Outsourcing - a way to increase efficiency? The logistics context

Table of Contents

List of Abbreviations

List of Tables and Figures

Introduction

1. Theoretical background
1.1 The concept of core competence as a basis for outsourcing
1.1.1 Identifying Core Competencies
1.2 Outsourcing and supply chain management: common trends
1.2.1 Reduction of vertical integration and short term focus
1.2.2 Avoidance of high capital investments
1.2.3 SCM as core competence
1.2.4 Cooperation management

2. Defining Supply Chain Management
2.1 Definitions
2.2 SCM perspectives with particular reference to outsourcing
2.2.1 Applications outsourcing
2.2.2 Forth Party Logistics
2.2.3 Third Party Logistics

3. Logistics Outsourcing
3.1 Initial point
3.2 Logistics functions and its outsourcing potential
3.2.1 Transportation
3.2.2 Warehousing
3.2.3 Shipment consolidation
3.2.4 Freight Forwarding
3.2.5 Invoice audit

4. Benefits and potential pitfalls of outsourcing
4.1 Benefits of outsourcing
4.1.1 Cost reduction
4.1.2 Avoidance of major investments
4.1.3 Wider skills pool
4.1.4 Quality of service
4.1.5 Higher flexibility
4.1.6 Improved ratios
4.1.7 Transformation of fixed costs into variable costs
4.1.8 Reduction of capital commitment
4.2 Potential pitfalls of outsourcing
4.2.1 Poor or non-performance
4.2.2 Loss of logistics know-how
4.2.3 Start up difficulties
4.2.4 Loss of motivation
4.2.5 Business transition and social plan
4.2.6 Dependency on the vendor

5. Planning Stage
5.1 Outsourcing Forms
5.2 Identifying potential providers
5.3 Request for proposal
5.4 Selecting the vendor
5.4.1 Evaluation criteria
5.4.2 Establishing a scoring system
5.4.3 Weighting the key criteria
5.4.4 Making final selection

Conclusion

List of References

Bibliography

Appendices

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of Tables and Figures

Diagram 1: Reduction of Vertical Integration

Diagram 2: The SCM perspectives

Diagram 3: European Market for Fourth Party Logistics

Diagram 4: Outsourcing volume in Europe

Diagram 5: Forecasted outsourcing volume in Germany

Diagram 6: Different kinds of logistics outsourcing activities

Diagram 7: Determination of outsourcing potential

Diagram 8: Top 10 Outsourcing Functions

Diagram 9: Benefits of Outsourcing from managers’ point of view

Diagram 10: Failure factors in logistics outsourcing

Diagram 11: Evaluation criteria for outsourcing vendor selection

Introduction

Supply Chain Management (SCM) is a management concept aimed at organising and optimising the complete value chain from sourcing raw materials to the final customer regardless of organisational boundaries^[1]. In recent years, the strategy of concentrating on core competencies of companies led to a vertical disintegration of processes along the value chain^[2]. Practical experience shows that companies focusing on their core competencies in first turn outsource logistics operations within their supply chain management to external service providers^[3].

Outsourcing is defined as “the practice of buying goods and services from outside suppliers, rather than producing them within a firm.”^[4] Harvard Business Review (HBR), the popular management journal recently listed outsourcing as one of the most influential concepts coined in the last 75 years^[5].

A fundamental question to ask in this work is whether outsourcing is really value enhancing and, in particular, whether the firm that undertakes outsourcing becomes more efficient^[6] as a result. In the context of this work the degree of efficiency will be addressed by analysing the input side as labour costs and capital for initial investments^[7].

It will be shown that in an attempt to increase efficiency by reducing expenses and turning fixed costs into variable costs, companies pursue restructuring procedures that include outsourcing of non-core activities to specialists having a lower cost base due to better economies of scale and scope^[8]. In addition, efficiency may also be improved because adjusting output to variations in demand and maintaining the quality of inputs may be easier via enforcing contracts with outside suppliers than in dealing with a strongly unionized internal workforce^[9].

However, according to Porter, increase in production efficiency alone will not lead to the long-term competitive advantage as there is a risk that the main innovative achievements and know-how can be copied by competitors^[10]. Concentration on core competencies and its protection is considered to be enormously important in sustaining the on-going growth. Therefore, this work is also intended to explain the importance of core competencies and to give an insight into the identification of capabilities which are considered to be core (Chapter 1). In order to underline the role of outsourcing in SCM and to prove that concentration on core competencies found confirmation in practice, common trends in development of both concepts are analysed in this part of the work.

