Organize around patients’ medical conditions rather than physicians’ medical specialty (ORGANIZE INTO
INTEGRATED PRACTICE UNITS): In an IPU, personnel work together regularly as a team toward a
common goal: maximizing the patient’s overall outcomes as efficiently as possible.
Measuring costs and outcomes for each patient (MEASURE OUTCOMES AND COSTS FOR EVERY
PATIENT). Measuring outcomes that matter to patients for a particular medical condition fall into three
tiers:
1. Health status achieved or retained:
a. Survival
b. Degree of health recovery
2. Process of recovery
a. Time to recovery
b. Disutility of care or treatment
3. Sustainability of health
a. Sustainability of health or recovery, nature of recurrences
b. Long-term consequences of therapy
The best method for understanding these costs is time-driven activity-based costing, TDABC.
Developing bundled prices for the full care cycle (MOVE TO BUNDLED PAYMENTS FOR CARE CYCLES)
Integrating care across separate facilities(INTEGRATE CARE DELIVERY ACROSS SEPARATE
FACILITIES/SYSTEMS). To achieve true system integration, organizations must grapple with four related
sets of choices:
- Defining the scope of services
- Concentrating volume in fewer location
- Choose the right location for each service line
- Integrating care for patients across locations
Expanding geographic reach (EXPAND EXCELLENT SERVICES ACROSS GEOGRAPHY). Two forms:
- Hub-and-spoke model
- Clinic affiliation
Building and enabling IT platform (BUILDING AND ENABLING INFORMATION TECHNOLOGY PLATFORM).
A value-enhancing IT platform has six essential elements:
- It is centered on patients.
- It uses common data definitions.
- It encompasses all types of patient data.
- The medical record is accessible to all parties involved in care.
- The system includes templates and expert systems for each medical condition.
- The system architecture makes it easy to extract information.
#5 Ghoshal S. and Bartlett C. (1994) Linking organizational context and managerial action: the
dimensions of quality of management
Barnard had similarly identified the importance of an embedded work-ethic-what he called ‘the moral
factor’ as a central requirement for effective organizations. He saw the main role of general managers
as creating this moral factor by inspiring peoples’ faith:
- faith in common understanding
- faith in the probability of success
- faith in the ultimate satisfaction of personal motives
- faith in the integrity of objective authority
- faith in the superiority of common purpose as a personal aim of those who partake in it
As we pursued this issue of ‘the smell of the place’, we obtained many descriptions and illustrations of
what the ‘smell’ was and how it came about.
First, in response to the ‘what’ question, categorize the various attributes of the new context along one
of four dimensions:
- discipline
- stretch
- trust
- support
Then, to summarize ‘how’ these dimensions of context came about, we identified and sorted the
interviewees’ descriptions that linked key events and activities into one or more of the four dimensions
of context. Some interviewees identified the same activity (e.g., the benchmarking exercise) as
influencing more than one dimension of context (e.g., stretch and discipline). In other instances, while
some interviewees identified one particular action (such as the introduction of a new cost accounting
system) as contributing to the development of one dimension (e.g., discipline), others described the
same action as contributing to another dimension (e.g., trust).
Discipline Developing of discipline. The actions listed in Table 1, collectively and interactively, led to
the development of:
- clear standards and expectations (clean standards)
- a system of open and fast-cycle feedback increased the frequency and the quality of internal
feedback. (fast cycle feedback)
- consistency in the application of sanctions (consistent sanctions)
These three attributes, in turn, contributed to the building of discipline within the company.
Proposition 1: Discipline is an attribute of an organization’s context that induces its members to
voluntarily strive for meeting all expectations generated by their explicit or implicit commitments.
Establishment of clear standards of performance and behaviour, a system of open, candid and fast-cycle
feedback, and consistency in the application of sanctions contribute to the establishment of discipline.
Stretch  Following Hamel and Prahalad (1993), we call this ‘stretch’ -an environment in which
individuals voluntarily stretch their own standards and expectations.
Three attributes collectively built this environment of stretch:
- the establishment of shared ambition (shared ambition)
- the emergence of a collective identity (collective identity)
- the development of personal significance in the turnaround task (personal meaning)
Proposition 2: Stretch is an attribute of an organization’s context that induces its members to voluntarily
strive for more, rather than less, ambitious objectives. Establishment of a shared ambition, the
development of a collective identity, and the ability to give personal meaning to the way in which
individuals contribute to the overall purpose of the organization contribute to the establishment of
stretch.
