Centralized vs decentralized sourcing strategy for multi-tier automotive supply network
International Journal of Productivity and Performance Management
ISSN: 1741-0401
Article publication date: 16 January 2019
Issue publication date: 19 February 2019
Abstract
Purpose
Multiple stages of procurement for a product in a supply chain (SC) altogether form a “multi-Tier” supply network. The purpose of this paper is to develop and verify a systematic solution approach to ascertain the realistic cost advantage of a coordinated centralized sourcing strategy as compared to an isolated decentralized sourcing strategy for a multi-tier supply network under demand uncertainty.
Design/methodology/approach
The proposed systematic solution approach consists of seven steps to compare and contrast the cost advantage of a centralized coordinated sourcing strategy over a decentralized stage-wise sourcing strategy for a multi-tier supply network. A real-life automotive industry case analysis of two distinct products provides sufficient empirical evidence on the expected cost advantage of centralized coordinated sourcing strategy under demand uncertainty.
Findings
The case analysis affirms the practicability of the proposed seven-step solution approach to determine the realistic cost advantage of coordinated sourcing.
Research limitations/implications
The scope of this research is restricted to a single product and two-tier supply network analysis. This research work also considers a restrictive assumption of negligible coordination cost.
Practical implications
The suitability of the proposed solution approach is verified using real-life case examples. This research provides theoretical insights and factual evidence to SC practitioners, so as to adopt a centralized sourcing strategy in a varied manufacturing environment.
Originality/value
There is no evidence of a systematic step-by-step solution approach to determine the cost advantage of a coordinated sourcing strategy over an isolated decentralized sourcing strategy for a multi-tier supply network under demand uncertainty.
Keywords
Acknowledgements
The authors would like to thank the anonymous reviewers for many insightful comments and suggestions which helped to improve the quality of the manuscript.
Citation
Bagul, A.D. and Mukherjee, I. (2019), "Centralized vs decentralized sourcing strategy for multi-tier automotive supply network", International Journal of Productivity and Performance Management, Vol. 68 No. 3, pp. 578-607. https://doi.org/10.1108/IJPPM-02-2018-0083
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited