Offshoring & the aftermath: Implications for the management of the purchasing and supply function
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This thesis investigates the broad question: what happens to the purchasing and supply management (PSM) function when the firm engages in production offshoring? This question emerges from varied and contemporary debates on the implications of the offshoring strategy on the firm’s value chain, the re-configuration of its capabilities in new environments, and the changes in firm level competences as a result of emerging complexity. The thesis particularly focuses on the PSM function, which despite its known strategic importance to firm performance, has not received a lot of attention on how it deals with the challenges that emerge from offshoring. Yet clearly, and as I empirically show, the events in the disintegration and geographical dispersal of firm activities for cost and other related reasons, undermines PSM function’s existing routines, effectiveness and performance. In general, the research adopts a qualitative approach in which the case study methodology is used mainly to answer and build on the conceptual, theoretical and empirical questions raised in the earlier parts of the research. The contributions and findings are reported in 4 papers – 3 of these are published journal articles and 1 article is an unpublished research paper. The article 1 examines the state of the research on the production offshoring phenomenon and subsequently investigates, how, following the disintegration of the firm, the aspect of reintegration of disaggregated and dispersed activities is considered in production offshoring research. First the article shows that production offshoring research is largely conceptual, and second, it shows that reintegration of dispersed activities is seen as both an issue of intra-firm governance, and also that of building on existing linkages in production network activities. The article 2 contributes to the theoretical understanding of the production firm as it implements the offshoring strategy, suggesting that the existing piece-meal theoretical explanations of the offshoring firm’s behavior ignore the systemic changes these firms make in order to remain viable. The article 3 builds on the existing offshoring evolutionary models to explain the specific changes that occur in the purchasing and supply organization as a result of offshoring. The findings suggest that offshoring is not only PSMs key change lever, but also presents momentum for reorganizing in the PSM function. Finally article 4 examines the level of coordination of the PSM function’s activities in the face of offshoring. The article suggests that the current view of coordination in PSM which addresses mainly the interface between activities and purchasing’s personnel is inherently flawed. It sidelines the role of coordination of information exchanges among purchasing process actors as a fundamental enabler of PSM activities coordination. In conclusion, the thesis demonstrates that offshoring strategies have significant implications for organizations that pursue them. Yet to PSM, these implications also present significant opportunities for the reinvention of PSM’s role in the firm thus assuring better purchasing performance, and ensuring that the firm remains viable in the long term.