Sourcing strategies

Published on December 6, 2012 Reviewed on December 31, 2019   32 min

Other Talks in the Series: Operations Strategy

0:00
One of the most important questions in strategy is sourcing. How should companies source, where they should source, should they do it internally or externally? These are all key questions of strategy for any company that wishes to compete in operations. This session will address all of these questions and attempt to develop a framework for sourcing strategy.
0:30
There are several important questions in sourcing strategy. The most important one is whether a company should vertically integrate and source internally or use outside suppliers and purchase commodities, services, or components. The question of vertical integration has been one of the most critical areas facing companies today, and there are many people who feel that the trend toward outsourcing has gone too far. But there are many other important questions in sourcing as well. What role should each supplier play? How many suppliers should one have? Should one have many suppliers? Should one have a small number? If one has a small number, should they have one or two? What types of relationships should one have with suppliers? What types of contracts and revenue arrangements should be made with suppliers? Should there be some buyback or alternative revenue sharing arrangement? Finally, in the era of globalization, should one offshore and seek suppliers or internal services in China or in other areas? More generally, how should one manage a global sourcing network?