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Impact of Strategic Outsourcing on Operational Control
Abstract
Many studies using the theories of Transaction Cost Economics and the Resource-Based View together with the core competencies approach have confirmed that strategic outsourcing might be an effective means for efficient exploitation of available resources. Additionally, for companies, outsourcing provides access to resources beyond the reach of the intrinsic capabilities of an organisation. In theory, such strategies should fuel competitiveness and operational efficiency. Five cases – all characterised by Make-to-Order or Engineering-to-Order for processing orders – have been reviewed, to explore the operational issues that result from strategic decision-making on outsourcing. From this evaluation, it appears that these companies perform weakly on the control of the outsourced activities. Furthermore, it seems that the (manufacturing) strategy is disconnected from outsourcing practices and that outsourcing is not perceived as contributing to competitive advantage. Finally, traditional criteria and behaviour for decision-making, i.e. a cost-driven perspective, prevail, which does not address the operational challenges for the cases. This chapter indicates that, based on these three theories, strategic decision-making on outsourcing insufficiently accounts for operational issues that emerge later during manufacturing.
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