Trust  In describing how such trust was developed, the three most important contributing factors
identified by the interviewees were:
-
the higher level of perceived fairness and equity in the company’s decision processes (equity)
the broader level of involvement in core activities (involvement)
an increase in the overall level of personal competence at all levels of the organization
(competence)
Proposition 3: Trust is an attribute of an organization’s context that induces its members to rely on the
commitments of each other. Fairness and equity in the organization’s decision processes, involvement
of individuals in decisions and activities affecting them, and staffing of positions with people who
possess and are seen to possess the required capabilities contribute to the establishment of trust.
Support  Collectively:
-
this greater availability of resources together with (access to resources)
increased autonomy (autonomy)
-
more help created an environment that supported rather than constrained lower-level
initiatives and entrepreneurship (guidance and help)
Proposition 4: Support is an attribute of an organization’s context that induces its members to lend
assistance and countenance to others. Mechanisms that allow actors to access the resources available
to other actors, freedom of initiative at lower levels and personal orientation of senior functionaries that
gives priority to providing guidance and help over exercising authority contribute to the establishment
of support.
We identified three behavioural characteristics that seemed to be central to management activity in
the ‘new’ Semco that had not been typical of behaviour early in our observations. The three behavioural
elements were:
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Distributed and Self-Generated Initiative: Proposition 5: Organizations that are able to establish
stretch, trust and discipline as attributes of their context can motivate and enable distributed
and self-generated initiatives that are aligned with the organization’s objectives and interests.
Mutual Cooperation: Proposition 6: Organizations that are able to establish trust, discipline and
support CIS attributes of their context can motivate and enable voluntary cooperation among
actors that are aligned with the organizations’ objectives and interests.
Collective Learning: Proposition 7: Organizational learning results from a combination of
distributed initiative and mutual cooperation which, in turn, require stretch, trust, discipline and
support as the antecedent conditions of organizational context.
#5 Bessant, J, Caffyn, S, & Gallagher, M. (2001). An evolutionary model of continuous improvement
behaviour
Winter defines routines as “...a relatively complex pattern of behaviour...triggered by a relatively small
number of initiating signals or choices and functioning as a recognisable unit in a relatively automatic
fashion...”. Tranfield et al suggest that three sets of routines are important:
-
those concerned with maintaining performance of current processes
those concerned with improving existing processes
those concerned with transforming or changing to new processes
Routines for continuous improvement: looking at CI as a particular bundle of routines which can help
an organisation improve what it currently does. We have major criticisms can be levelled:
-
-
it is often prescriptive and fails to cover implementation
when it does explore implementation — how to introduce CI — it tends to assume a
correlation between exposure to tools (such as the seven quality management tools
and CI — and neglects the other elements of behaviour building
it assumes a binary split between having or not having CI, rather than seeing it as an
emerging and learned pattern of behaviour which evolves over time
CIRCA programme — Continuous Improvement Research for Competitive Advantage - The research
design had two elements:


action research on particular CI problem issues within a core group of companies
experience sharing and development of the CI field through a wider network of companies
It should be stressed that the primary objective in each case was to explore the experience of
implementing CI and data was collected around the following basic themes:
-
Background data characterising the organisation and its products, markets, etc.
History of CI, especially reconstructing the process of evolution
Performance measures, both in terms of the level of CI activity and in terms of impact
on the business
Practice measures, exploring the extent to which CI behaviours were in place and had
become ‘routinised’
Key blocks and barriers to maintaining or developing CI
Key enablers facilitating progress
They detect though cases that:
-
CI involves a suite of behaviours which evolve over time
These behaviours cluster around several core themes
These clusters — routines — evolve and are reinforced over time.
There appears to be a correlation between performance and the extent of
development of these routines.
Developing routines involves two kinds of learning — improving and reinforcing
behaviours within a particular routine cluster and adding new routines to the repertoire
-
-
Every organisation trying to implement CI is aiming at establishing the same patterns
of behaviour but there is widespread variation in the context within which they are
doing so.
