Integration in the Global Sourcing Organization — An Information Processing Perspective

Abstract

Global sourcing refers to the integration of decision making across worldwide purchasing units within a multinational corporation (MNC). In order to manage the integration challenge, firms have a number of tools, varying from centralization and formalization to cross-locational teams. In this paper, we focus on explaining how and why to integrate in different circumstances. The aim of this paper is to complement prior research on global sourcing organizations, which is still rather scarce and more exploratory in nature. By extending the arguments of the information processing perspective of organizations to the global sourcing context, we seek to propel a theoretical discussion on integration in the global sourcing organization. Based on the results of 12 case studies in three MNCs, we propose that integration approaches in global sourcing organizations vary depending on the three contingencies of category characteristics, supply environment characteristics and interdependence of the purchasing units.A category encompasses a group of similar items that are required for specific business activities of the firm.

Purchasing Organization and Design: A Literature Review

“…Further, using standards in purchasing entails that activities can be performed in a routine manner, which reduces variability and helps to lower uncertainty in purchasing. However, as Trautmann, Turkulainen, Hartmann, and Bals (2009) pointed out, standardization limits the organization's capacity to process information, wherefore it should only be used as a design instrument in purchasing in case information processing requirements are not too high.…”

“…Inconsistencies between these factors and the objectives of the commodity groups were hypothesized to result in reduced performance. Trautmann, Turkulainen, Hartmann, and further addressed drivers of global integration of product categories and derived category selection criteria and implementation guidance for designing the global sourcing organization.…”

“…In the area of purchasing, researchers have studied patterns in the organization of purchasing, identified contextual factors that influence its design or analyzed the contribution of the PO to purchasing performance (PP) or the performance of the entire organization. Although a large number of works have appeared that study the organization of purchasing, several authors noted that prior research has been widely unstructured and that a more systematic approach towards research on the PO is necessary (Trent and Monczka 2003;Gelderman and Semeijn 2006;Quintens, Pauwels, and Matthyssens 2006a;Trautmann, Turkulainen, Hartmann, and Bals 2009). This paper presents the results of an extensive literature review of the organization of purchasing covering the period from 1967 to 2009.…”

Development of a risk-oriented strategic sourcing (ROSS) framework for the construction and electronics manufacturing industries

“…In addition, Trautmann et al (2009b) present a purchasing portfolio approach to assess global synergies by adapting the Kraljic Model (Kraljic, 1983). The authors apply a two-by-two matrix and build three evaluation categories: economies of scale (degree of volume aggregation vs. supplier delivery scope), economies of information (purchase complexity vs. supply risk) and economies of process (transaction volume vs. process complexity).…”

“…The research by Arnold (1999) looks at the optimum degree of centralisation by considering the internationalisation of sourcing and the company's structures, whereas Trautmann et al (2009b) focus on volume synergies, information and processes. Both papers are based on case studies with a narrow focus on specific circumstances.…”