Chapter 2 provides definitions of SCM and logistics and narrows the scope of investigation. Different perspectives of SCM are derived from the concept giving appropriate examples of corresponding outsourcing issues. As in most companies, the logistics function is not seen as a core competence (strategic reason) and since it requires a high level of capital commitment which is not preferred by business practitioners (financial reason), the main emphasis of this work is placed on the logistics perspective.

Each logistics activity represents a certain level of competence in a company. If this level is low and competence is not considered to be core, then the issue of outsourcing as a possible means for improving efficiency is raised. Therefore, Chapter 3 is dedicated to different logistics functions and their outsourcing potential. The most fundamental logistics functions that are outsourced in practice are discussed here in detail.

In order to determine the degree to which logistics operations are successfully outsourced and to find out what the related risks are, a detailed discussion on the most significant benefits and potential pitfalls is given in Chapter 4. Here, the notion of efficiency is addressed directly by examining such benefits of outsourcing as a cost and capital commitment reduction, avoidance of major investments, improved ratios and others.

While this work is comprehensive, it is not intended to guide through the many phases of an outsourcing transaction, hence, it will not cover strategies of negotiations or performance measurement. It is not designed to meet the needs of the company that wants to know all the aspects of how to outsource some or all of its logistics functions.

This work will give an overview of selected issues that may arise during the outsourcing of a logistics function, putting the main emphasis on the planning stage as it is considered to be the critical factor in a successful outsourcing project. The most important decision during the outsourcing process is taken when the company is selecting its future partner^[11]. This decision has a long-term affect on the company’s everyday operations^[12]. Hence, Chapter 5 covers the planning stage of an outsourcing project and discusses the vendor^[13] selection process in detail.

It is important to note that, in this work, domestic is not distinguished from international outsourcing (also referred to as “offshoring”), it is rather concerned with outsourcing in general. As international considerations would involve numerous additional subjects as, for example, cultural issues or governmental regulations, it requires separate research demanding additional time and resources.

1. Theoretical background

The perception of how to prevail in global competition has changed in the last decades^[14]. During the 80s, top executives were concentrating on restructuring and delayering their corporations^[15]. In the 90s the situation has changed. The decision making shifted to the ability to identify, cultivate, and exploit the core competencies of the company – to create the ongoing growth in the strongly competitive environment^[16]. In the short run, a company's competitiveness is strongly dependent on the price/performance attributes of the product^[17]. In the long run, however, competitiveness derives from the ability to create, at lower cost and less time than competitors, the core competencies that “spawn unanticipated products”^[18].

1.1 The concept of core competence as a basis for outsourcing

Hamel and Prahalad discussed several risks of ignoring core competencies^[19]. Among them are the weakened opportunities for growth, the dangerous dependence on outside suppliers of core products or the focus only on end products which leads to the lack of investment in development of new core competencies, to name just few^[20]. Therefore, the core competence perspective should be a natural one in most companies. Some authors refer to Hamel and Prahalad in the context of their 1990 article, “The Core Competence of the Corporation”, and attribute the concept to the rapid development of the outsourcing industry^[21]. It has been noted that by understanding all the elements that enable the company to operate, managers can realise which ones are the sources of competitive advantage and which can by done by a third party^[22].

Benn and Pearcy suggest that Michael Porter clarified this analysis by describing and explaining the concept of value chains^[23][24]. They argue that understanding of the value chain is of primary importance for the success of the outsourcing project, and if it is done correctly, the company understands each part of the chain beginning from the customer input to the service delivery, how they interrelate and which are core to competitive advantage^[25]. If an organisation decides to outsource any of the elements its value chain to a third party, it will be successful as long as the client organisation retains responsibility for managing the connections between the elements and the strategic planning for each element, whether made or bought^[26]. It would be important to note that Michael Porter also claims that an increase in production efficiency alone may not lead to the on-going competitive advantage^[27]. The reason is that competitors can copy the achievements of companies and therefore reduce the uniqueness of its products, which leads to decrease in competitiveness^[28]. Outsourcing certain function may become dangerous as the outsourced processes become less differentiated and do not demand special competencies for its fulfillment which increases the risk of imitation by competitors^[29]. Therefore it is vital for success to identify processes employing core competencies, do not take them into outsourcing considerations and protect from reproducing by another party^[30].