In similar fashion the blocks and barriers to effective development of these behaviours
and the ways of enabling their evolution have a generic and a contingent nature.
Although the development of CI involves a behavioural learning process which takes
place over time, there is no correlation between length of time and degree of success.
We argued above that building and embedding routines is an extended learning process, and involves
a process of gradual accumulation.
Stages in the evolution of CI:
-
Level 1 – pre -CI
Level 2 – structured CI
Level 3 – goal-oriented CI
Level 4 – proactive CI
Level 5 – full CI
Key routines associated with CI and their constituent behaviours:
-
Understanding CI
Getting the CI habit
Focusing CI
Leading the way
Aligning CI
Shared problem solving
Continuous improvement of continuous improvement
The learning organization
Underpinning this is our methodology for development of CI which owes much to other
organisational development (OD) approaches (French and Bell, 1995). Basically, it involves a cyclic
process made up of the following stages:




Diagnose — through the audit tools developed around the behavioural model
Visualise where the next feasible steps in development are likely to be (Reinforcing
certain behaviours and developing new ones to add)
Implement changes using a selection of appropriate enablers
Review and repeat.
An explanation of the different levels. Levels:
 0=No CI activity
 1=Trying out the ideas
 2=Structured and systematic CI
 3=Strategic CI
 4=Autonomous innovation
 5=The learning organisation
#6 Sprague, Linda G. (2007). Evolution of the field of operations management.
#7 Platts, KW, & Song, N. (2010). Overseas sourcing decisions–the total cost of sourcing from
China
Purpose –cost savings a major reason for sourcing from China, the actual cost savings may not be as
great as expected. Companies generally do not comprehensively measure the costs of global
sourcing, and significantly underestimate the true costs incurred.
In this framework, the cost items are classified into:
- set up costs
- ongoing costs
#8 Fisher, M., Hammond, J., Obermeyer, W., & Raman, A. (1997). Configuring a supply chain
to reduce the cost of demand uncertainty.
Reducing lead time enables a company to react more quickly to demand information and, hence, to
better match supply with uncertain demand.
Approach: “Accurate Response”. Approach calls for firms to divide their production capacity into two
distinct parts: speculative and reactive. Is a risk-based production sequencing strategy
Operational Levers that Facilitate the Matching of Supply and Demand:
Increasing Reactive Production Capacity: To the extent that it reduces speculative production,
additional reactive capacity can clearly help firms minimize the stockout and markdown costs that
dampen profits. Several distinct phases that are critical to determining reactive capacity requirements,
among them are the following:
-
time to gather market intelligence
time to acquire materials
the reactive production period
factory through- put and transportation time
Three approaches to increasing reactive capacity:
-
Increase total capacity
Reduce raw material acquisition lead time, factory throughput time, and/or
transportation time
Secure market information earlier
Reducing Minimum Production Lot-Size Constraints
 improving market Intelligence
Managers in industries that produce uncertain demand, short life cycle products:
-
must begin develop models of their supply chains and identifying constraints that make
it difficult to schedule production in reaction to demand information.
understand the cost and effort required to relax these constraints.
need to quantify the impact of relaxing these constraints on their ability to match supply
with demand, using the Accurate Response a
found out that suppliers located close to the market might not be the most responsive to consumer
demand and to discover the diminishing marginal impact of changes to most operational variables on
stockout and markdown costs.
#9 McIvor, R. (2009). How the transaction cost and resource-based theories of the firm inform
outsourcing evaluation.
TCE  In the TCE approach, the properties of the transaction determine what constitute the most
efficient governance structure—market, hierarchy or alliance. The primary factors producing
transactional difficulties include:
-
bounded rationality
opportunism
small numbers bargaining
information impactedness.
These transaction difficulties and associated costs increase when transactions are characterized by:
asset specificity can be:
o non-specific (highly standardized)
o idiosyncratic (highly customized to the organization)
o mixed (incorporating standardized and customized elements in the
transaction).
- uncertainty
- infrequency.
 When asset specificity and uncertainty is low, and transactions are relatively frequent,
transactions will be governed by markets.
 Hierarchical governance occurs when uncertainty and high asset specificity lead to
transactional difficulties.
