Outsorcing

Computers in Industry 49 (2002) 59–75

Framework for outsourcing manufacturing: strategic and operational implications
Jesper Momme
Department of Production, Aalborg University, Fibigerstraede 16, 9220 Aalborg East, Denmark

Abstract Over the last decade, outsourcing has proved to be a relevant strategic option for companies narrowing their operations to focus on core competencies. Thispaper analyses the process of outsourcing manufacturing to cost-efficient and innovative suppliers in support of internal resources and capabilities. A scientific reference model founded on manufacturing strategy is proposed to help choose the right level of analysis and steer the research process. From this, a system model is developed to enable identification of the production system elements andinternal support functions. Finally, a framework that links the phases of the entire outsourcing process to strategic planning is synthesised. The framework includes a logical sequence of key activities with built-in performance measures and expected output for each of the phases. The research methodology combines theory study with case study and action research in Aalborg Industries, which operatesin the heavy industry. Thereby, the research pursues both academic and industrial application. # 2002 Elsevier Science B.V. All rights reserved.
Keywords: Outsourcing framework; Manufacturing strategy; Competencies; Open systems theory; Case study; Action research

1. Introduction Entering the third millennium, most industrial sectors face intensified conditions both in the marketplace and withinthe corporate boundaries. The customers are putting higher demands and constraints on their upstream linkages. Formerly, the customers focused mainly on low total systems cost, high quality and good delivery performance. Presently, they also expect short product life cycles and time-to-market, innovativeness and customisation [1]. The companies and their suppliers are experiencing the emergenceof a global economy and rapidly changing markets. At the same time, the complexity of products and technologies is increasing and their functionalities are expand-

E-mail address: i9jmo@iprod.auc.dk (J. Momme).

ing [2]. Globalisation and technological innovation appear to be common denominators of these marketing and corporate business challenges. From a corporate strategy point of view, theyadd new competitors and markets and put strong pressure on companies’ competitiveness and profitability. From a combined business and functional strategy viewpoint, they call for improved organisational adaptability and more flexible and advanced systems relative to manufacturing, logistics, engineering, information and process technology and the like [3,4]. Table 1 specifies the wide range oftrends in the industry and their implications. Besides, the table includes examples of initiatives that may be taken to proactively meeting the trends and implications. It is noticed that the trends, implications and initiatives are not fully consistent in the sense that certain interdependencies and overlaps exist in practice.

0166-3615/02/$ – see front matter # 2002 Elsevier Science B.V. Allrights reserved. PII: S 0 1 6 6 - 3 6 1 5 ( 0 2 ) 0 0 0 5 9 - 3

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J. Momme / Computers in Industry 49 (2002) 59–75

Table 1 The wide range of industrial trends and implications that represent the problem context of the paper Trends Information and process technology— including the Internet, electronic data interchange, e-commerce, supply chain planning systems, robotics, etc.—is gaining anall-important influence on the industry structure Implications Facilitates integration of operations of separate companies into a cohesive whole, which is a strong incentive to establish buyer–supplier relationships Initiatives Moving from traditional arms’ length relationships to partnering relationships in which both parties work within ‘‘the spirit of the contract’’

Enables rapid deployment...