Staffan Brege

Outsourcing—success or failure?: Findings from five case studies

Abstract Large manufacturers with assembly-line production technology are currently going through an extensive change process. One important strategic change is the increased degree of purchasing and outsourcing, following from strategic make or buy decisions. In this article we focus on the outsourcing decision, the outsourcing process, the outsourced unit and the results in terms of factors characterizing successful and unsuccessful outsourcing cases (i.e. success and failure for the outsourced units, not necessarily for the outsourcing companies). Our empirical data comprise five in-depth case studies focusing upon buyer and supplier dyads. The results indicate that: • • the driving forces behind outsourcing can be a combination of financial problems, a need for clear focus on core competence, and cost efficiency considerations; • • the outcome of outsourcing is more successful if the outsourcing is based on strategic decisions including core competence and cost efficiency considerations rather than being emergency action prompted by financial problems; • • the outcome of outsourcing has the greatest potential for success if the outsourcing process is abrupt and gradual at the same time, characterized by high pace in terms of ownership change and high commitment both in the process and after; • • the outcome of outsourcing has the greatest potential for success if the outsourced unit is able to develop a strong resource base and a balanced customer base (built up from a platform of a close and long-term relationship with the ‘parent’).

Structural Changes in the Supply Chain

Logistics is changing from a focus on cost reduction and service improvement at the firm level to an emphasis on supply chain restructuring and organizing to increase overall efficiency and effectiveness. In this article, we focus on structural changes in the supply chain, the results of which are the reengineering of materials management, physical distribution and sales activities. Using case studies, we identified five different structural changes which affected the organization of logistics, marketing and sales activities. By using modern information technology, it was possible to centralize physical and administrative activities and, at the same time, maintain a decentralized sales organization. Total distribution costs were reduced by 30‐50 per cent and customer service was significantly improved.

Business models in industrialized building of multi-storey houses

The business model construct has been widely used during the last decade, partly because of its potential to provide a holistic view of how companies do business. A test of how prefabrication could form the basis of a construction firm’s business model can lead to an understanding of the potential for the competitiveness and profitability of industrialized building. The aim is to adapt a general business model construct and use it to empirically identify the most frequently used and the most viable business model. The theoretical perspective is employed to examine how a company does business and which activities and resources are mobilized through the distinction between strategic and operational effectiveness. The multiple case studies include five major Swedish companies that produce prefabricated timber building systems and the analysis is grounded in pattern-finding. The business model construct includes: market position, offering, and operational platform. The result indicates five business model elements: prefabrication mode, role in the building process, end-user segments, system augmentation and complementary resources. Applying this construct to the five case companies revealed that one out of seven models was found to be viable in terms of both ‘market share’ and decision-makers’ opinions. One important conclusion is to take the prefabrication mode as the starting point for business model design and then adapt the other elements to a good fit.

Customer involvement in service production, delivery and quality: the challenges and opportunities

Purpose – The aim of this paper is to explore the role of customer involvement in service production and its possible effects on the quality of service delivery as well as customer satisfaction.Des ...

Linkage between organisational innovation capability, product platform development and performance : The case of pharmaceutical small and medium enterprises in Iran

This study examines the relationship between organisational innovation capability, product platform development and performance in pharmaceutical small and medium enterprises (SMEs) in Iran, an area which has remained unexplored. The intensive literature review has led us to suggest an empirically tested conceptual model consisting of innovation capability, product platform and performance as well as factors/enablers shaping innovation capability in the pharmaceutical firms. Combinations of quantitative and qualitative methods were used for data collection and analysis. Eight Active Pharmaceutical Ingredients (API) companies that produce about 80% of local manufactured API were studied. The results show that the Iranian firms have chosen an imitative strategy in technology and product development. The common pattern for technology sourcing was external. However, although all companies purchased technologies from well-known suppliers, they demonstrated significant differences in the variety of products produced and performance. The failure firms lacked sound absorptive capability. Furthermore, the firms with high performance used a combination of internal and external sources for technology and product development. The empirical analysis showed a positive relationship between innovation capabilities, technology platform, product platform and performance. The pre-requisite to this relationship was found to be effective innovation management and strength/abilities in strategy, organisational structure, learning, processes and linkage (relationship) with the customers, suppliers and alliances.

