Sourcing Strategy Principles, Policy and Designs
Sourcing Strategy is about sourcing as a long term strategic activity. Myopic purchasing management stops short with describing functional procedures and procedural innovations such as online order processing. The goal of this book is not just to document
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Sourcing Strategy Principles, Policy and Designs
Sudhi Seshadri, Ph.D.
a- springer
Library of Congress Cataloging-in-PublicationData A C.I.P. Catalogue record for this book is available from the Library of Congress. ISBN 0-387-25182-0
e-ISBN 0-387-25183-9
Printed on acid-free paper.
O 2005 Springer Science+Business Media, Inc. All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+BusinessMedia, Inc., 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now know or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks and similar terms, even if the are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights.
Printed in the United States of America. 9 8 7 6 5 4 3 2 1
SPIN 1 1363897
To Shreelata, for being there at the beginning of this project, and all her support in taking it to its completion.
Contents
List of Exhibits Preface Acknowledgements PART 1: Principles and Policy I: Sourcing Strategy 2: Outsourcing 3: Architecture and Processes 4: Sourcing Goals and Objectives 5: The Government Sourcing Environment 6: Costs and Performance Risks 7: Contracts and Incentives 8: Source Selection 9: Supplier Strategies 10: Sourcing Reports and Data PART 2: Design 11: Foundations of Sourcing Analysis 12: Sourcing Design Elements 13: Risks and Rewards of Multiple Sourcing 14: Capacity Constraints and Pricing in Sourcing Markets 15: Syndicates, Risk and Demand Uncertainty 16: Risks and Resource Sharing 17: Selection and Incentives for Innovation: LIC 18: Selection and Incentives for Innovation: Yardstick Contracts Notes References Subject Index
ix xi xix 1 5 13 31 51 65 77 93 111 139 155
169 177 187 193 211 229 243 255 269
287 297 315
List of Exhibits
Exhibit 1.1: Systems contrasted with Strategy. Exhibit 1.2: Nissan Motor Company Analysis of Global Financial Performance. Exhibit 1.3: Re-engineered Levels of Function, Architecture and Process in Sourcing Strategy. Exhibit 2.1: Percent outsourced merchandise and manufactured goods (COGS) of total Revenue. Exhibit 3.1: Strategic sourcing governance architecture. Exhibit 3.2: Dynamics of Markets, Contracts and Relationships. Exhibit 3.3: ProxsysB Academic Version: Contents. Exhibit 3.4: Environment Indexes Exhibit 3.5: Fixed Price Contracts Module. Exhibit 4.1: Tradeoffs in component economic quantities in acquisition. Exhibit 5.1: Sourcing awards and capacity utilization. Exhibit 5.2: Pre-and Post-Award price. Exhibit 6.1: Types of accounting costs. Exhibit 6.2: Cost Drivers. Exhibit 7.1: Disclaimer Sources of Risk. Exhibit 7.2: A comparison of common contract designs. Exhibit 7.3: A comparison of competitive markets and relatio