1.1.1 Identifying Core Competencies

To achieve long-term growth, companies need to develop, protect, and leverage their core competencies and consider outsourcing only those activities that do not confer a competitive advantage^[31]. Identifying which resources and capabilities to preserve and which activities to outsource requires careful consideration and planning.

Prahalad and Hamel suggest three factors to help identify core competencies in any business:

- Access to a wide variety of markets: the key core competencies here are those that enable the creation of new products and services;
- A significant contribution to the perceived customer benefits: core competencies are the skills that enable a business to deliver a fundamental customer benefit, therefore it is essential for the company to identify those benefits;
- Difficulty for competitors to imitate: a core competence should be unique: in many industries, most skills can be considered a prerequisite for participation and do not provide any significant competitor differentiation. To qualify as core, a competence should be something that other competitors wish they had within their own business^[32].

In the context of logistics authors offer additional key questions which are considered vital for identifying core competencies:

- Are there any special performance factors of the process which are not fulfilled by competitors^[33] ?
- Is the process exceptionally cost-efficient^[34] ?
- Is the quality of performance significantly higher than the one provided by competitors^[35] ?
- Is a need for future investments in the process that might be considered as core, not inevitable^[36] ?

If there are more positive answers than negative then the company should define the process as “core” and hense, accordingly protect and defend its properties in order to compete effectively in rapidly changing business world^[37].

The statement that a systematic review of the existing processes is one of the first steps toward incorporating outsourcing in the business model is strongly supported in the modern business environment^[38].

1.2 Outsourcing and supply chain management: common trends

Analysing some of the main trends that created the concept of supply chains one may recognize that primary drivers are comparable to those in outsourcing, which leads to the idea that outsourcing belongs to one of the main attributes of the modern supply chain management. The analysis shows that both concepts are strongly interrelated. The upper-discussed concept of core competence, avoidance of high capital investments and short term focus are some of the trends that stimulated the development of supply chains and the corresponding outsourcing decisions. C ooperation management is another key point in supply chain management and in outsourcing projects that establishes closer relationship between the two concepts.

1.2.1 Reduction of vertical integration and short term focus

The concept of core competence is also seen as a background for strategic planning in supply chain management^[39]. Identifying the role of the company in the supply chain helps in the process of task sharing between suppliers^[40]. The inevitable consequence is a distinctive reduction of vertical integration^[41] which serves as another basis for outsourcing (please refer to Diagram 1)^[42].

Abbildung in dieser Leseprobe nicht enthalten

Diagram 1: Reduction of Vertical Integration as a consequence of core-competency focus

Some authors are of the opinion that this trend found confirmation in practice: the importance of make-or-buy decision is growing as producers control smaller segments of supply chain^[43]. Procurement is seen as a function which was mostly affected by this trend^[44]. In the past, sourcing had a focus on raw materials and individual parts; nowadays the trend is shifting towards sourcing of the whole component assemblies^[45].

In the effort to understand the success of the core-competency strategy in terms of its adoption by global companies, De Kok and Graves identify a number of circumstances that seem to characterize the late eighties business environment^[46]. They claim that in the Western world the eighties were a time of relatively low economic growth and high unemployment rates which led to a short-term focus^[47]. The core-competency strategy allowed companies to increase their return on investments (ROI) and related business performance indicators at the same time: outsourcing non-core competencies eliminated the associated fixed costs in the denominator of ROI, which positively affected the result^[48]. The economic climate allowed multinational companies to outsource high-cost operations to companies with lower costs leading to immediate improvements in the balance sheets^[49].

1.2.2 Avoidance of high capital investments

Another trend that links the concept of supply chains to outsourcing is avoiding high capital investments^[50]. The improvements in labour productivity and process capabilities always required on-going investments^[51]. By the end of the eighties, multinational companies with a tradition of capital-intensive manufacturing, such as electronics, white goods, automotive and consumer packaged goods (CPG), had invested for three decades in automation and mechanisation of manufacturing process^[52]. The labour was replaced by capital, to the point that the capital-labour ratio approached that of primary industries, such as chemicals and metals^[53]. Most of these vertically-integrated companies found that the added value was shifting upstream from assembly to fabrication and the need for investments in labour productivity and process improvements kept increasing^[54]. Most companies decided to concentrate on their brands, implying that they concentrated on marketing and sales, and research and development of their products as well as on purchasing in order to increase their buying power^[55]. This trend continues nowadays: in consumer packaged goods, for example, some manufacturers are pulling out of manufacture to concentrate on marketing and innovation^[56]. Therefore upstream manufacturing activities were outsourced which continues to date^[57].