 Medium levels of asset specificity lead to bilateral relations in the form of co-operative
alliances between the organizations—inter- mediate governance.
-
RBV  Resource-based theorists view the firm as a unique bundle of assets and resources that, if
employed in distinctive ways, can create competitive advantage. According to Barney (1991), a
resource with the potential to create competitive advantage must meet a number of criteria, including:
-
Value
Rarity
Imitability
-
Organization
TCE and the RBV are complementary:
-
TCE focuses primarily on the role of efficient governance – through transaction analysis
– in explaining firms as institutions for organizing economic activity
RBV focuses on the search for competitive advantage, through resource analysis.
TCE is focusing primarily on governance skills
RBV focuses primarily on production skill.
TCE provides a sound theoretical basis for analysing market versus hierarchical
mechanisms in the outsourcing decision
RBV, inter-organizational collaboration can be employed to access and develop
complementary resources that contribute to competitive advantage.
Measures:
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-
Contribution to competitive advantage: activities are either
o critical to competitive advantage
o not critical to competitive advantage.
Relative capability position: When determining the relative capability position, it is
important to understand both the type and source of advantage in the activity
o distinctive capability position – produce internally
o non-distinctive capability position – outsource
The measure of opportunism associated with outsourcing is introduced to integrate this logic into the
prescriptive outsourcing framework.
The three measures of contribution to competitive advantage, relative capability position and the
opportunism associated with outsourcing are integrated into a prescriptive framework for outsourcing
evaluation. A central premise of the prescriptive framework is that outsourcing evaluation should be
linked with corporate strategy. Therefore, the measures of contribution to competitive advantage and
relative capability position are considered as the starting point for evaluation, followed by consideration
of the opportunism associated with outsourcing measure. The framework includes the paths of the
outsourcing decisions. Although the three insourcing options in the framework – Perform Internally and
Develop, Invest to Perform Internally and the Spin-off option (which may also be chosen as a result of
opportunism variables) – are discrete decision-making choices, the interaction between the RBV and
TCE variables illustrates the continuous nature of the variables in the framework, where out- sourcing
is considered as a potential option.
Critical to competitive advantage and a distinctive capability position
In this instance, there are a number of potential sourcing strategies:
Perform Internally and Develop. This involves performing the activity internally and further
developing future capability.
- Outsource. Ideally, an organization would wish to have superior performance in as many critical
activities as possible.
Critical to competitive advantage and a non-distinctive capability position
- Outsource: This is a potential strategy where it is both difficult and costly to replicate a superior
performance position held by a competitor or supplier.
- Invest to perform internally. This option involves investing the necessary resources to bridge
the performance disparity between the sourcing organization and competitors. The selection
of this option will be influenced by the significance of the disparity in performance and barriers
to imitation.
Not critical to competitive advantage and a distinctive capability position
-
-
Sourcing
Not critical to competitive advantage and a non- distinctive capability position
Opportunism associated with outsourcing
Where outsourcing is a potential option, an assessment of the opportunism associated with
outsourcing should be undertaken. In this scenario the level of opportunism associated with
outsourcing is manageable through selecting the appropriate relationship strategy below:
- Non-specific contracting
- Recurrent contracting
- Relational contracting
#10 Dabhilkar, Mandar. (2011). Trade-offs in make-buy decisions
Theoretical frame
Trade-offs in operations strategy: Wickham Skinner introduced the idea of trade-offs in operations
strategy introduced manufacturing strategy, well known as the focused factory. Against trade off : and
cone model was that world-class manufacturers could improve several performance objectives
simultaneously without having to make trade- offs such as that between cost and flexibility.
Make-buy decisions as a key strategic decision area in operations strategy: The theoretical underpinnings
for make-buy decisions can be traced back to both transaction cost economies (TCE) and the resourcebased view (RBV).
TCE and RBV help to identify a number of critical factors that inform the make-buy decision. Starting
with transaction costs, these are defined as the costs of planning, adapting, coordinating and
safeguarding exchange. The level of transaction cost is determined by two behavioural factors and two
transaction factors opportunism and bounded rationality.
