Summary papers Purchasing Management
Paper 1 When manufacturing moves back: Concepts and questions (Fratocchi et al)
On the one hand, recent cases of back-shoring can be dismissed as the direct and short-term consequence of the global crisis and of
government incentves to bring jobs back to the home country of the company. On the other hand, the global scale of the
phenomenon and its presence also in those countries where no government incentves are ofered (Kinkel, 2012), together with the
co-existence of back-reshoring and of-shoring, all suggest that complex dynamics involving locatonal, industry, and frm-level
factors are at issue and deserve closer atenton.
Manufacturing ‘back-shoring’ to denote the decision to relocate in the frm's home country producton or supply previously of-
shored, while, the term manufacturing “reshoring” is meant to indicate a generic change of locaton with respect to a previous of-
shore country.
Characterizaton of back-reshoring (afer analysis of defnitons found in literature):
It is the reverse decision with respect to a previous of-shoring process;
It does not necessarily involve the repatriaton or the closure of the whole of a company of-shore actvites or of a whole
plant;
It is essentally a decision to relocate, irrespectve of the ownership mode (in-sourced and out-sourced) in the ofshore
country.
There are also other related concepts such as “foreign divestment” and “de-internatonalizaton”, which, however, do not capture
some of the key features of back-reshoring, such as out-sourced producton, and the contemporary relocaton of manufacturing
actvites in the home country or in its neighboring region. Next, foreign divestment is ofen referred to a subsidiary as a whole, more
than to specifc value chain actvites.
Writers of the paper propose a ‘new’ conceptualizaton of the term back-reshoring as “a voluntary corporate strategy regarding the
home country's partal or total relocaton of (in-sourced or out-sourced) producton to serve the local, regional or global demands”.
To conclude, reshoring is not a once and for all decision but rather a possible phase of the frm's long-term internatonalizaton
strategy of producton actvites.
What do we know about back-reshoring?
Since the unit of analysis on back-reshoring is ofen below the level of plant (at the product or component level), public secondary
data will be difcult if not impossible to obtain. However there is some data mentoned in the paper:
- In terms of duraton, the inital of-shoring decision is generally reversed afer 3–5 years. This lead Kinkel and Maloca to
conceptualize back-reshoring as “short-term correctons of prior locaton misjudgments, rather than a long-term reacton
to slowly emerging local development trends”.
- Firms that back-reshore are generally large ones and operate in high-technology industries.
- Back-reshoring is motvated predominately by concerns about loss of fexibility, ability to and costs of deliver on tme and
quality issues.
- Government trade policies are identfed as a key factor in increasing the appeal of the US as a manufacturing locaton
Implicatons
More research necessary on:
- Motvatons for back-reshoring (Why: cost-efciency vs. market enlargement)
- The value chain actvites involved (What: labor vs. capital intensive),
- The home/host countries specifcites determining the back-reshoring decision (Where: low-cost vs. western industrialized
countries),
- The modes of entry into (and subsequently exit from) the host country (How: Greenfeld investments vs. merger and
acquisitons or outsourcing).
,Paper 2 Achieving excellence in global sourcing (Trent and Monczka)
Global sourcing: an advanced approach to sourcing and supply management that involves integratng and coordinatng common
materials, processes, designs, technologies and suppliers across worldwide buying, design and operatng locatons.
Shifing from a narrow cost-reducton emphasis to an emphasis on globally integrated and coordinated sourcing strategies should
improve an organizaton’s compettveness.
Internatonal purchasing vs. global sourcing
Internatonal purchasing involves a commercial transacton between a buyer and a supplier located in diferent countries.
Global sourcing, on the other hand, involves integratng and coordinatng common items, materials, processes, technologies,
designs and suppliers across worldwide buying, design and operatng locatons.
Organizatons that practce strictly domestc purchasing (Level I) ofen progress toward internatonal purchasing (Level II) because
they are confronted with a requirement for which no suitable domestc supplier exists or because compettors are gaining an
advantage due to their sourcing practces. Companies ofen start making internatonal purchasing part of their sourcing strategy
(Level III) once they recognize that purchasing internatonally can lead to a range of performance improvements.
The fourth level, the frst of two global sourcing levels in the model, features integrated and coordinated sourcing strategies across
worldwide buying or site locatons.
At Level V, the highest global sourcing level, integraton and coordinaton occur not only among worldwide buying locatons but also
across functonal groups, including operatons, marketng and engineering.
(A global sourcing agreement or contract is one that applies throughout an entre company, usually with a supplier that has global
capabilites).
Characteristcs of outstanding global sourcing:
1. Executve commitment to global sourcing
2. Rigorous and well-defned processes
3. Availability of needed resources
o tme is most important but also least available
o knowledge and skills difer a lot for site-based sourcing compared to global sourcing
o informaton on performance, capabilites, requirements
4. Integraton through informaton technology
5. Supportve organizatonal design
6. Structured approaches to communicaton
7. Methodologies for measuring
, Paper 3 Service supply management: the next frontier for improved organizational
performance (Ellram et al.)
Historically, the service sector has received less atenton than the manufacturing sector because the US economy was built on
manufacturing and farming sectors. Within supply chain management, this lack of atenton extends to the purchase of services.
Services may be more difcult for people to visualize and to measure. In general, “service-level agreements” and “statements of
work” have not been as precise and fnely tuned as specifcatons for manufactured goods. There is a general belief that service
quality and performance are not as easy to measure and specify objectvely as product quality and performance.
There is a strong belief that purchasing services is more difcult than purchasing goods. There is a standard process for purchasing
goods, but there is no standard process for purchasing services.