1.2.3 SCM as core competence

Outsourcing activities allowed some companies to see their supply chain management as a core competence. Lee and Billington use Hewlett-Packard (HP) as an example of a company which recognized that SCM was one of its core competencies^[58]. In parallel to concentration on research and development in software and printing technology, marketing and sales, and outsourcing manufacturing, HP successfully developed the skills for SCM. HP realised that one of its key success factors could be to offer both speed of delivery and product diversity to the market, and that this could be manageable without owing traditional manufacturing assets^[59]. The product diversity was created as close as possible to the consumer, thereby for efficiencies upstream in SC^[60].

Benn and Pearcy discuss Dell Computer Corporation as another example of a company that has made SCM its core competence^[61]. Dell realises that to deliver effectively, it needs to understand its value chain in great detail^[62]. Prior to Dell, personal computer (PC) manufacturers sold PCs through their dealer network, which required substantial capital investments in inventory by the dealers and increased risks for manufacturers^[63]. In contrast, Dell decided to sell directly to the customer using the Internet as its marketing and sales channel^[64]. Then it was possible to eliminate the final product inventory, as the company was able to assemble PCs for each customer order^[65]. This example shows the potential for operating low-inventory, high-flexibility and customised-product supply chains. Outsourcing helps Dell to concentrate on sales while Welsh Western and Target are responsible for logistics function, and maintenance is handled through business partners Unisys and Getronics^[66]. Today Dell is the number one supply chain company in the world (refer to the 2005 ranking presented in Appendices)^[67].

1.2.4 Cooperation management

The interconnected links of material and information flows along the supply chain can only be achieved by managing relationships among partners^[68]. Partnership is seen as one of the main principles of supply chain management and as well as of the outsourcing projects^[69]. If supply chains want to be more than a pure addition of suppliers and customers, their management must have a lot in common with the management of strategic alliances^[70]. Cooperation management in supply chains starts with the challenge of identifying the right partners within the value chain^[71]. This process is just as important as a careful selection of the right vendor for outsourcing project following by the future cooperation between two parties. A key to building the new relationship is how both parties will monitor performance, evaluate the results, and solve the problems^[72]. The relationship should be built on trust and shared commitment to success^[73]. The only difference between SCM and outsourcing in this context would be that “…a supply chain is defined as a set of three or more entities (organisations or individuals)…”^[74] Outsourcing project in turn usually deals with only two parties, which involves less complexity in communication process. An exception, however, would be the multi-vendor outsourcing (also referred to as multisourcing)^[75]. Multisourcing requires a broader internal management equipped to manage cooperation with several vendors at a time which makes it similar to complexity of SCM^[76].

Although the importance of cooperation is frequently mentioned in literature, only few instruments are described that help to face the challenges of supply chain management from the perspective of interpersonal cooperation^[77]. Therefore this topic requires further research^[78].

The issues discussed above shed some light on the development of supply chains and the role of outsourcing in this process. It should be clear that both concepts are interrelated and in many cases have similar objectives^[79]. In order to get the clear picture of all SCM activities that can be outsourced, the correct definition of supply chain management is required.

2. Defining Supply Chain Management

Although the concept of Supply Chain Management is relatively young, its definition could serve as a separate topic for an empirical research, as there are already too many competing approaches to define the issue. Therefore only a selected range of relevant definitions will be discussed.

2.1 Definitions

Some authors (Freiwald, Seuring & Goldbach) refer to the definition of Handfield and Nichols:

The supply chain encompasses all activities associated with the flow and transformation of goods from raw materials stage (extraction), through to the end user, as well as the associated information flows. Material and information flow both up and down the supply chain. Supply Chain Management is the integration of these activities through improved supply chain relationships, to achieve a sustainable competitive advantage.^[80]

It is also evident (according to Freiwald^[81], Schary/Skjott-Larsen^[82], Seuring & Goldbach^[83] ), that the management of material and information flows links SCM to its conceptual basis in logistics^[84]. While logistics aims at optimising material and information flows between single facilities, SCM looks much further, as the second part of the definition states^[85].

