Make or buy decision – strategic sourcing
Purpose of the study
The modern manufacturing environment is highly dependent on the sourcing of labor, products, and other core functions that promote the overall success of a firm. There is a need to understand sourcing strategies that can add value to an organization without incurring many costs or facing significant risks. This study aims to identify an effective method that Cummins Engine Company can utilize regarding sourcing decisions consistent with the high quality of engineering products that it manufactures. Notably, Cummings has been trying to improve its operations in-house for the better part of its existence. However, this has been consuming a lot of resources, including labor and funds. In essence, the paper wants to establish critical components to its products that it is good at making. On the same note, the company wants to look at outsource components where suppliers are better suited to provide services and products at reduced costs and more substantial performance incentives. The research will also aim to find out how to utilize outsourcing to generate employee commitment to improving manufacturing performance.
Design
The study mainly made use of observation of the general market trends. It looked at other engine manufacturers’ practices, including John Deere, Navistar International, and JI Case. Conversations with managers of these firms revealed the companies’ performances in production, labor management, and partnerships with other companies in the field. Other discussion points include relationships between the companies and their suppliers and the sourcing decisions they make.
Findings
The study established that the firms have been overinvesting in commodity parts and neglecting to develop a competitive advantage from the interaction with managers of other companies. Spending a lot of money on unnecessary things results from confusion in these firms. They fail to look at the hierarchy of strategic importance or supplier capabilities that they can utilize to increase efficiency and reduce costs. The paper also established that companies have conflicts regarding different functions. Thus, sourcing strategies are weakened. Apart from that, managers fail to understand the need to invest in intangible resources like engineering talent and management attention. The mentality that a company can handle all its activities on its own is detrimental to its success. Lastly, the paper established that most managers think outsourcing would be harmful because it would reduce its ability to differentiate its products. Managers fail to understand that some suppliers can manufacture some components at reduced costs and increase efficiency.
Originality
This research study aims at addressing an issue that many companies fail to handle appropriately. Sourcing for labor puts many companies in a dilemma in that they may be caught between the need to protect jobs for their employees and save production costs. While both actions are justified, managers usually do not have the best strategies to approach the issue. This paper will be essential in understanding the problem and providing a solution that can be utilized by companies across the board. Information from this study can help readers find out how to differentiate core parts from commodities. By doing this, they can understand the functions to give up to suppliers and those that can be performed in-house. They can improve their core competencies and create links with suppliers to increase their general value by manufacturing superior products. Future research studies can use this study’s information to expand knowledge on overcoming sourcing techniques that can lead to strained relationships between a company and its suppliers.
Practical Implication
Information from this study has a practical implication in that it brings in a new body of knowledge that manufacturers can utilize in their daily running of activities. The information is based on the experiences of real companies. Thus, it is relevant to the modern business environment. Managers can utilize the knowledge to put in place effective sourcing mechanisms. It guides them on the essential aspects to concentrate on when carrying out the actions. Therefore, companies are better suited to create stronger relationships with suppliers.