Five strategic outsourcing motives:
1. Cost motive
2. Quality motive
3. Speed motive
4. Flexibility motive
5. Innovation motive
Trade-offs in make-buy decisions: The present study attempts to fill this gap in the operations strategy
literature by utilising TCE and RBV to extend the debate over trade-offs to make-buy decisions. So why
do firms have to sacrifice performance improvements in some capabilities in order to excel in others
when outsourcing manufacturing?
- The first issue, asset specificity, or more particularly transaction- specific investments, is
necessary to leverage the supplier capability sought.
-
-
The second reason is linked to the other significant TCE-related factor, uncertainty, defined as
not being able to predict future states of technology, demand or supply. Implied demand
uncertainty is defined as demand uncertainty imposed on the supply chain because of the
customer needs it seeks to satisfy.
The third reason is linked to the RBV factors complementary capabilities and strategic
relatedness. The buying firm must exploit complementary capabilities at the supplier stage
when outsourcing.
Following these three reasons it is hypothesised that trade-offs remain in make-buy decisions.
Hypothesis A. Strategic outsourcing initiatives lead to distinct capability improvements.
Hypothesis B. The resulting outsourcing capabilities do not emerge cumulatively.
The study utilises TCE and RBV to explain why trade-offs remain in make-buy decisions, reasons:
- First, transaction-specific investments are needed to leverage the capabilities of the supplier
- secondly, competitive priorities such as speed, flexibility and innovation cause implied demand
uncertainty to increase
- Third, outsourcing entails a shift in unit of analysis
 The conclusion that follows is that make-buy decision frameworks that fail to consider trade-offs
inherent in competitive priorities are incomplete.
#11 Dabhilkar, M., Bengtsson, L. & Lakemond, N. (2016) Sustainable supply
management as a purchasing capability: a power and dependence perspective
The purpose of this paper is to explain why and how Sustainable Supply Management (SSM) initiatives
by manufacturing firms differ across the Kraljic matrix according to purchasing capability.
The sustainable sourcing literature offers the advice to view SSM as a potential purchasing capability.
However, such purchasing capability development has to take into consideration individual differences
across purchasing categories. The Kraljic matrix is often used to serve this purpose. Although
conceptually appealing and often used in industrial practice. The purpose of this study is to illustrate
and provide a theoretical explanation for why SSM is a purchasing capability that must vary across
purchasing categories defined by different situations of power and dependence.
We suggest that SSM as a purchasing capability can be defined as a buying firm’s ability to integrate,
build and reconfigure internal and external resources using organizational processes to increase
economic returns as well as social and environmental responsibility along the supply chain. Our
suggested definition is based on three premises:
1. The first premise concerns implementation of social and environmental improvement
programs that aim to increase supplier compliance.
2. The second premise concerns the necessity for trade-offs among competitive priorities.
3. The third premise concerns the alignment of the purchasing function’s competitive priorities
with overall firm competitive strategies for improved business performance.
Enforcing SSM through power and dependence. Power actually refers to Relative Power, Dependence
to Total Interdependence.
Power and dependence in Kraljic’s Matrix: purchased items are usually classified according to the
following typology of four main purchasing categories (Kraljic, 1983):
- Leverage items
- Strategic items
- Noncritical items
- Bottleneck items
Financial Risk=Profit Impact
Hypothesis development:
H1. Implementation of sustainable sourcing programs has a positive effect on social and
environmental supplier compliance in all categories but bottleneck components.
H2a. There are trade-offs between social and environmental sustainability and costs manifested in
competitive priorities for purchasing noncritical components.
H2b. There are trade-offs between social and environmental sustainability and costs manifested in
supplier performance for noncritical components.
H3. Strategic alignment of social and environmental sustainability objectives between corporate
and supply function levels only leads to improved net profits for the firm buying strategic
components.
Analysis
Survey questions:
- Sustainable sourcing programs.
- Category-level competitive priorities.
- Category performance.
- Firm-level competitive priorities.
- Strategic alignment.
- Net profits.
in particular, we show that a differentiation between purchasing categories that reflects power and
interdependence in three aspects is highly relevant when SSM is developed into a purchasing capability:
- The first aspect relates to how heterogeneity in implementation of management practices
correlates with improved performance
- The second aspect relates to the necessity of facing trade-offs among competitive priorities
- The third aspect relates to the alignment of overall firm competitive strategies with functional
competitive priorities