Concerning the differences between SCM and logistics significant input is provided by the Council of Logistics Management (CLM). In 1998, the CLM modified its popular definition of logistics to a new one: “Logistics is a part of the supply chain process that plans, implements, and controls the efficient and effective flow and storage of goods, services, and related information from the point-of-origin to the point-of-consumption in order to meet customer’s requirements”^[86]. Although this definition of logistics stands for a very integrated approach, the CLM regards logistics as a subset of SCM. It is defined as: “Integrating and Managing Business Processes across the Supply Chain”^[87].

Summarizing the attitude of the CLM two key messages can be derived:

- SCM is not a function, it is a holistic management concept
- SCM extends an integrated view of logistics. It integrates and manages key business processes across the supply chain.

Schönsleben’s et. al. SCM definition focuses on the functions of the value chain and view of inter-organisational cooperation^[88]. They describe SCM as the management of a strategic and long-term co-operation of logistical network members to develop, manufacture and distribute products^[89]. Considering it from that perspective SCM can be defined as a special form of vertically integrating alliances^[90].

Completing the list of the common views on SCM another aspect has to be mentioned: the development of information technology (IT)^[91]. The role of IT has significantly gained importance in the 1990s^[92]. The Internet as a worldwide available IT-infrastructure and the performance progress of IT architectures has created the basis for inter-organisational software applications (e.g. SAP APO to name the most popular system) enabling inter-company planning, execution and optimisation^[93].

2.2 SCM perspectives with particular reference to outsourcing

Taking into account the upper-mentioned definitions, the following diagram has been outlined to represent the SCM perspectives and examples of corresponding outsourcing issues.

Abbildung in dieser Leseprobe nicht enthalten

Diagram 2: The SCM perspectives and examples of corresponding outsourcing issues

In order to narrow the scope of this work, the examples of corresponding outsourcing issues will be discussed at a glance, providing its general understanding and relevance in the context of this work.

2.2.1 Applications outsourcing

Over the last two decades, IT outsourcing (or applications outsourcing^[94] ) has seen the largest volume of outsourcing in comparison to other functional areas in terms of the total cash volume of contracts signed^[95]. As companies are structured to generate profitability from efficiency, there is a clear understanding of the importance of using the best technology^[96]. The result is that IT outsourcers who are not able to invest heavily in getting the IT infrastructure tend to outsource it to external providers^[97]. In the SCM context the quality if IT structures is vital for success. As noted above, the complexity of SC networks demands sophisticated systems for inter-organisational planning, execution and optimisation of processes. This is the reason why there has been given strong attention to the outsourcing of IT functions. Both the popular press and academic literature have recently covered IT outsourcing, thus this work will look at it superficially.

[...]

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^[1] cf. Handfield, R. B. & Nichols, E. L. (1999). Introduction to Supply Chain Management. Upper Saddle River: Prentice Hall. p. 2 as cited by Seuring, S. & Goldbach, M. (eds). (2002). Cost Management in Supply Chains. Heidelberg: Physica-Verlag. p. 17

^[2] cf. ibid.

^[3] cf. Schary, P. B. & Skjott-Larsen, T. (2001). Managing the Global Supply Chain, 2nd Edition. Copenhagen: Copenhagen Business School Press. p. 226

^[4] Black, J. (2003). A Dictionary of Economics (2nd ed). Oxford: Oxford University Press. p. 337

^[5] cf. Jayasimha, K. R. (2002). Logistics Management – An Introduction. Retrieved on-line in the Internet on the 21st of April 2006: http://www.icfaipress.org/books/Logistics%20management% 20-%20Vol-1.asp. p. 1

^[6] Efficiency – the degree to which inputs are used in relation to a given level of outputs. Managers judge the degree of efficiency by comparing actual outputs achieved with actual inputs (such as the costs of material and labour). Source: Horngren, C. T. et. al. (2005). Introduction to management accounting, 14th ed. Upper Saddle River: Pearson/Prentice Hall. p. 317

^[7] cf. Horngren, C. T. et. al. ibid.

