The MGS Blog

Tuesday, January 8, 2013

Why Global Sourcing?

I argue that the sourcing phenomenon is an intrinsic feature of human societies that is amplified by scientific advance, manufacturing innovation, technology more generally, and accelerated in the modern era of computer based infrastructures, high-tech products and services.

What organizational activities and products are amenable to sourcing beyond the traditional boundaries of organizations? And if activities and products can be sourced beyond the boundaries of the organisation what models or modes can be used?

Outsourcing isn't a business fad, it is a fundamental part of modern industrial production. Capital based manufacturing and production of goods and services is predicated on the basic idea of a division of labour. Specialised stages of manufacture, in other words a supply or value chain exist when skilled work is applied to some material, goods or activity to add value until an end point when the good or service is consumed. All industrial and professional specialisation represents therefore a kind of outsoucing. No one organisation, firm or individual has within its power the totality of knowledge, skills, resources, effort and time to produce everything we need or desire. Sourcing has therefore been and remains an intrinsic aspect work (labour and production) in society, from the most rural to the most metropolitan.

What therefore is sourcing? Consider the following definition:
“Sourcing is the act through which work is contracted or delegated to an external or internal entity that could be physically located anywhere. Sourcing encompasses various in-sourcing and outsourcing arrangements such as offshore outsourcing, captive offshoring, nearshoring and onshorning.” (Oshri et. al, 2009)
In light of the prominence and pervasiveness of inter-firm sourcing what are the advantages and disadvantages of different sourcing modes and how are they justified and applied in historical and contemporary settings? The current situation is never completely estranged from its historical contexts. Historical trends in global sourcing lead in to current topics and help to explain how local conditions have evolved.

For one reason or another various sourcing modes have proved more successful in particular industries and in particular locations. The relationship between technology trends and the emergence of expanding arrays of options around sourcing of product components and services offer one set of explanations, explanations such as the irresistible imperative of technology driven change or particular organisational structures. Other ways of understanding the success of sourcing through uncertain contextual conditions and processes of emerging knowledge adapting to and taking advantage of unique situations and knowledge.

An interpretation of global sourcing discourse that managers can use effectively should be more than the straight application of technological recipes, formulas, methods, rules, and organisational templates. Reflective actors will always seek to identify the interests involved, to be aware of who benefits (or looses) in order to juxtapose and evaluate among the various strategic decisions between in-house and outsourced delivery. Sourcing initiatives may proceed smoothly but if not what remedial measures can be employed addressing the organizational and technological issues relating to global sourcing?

The reflective manager has a broad palette of concepts and frameworks for interpreting and deciding sourcing cases. However this area of organisational operations is constantly evolving and changing and so the manager must be adept at identifying emerging trends in sourcing relationships that are likely to be important in the future with implications for current situations. In this way involved actors can merge theory with context, against a historical backdrop, extrapolate and justify the implications of changing sourcing arrangements in complex inter-organizational relationships.

Oshri, I., Kotlarsky, J. & Willcocks, L. P. (2009) The Handbook of Global Outsourcing and Offshoring, Palgrave Macmillan.