Paper 1 When manufacturing moves back: Concepts and questions (Fratocchi et al)
On the one hand, recent cases of back-shoring can be dismissed as the direct and short-term consequence of the global crisis and of
government incentves to bring jobs back to the home country of the company. On the other hand, the global scale of the
phenomenon and its presence also in those countries where no government incentves are ofered (Kinkel, 2012), together with the
co-existence of back-reshoring and of-shoring, all suggest that complex dynamics involving locatonal, industry, and frm-level
factors are at issue and deserve closer atenton.
Manufacturing ‘back-shoring’ to denote the decision to relocate in the frm's home country producton or supply previously of-
shored, while, the term manufacturing “reshoring” is meant to indicate a generic change of locaton with respect to a previous of-
shore country.
Characterizaton of back-reshoring (afer analysis of defnitons found in literature):
It is the reverse decision with respect to a previous of-shoring process;
It does not necessarily involve the repatriaton or the closure of the whole of a company of-shore actvites or of a whole
plant;
It is essentally a decision to relocate, irrespectve of the ownership mode (in-sourced and out-sourced) in the ofshore
country.
There are also other related concepts such as “foreign divestment” and “de-internatonalizaton”, which, however, do not capture
some of the key features of back-reshoring, such as out-sourced producton, and the contemporary relocaton of manufacturing
actvites in the home country or in its neighboring region. Next, foreign divestment is ofen referred to a subsidiary as a whole, more
than to specifc value chain actvites.
Writers of the paper propose a ‘new’ conceptualizaton of the term back-reshoring as “a voluntary corporate strategy regarding the
home country's partal or total relocaton of (in-sourced or out-sourced) producton to serve the local, regional or global demands”.
To conclude, reshoring is not a once and for all decision but rather a possible phase of the frm's long-term internatonalizaton
strategy of producton actvites.
What do we know about back-reshoring?
Since the unit of analysis on back-reshoring is ofen below the level of plant (at the product or component level), public secondary
data will be difcult if not impossible to obtain. However there is some data mentoned in the paper:
- In terms of duraton, the inital of-shoring decision is generally reversed afer 3–5 years. This lead Kinkel and Maloca to
conceptualize back-reshoring as “short-term correctons of prior locaton misjudgments, rather than a long-term reacton
to slowly emerging local development trends”.
- Firms that back-reshore are generally large ones and operate in high-technology industries.
- Back-reshoring is motvated predominately by concerns about loss of fexibility, ability to and costs of deliver on tme and
quality issues.
- Government trade policies are identfed as a key factor in increasing the appeal of the US as a manufacturing locaton
Implicatons
More research necessary on:
- Motvatons for back-reshoring (Why: cost-efciency vs. market enlargement)
- The value chain actvites involved (What: labor vs. capital intensive),
- The home/host countries specifcites determining the back-reshoring decision (Where: low-cost vs. western industrialized
countries),
- The modes of entry into (and subsequently exit from) the host country (How: Greenfeld investments vs. merger and
acquisitons or outsourcing).
,Paper 2 Achieving excellence in global sourcing (Trent and Monczka)
Global sourcing: an advanced approach to sourcing and supply management that involves integratng and coordinatng common
materials, processes, designs, technologies and suppliers across worldwide buying, design and operatng locatons.
Shifing from a narrow cost-reducton emphasis to an emphasis on globally integrated and coordinated sourcing strategies should
improve an organizaton’s compettveness.
Internatonal purchasing vs. global sourcing
Internatonal purchasing involves a commercial transacton between a buyer and a supplier located in diferent countries.
Global sourcing, on the other hand, involves integratng and coordinatng common items, materials, processes, technologies,
designs and suppliers across worldwide buying, design and operatng locatons.
Organizatons that practce strictly domestc purchasing (Level I) ofen progress toward internatonal purchasing (Level II) because
they are confronted with a requirement for which no suitable domestc supplier exists or because compettors are gaining an
advantage due to their sourcing practces. Companies ofen start making internatonal purchasing part of their sourcing strategy
(Level III) once they recognize that purchasing internatonally can lead to a range of performance improvements.
The fourth level, the frst of two global sourcing levels in the model, features integrated and coordinated sourcing strategies across
worldwide buying or site locatons.
At Level V, the highest global sourcing level, integraton and coordinaton occur not only among worldwide buying locatons but also
across functonal groups, including operatons, marketng and engineering.
(A global sourcing agreement or contract is one that applies throughout an entre company, usually with a supplier that has global
capabilites).
Characteristcs of outstanding global sourcing:
1. Executve commitment to global sourcing
2. Rigorous and well-defned processes
3. Availability of needed resources
o tme is most important but also least available
o knowledge and skills difer a lot for site-based sourcing compared to global sourcing
o informaton on performance, capabilites, requirements
4. Integraton through informaton technology
5. Supportve organizatonal design
6. Structured approaches to communicaton
7. Methodologies for measuring
, Paper 3 Service supply management: the next frontier for improved organizational
performance (Ellram et al.)
Historically, the service sector has received less atenton than the manufacturing sector because the US economy was built on
manufacturing and farming sectors. Within supply chain management, this lack of atenton extends to the purchase of services.
Services may be more difcult for people to visualize and to measure. In general, “service-level agreements” and “statements of
work” have not been as precise and fnely tuned as specifcatons for manufactured goods. There is a general belief that service
quality and performance are not as easy to measure and specify objectvely as product quality and performance.
There is a strong belief that purchasing services is more difcult than purchasing goods. There is a standard process for purchasing
goods, but there is no standard process for purchasing services.