^[8] cf. Financing the Supply Chain. (2001), in Lloyd’s Shipping Economist, November 2001. pp. 23-26

^[9] cf. Black, J. loc. cit. p. 337

^[10] cf. Porter, M. (1999). Wettbewerb und Strategie. München: Econ. pp. 51-52 as cited by Müller-Dauppert, B. (ed). (2005). Logistik-Outsourcing: Ausschreibung, Vergabe, Controlling. München: Verlag Heinrich Vogel. p.11

^[11] cf. Changsen, Z. (2005). Third Party Logistics Management. Berlin: Logos Verlag. p. 22

^[12] cf. ibid.

^[13] There is not common usage of names for the organisation that outsources a function or for the organisation to which the function is transferred. Consequently, as common terminology throughout this work, the organisation that wishes to divest itself of a function is called the “company” or the “outsourcer”, while the name of organisation that takes on these services is called the “vendor” or the “supplier” or “service provider”.

^[14] cf. Goold, M. & Luchs, K. S. (1996). Managing the Multibusiness Company: strategic issues for diversified groups. London: Routledge. p. 218

^[15] cf. ibid.

^[16] cf. ibid.

^[17] cf. ibid.

^[18] ibid.

^[19] cf. Hamel, G. & Prahalad, C. K. (1994). Competing for the Future. Boston: Harvard Business School Press. p. 221

^[20] cf. ibid. pp. 221-222

^[21] cf. Hamel, G. & Prahalad, C. K. (1990). The Core Competence of the Corporation. Boston: Harvard Business Review as cited by Benn, I. & Pearcy, J. (2002). Outsourcing: exploiting the skills of third parties. London: Hodder & Stoughton Educational. p. 5

^[22] cf. Hamel, G. & Prahalad, C. K. (1990). loc. cit.

^[23] cf. Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press as cited by Benn, I. & Pearcy, J. loc. cit. p. 6

^[24] The value chain categorizes the value-adding activities of an organisation. The "primary activities" include: inbound logistics, operations (production), outbound logistics, sales and marketing, and service (maintenance). The "support activities" include: administrative infrastructure management, human resources management, R&D, and procurement. The costs and value drivers are identified for each value activity. Source: Porter, M. ibid. p. 39

^[25] cf. ibid.

^[26] cf. ibid.

^[27] cf. Porter, M. (1999). loc. cit.

^[28] cf. ibid.

^[29] cf. ibid.

^[30] cf. ibid.

^[31] cf. Müller-Dauppert, B. loc. cit. p. 12

^[32] cf. Hamel, G. & Prahalad, C. K. (1994). loc. cit. pp. 224 et. seq; cf. Müller-Dauppert, B. ibid.

^[33] cf. Müller-Dauppert, B. ibid.

^[34] cf. ibid.

^[35] cf. Müller-Dauppert, B. loc. cit.

^[36] cf. ibid.

^[37] cf. ibid.

^[38] cf. McGill, D. (2004). Building a High Performance Business Model. Retrieved on-line in the Internet: http://www.accenture.com/Global/Services/By_Industry/Media_and_ Entertainment/R_and_I/HighTools.htm. p. 2

^[39] cf. Boutellier, R. & Corsten, D. (2000). Basiswissen Beschaffung. München: Carl Hanser Verlag as cited by Corsten, D. & Gabriel, C. (2004). Supply Chain Management erfolgreich umsetzen. Heidelberg: Physica-Verlag. pp. 19 et. seq.

^[40] cf. Boutellier, R. & Corsten, D. loc. cit.

^[41] In microeconomics and strategic management, the term vertical integration describes a style of ownership and control. Vertically integrated companies are united through a hierarchy and share a common owner. Usually each member of the hierarchy produces a different product, and the products combine to satisfy a common need. Source: en.wikipedia.org/wiki/Vertical_ integration

^[42] cf. Boutellier, R. & Corsten, D. ibid.

^[43] cf. Corsten, D. & Gabriel, C. loc. cit. p. 22

^[44] cf. ibid. p. 23

^[45] cf. ibid.

^[46] cf. De Kok, A. G. & Graves S. C. (eds). (2003). Supply Chain Management: Design, Coordination and Operation. Amsterdam: ElsevierB.V. p. 2 et. seq.

^[47] cf. ibid.

^[48] cf. ibid.

^[49] cf. ibid.

