Safeguarding the Promise of Production Outsourcing

Jason Amaral (), Corey A. Billington () and Andy A. Tsay ()
Additional contact information
Jason Amaral: Emeraldwise, LLC, PO Box 620720, Woodside, California 94062
Corey A. Billington: IMD International, Ch. de Bellerive 23, PO Box 915, CH-1001 Lausanne, Switzerland
Andy A. Tsay: Leavey School of Business, Santa Clara University, OMIS Department, 500 El Camino Real, Santa Clara, California 95053

Interfaces, 2006, vol. 36, issue 3, 220-233

Abstract: Today’s product companies (original equipment manufacturers, or OEMs) increasingly outsource production, especially when the activities are asset intensive or require process technologies characterized by rapid innovation. When such an OEM also outsources the procurement of the required materials, especially to the party providing the production services, the OEM risks unpleasant surprises, such as unauthorized part or supplier substitutions, overbilling, mistreatment of the supply base, and the loss of the OEM’s procurement leverage. Based on supply chain audits and interviews in numerous industries, we propose and analyze strategies for preventing these outcomes when outsourcing production. We recommend that OEMs carefully consider the underlying means, motives, and opportunities of the service providers when deciding which activities to outsource and how to establish effective business controls. Firms such as Hewlett-Packard, Motorola, and Dell have implemented these ideas.

Keywords: manufacturing; strategy; inventory; production; outsourcing (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://dx.doi.org/10.1287/inte.1060.0210 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:36:y:2006:i:3:p:220-233

Access Statistics for this article

More articles in Interfaces from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().