Outsourcing decisions – the case of parallel production

Purpose – The purpose of this paper is to investigate an underexplored aspect of outsourcing involving a mixed strategy in which parallel production is continued in-house at the same time as outsourcing occurs. Design/methodology/approach – The study applied a multiple case study approach and drew on qualitative data collected through in-depth interviews with wood product manufacturing companies. Findings – The paper posits that there should be a variety of mixed strategies between the two governance forms of “make” or “buy.” In order to address how companies should consider the extent to which they outsource, the analysis was structured around two ends of a continuum: in-house dominance or outsourcing dominance. With an in-house-dominant strategy, outsourcing complements an organizations own production to optimize capacity utilization and outsource less cost-efficient production, or is used as a tool to learn how to outsource. With an outsourcing-dominant strategy, in-house production helps maintain complementary competencies and avoids lock-in risk. Research limitations/implications – This paper takes initial steps toward an exploration of different mixed strategies. Additional research is required to understand the costs of different mixed strategies compared with insourcing and outsourcing, and to study parallel production from a supplier viewpoint. Practical implications – This paper suggests that managers should think twice before rushing to a “me too” outsourcing strategy in which in-house capacities are completely closed. It is important to take a dynamic view of outsourcing that maintains a mixed strategy as an option, particularly in situations that involve an underdeveloped supplier market and/or as a way to develop resources over the long term. Originality/value – The concept of combining both “make” and “buy” is not new. However, little if any research has focussed explicitly on exploring the variety of different types of mixed strategies that exist on the continuum between insourcing and outsourcing.

Value-added strategies and forward integration in the Swedish sawmill industry: positioning and profitability in the high-volume segment

Abstract The changing market conditions for the Swedish sawmill industry place a focus on a better understanding of the pros and cons of value-added and forward integration strategies. The purpose of this article is to describe and explain recent value-added strategies in the Swedish sawmill industry. The study includes strategies from 13 of the 15 largest sawmill companies for the period between 2002 and 2005, describing a differentiation between value added in primary sawmill production and forward integration into secondary production. It also aims to relate some basic conditions, such as company size, company growth and corporate strategy, to value added and forward integration to profitability. The results show strong positive and significant correlations between forward integration, value added in primary production (somewhat weaker) and unit revenue, and profitability measured as return on investment. There were no strong or significant correlations between size and profitability, playing down the importance of economies of scale (among these already large companies). An interesting result is the much higher profitability of the buying sawmill companies compared with the forest corporations, stressing the importance of both a long-term strategy when investing in value-added activities and ultimately the priorities of ownership.

Dynamic Effectiveness: Improved Industrial Distribution from Interaction Between Marketing and Logistics Strategies

Abstract Based on different observations, in theory as well as in practice, we have identified strategies and operations following two different tracks, striving in different directions, despite it being well known they should go hand in hand. For companies challenged by a more and more dynamic business environment with heavier market segmentation, additional marketing channels, increasing globalisation on supplier and customer side, and high pressure on profit margins, the result from this is competitive weakness. The purpose of this article is to switch focus from operational effectiveness and strategic positioning as static success concepts on how to improve industrial distribution, to dynamic challenges of how to continuously manage the interaction between marketing strategies and operations (e.g., logistics) under the influence of a dynamic business environment. From theories in market strategies, logistics, flexibility, and marketing channels together with empirical experience from a best practice case study, we are introducing a model for dynamic effectiveness, describing the different characteristics of a company and what to focus on in order to become more dynamic. In order to constantly move to new market positions, and at the same time, restructure logistics and improve operational effectiveness, we have identified the dynamic capabilities of an organisation to be the key to success in industrial distribution. We define dynamic effectiveness as “how fast-and-well a company can go from one strategic positioning and productivity frontier to another.” It tells that a frequent interaction between new strategic moves and actions for higher operational effectiveness is required to be in pace with the dynamic and changing business environment and to stay ahead of competition. As a part of this, best practice logistics performance makes it possible not only to be more agile to new strategic moves, but also to drive strategic development from a high operational level. This is achieved by designing logistics to be a resource base to support and be an enabler for new strategic moves on the market.

Distribution Channel Reengineering - organizational separation of distribution and sales functions in the European market

Distribution Channel Reengineering - organizational separation of distribution and sales functions in the European market

The Applicability of Integrated Solutions Offerings: Differential Effects of Product Complexity

The purpose of this article is to develop a conceptual model of the influences of product complexity on the applicability and adoption of solutions offerings as a marketing strategy. Qualitative data from in-depth interviews with executives at 7 furniture manufacturing firms were investigated and a conceptual model was developed. Based on the results, a model for relationships between different aspects of complexity and solutions is proposed and an expansion of the complexity concept suggested. The article expands the knowledge on both solutions strategy and complexity and may also guide managers in the development of their marketing strategies.