^[50] cf. Bragg, S. M. (1998). Outsourcing. New York: John Wiley & Sons, Inc. pp. 2-3

^[51] cf. ibid.

^[52] cf. De Kok, A. G. & Graves S. C. (eds). loc. cit. p. 3

^[53] cf. ibid.

^[54] cf. ibid.

^[55] cf. ibid.

^[56] cf. Lewis, C. (09/2003). Thinking outside the box in Logistics Europe Magazine. p. 29

^[57] cf. De Kok, A. G. & Graves S. C. (eds). ibid.

^[58] cf. Lee, H. L. & Billington, C. (1995). The Evolution of Supply Chain Management Models and Practice at Hewlett-Packard. Interfaces 25. pp. 42-63

^[59] cf. ibid.

^[60] cf. ibid.

^[61] cf. Benn, I. & Pearcy, J. loc. cit. p. 6

^[62] cf. ibid.

^[63] cf. ibid.

^[64] cf. ibid.

^[65] cf. ibid.

^[66] cf. ibid. p. 7

^[67] According to AMR Research Report “The Supply Chain Top 25” in Beschaffung Aktuell: Materialwirtschaft, Einkauf, Logistik (05/2005). p. 10

^[68] cf. Seuring, S. (2003). loc. cit. p. 17

^[69] cf. Corsten, D. & Gabriel, C. loc. cit. p. 213

^[70] cf. Seuring, S. (2003). ibid.

^[71] cf. Seuring, S. (2003). loc. cit. p. 225

^[72] cf. Greaver, M. F. (1999). Strategic Outsourcing: A Structured Approach to Outsourcing Decisions and Initiatives. New York: AMACOM p. 29

^[73] cf. ibid.

^[74] Freiwald, S. (2005). Supply Chain Design. Frankfurt am Main: Peter Lang Verlag. p. 5

^[75] cf. Mayer, A. G. & Söbbing, T. (2004). Outsourcing leicht gemacht. Frankfurt am Main: Redline Wirtschaft bei ueberreiter. p. 27

^[76] cf. Halvey, J. K. & Melby, B. M. (2000). Business Process Outsourcing: Process, Strategies, and Contracts. New York: John Wiley & Sons, Inc. p. 32

^[77] cf. Seuring, S. (2003). ibid. p. 226

^[78] cf. ibid. p. 236

^[79] The reduction of total costs is a frequently stated objective in supply chain management. It is also the most significant benefit of outsourcing as it will be shown in the following chapters.

^[80] Handfield, R. B. & Nichols, E. L. loc. cit. p. 2 as cited by Seuring, S. & Goldbach, M. (eds). loc. cit. p. 17

^[81] cf. Freiwald, S. loc. cit. pp. 9 et. seq.

^[82] cf. Schary, P. B. & Skjott-Larsen, T. (1998). Managing the Global Supply Chain. Copenhagen: Copenhagen Business School Press. p. 17 et. seq.

^[83] cf. Seuring, S. & Goldbach, M. (eds). ibid.

^[84] cf. ibid.

^[85] cf. ibid

^[86] Lambert, D. M. et. al. (1998). Supply Chain Management : Implementation Issues and Research Opportunities, in International Journal of Logistics Management, Vol. 9, No. 2, pp. 1-19 as cited by Changsen, Z. loc. cit. p. 5

^[87] ibid.

^[88] cf. Schönsleben, P. et. al. (2001). Nachhaltige Steigerung der Integration von Wertschöpfungsketten durch SCM. in Supply Chain Management, I/2001. pp. 15-25

^[89] cf. ibid.

^[90] cf. ibid.

^[91] cf. De Kok, A. G. & Graves S. C. (eds). loc. cit. pp. 8-11

^[92] cf. ibid.

^[93] cf. De Kok, A. G. & Graves S. C. (eds). loc. cit.

^[94] cf. Hermes, H. J. & Schwarz, G. (eds). (2005). Outsourcing: Chansen und Risiken, Erfolgsfaktoren, rechtssichere Umsetzung. München: Haufe/Deloitte. p. 34

^[95] cf. Bragg, S. M. (1998). Outsourcing. New York: John Wiley & Sons, Inc. p. 102

^[96] cf. Benn, I. & Pearcy, J. loc. cit. p. 13

^[97] cf. ibid.