The way economic value is created is fundamentally changing. As a result of increased utilization of resources of suppliers and partners, the cost of purchased goods and services can be even 70-80% of revenue. These suppliers and partners producing the majority of the costs, value and innovation of a company can be considered as the external resources of a company. Management of external resources is problematic for companies, as rules which apply for internal management do not apply as such. At the same time relying on pure market approaches is neither a sufficient approach. From a governance model theory perspective new, network and hybrid forms have emerged. In the research reported here, the practices for management of upstream external resources are investigated from a focal company perspective. The research is scoped around practices of a manufacturing company. The research question is: How a focal company can manage its supplier base in different managerial situations? Findings of this research demonstrate that the concept of orchestration is relevant from the external resource management point of view, and it can be identified empirically. The concept of orchestration is characterized as an activity, where a company is intentionally leading and influencing its external resources beyond the set of operative activities it conducts itself. In order to develop a strategy for external resource management, a firm must identify and define its business objectives. This should be done both from the overall company perspective, and also for each of the buyer-supplier relationships, choosing between innovation focus and cost competitiveness focus. Additionally, the business objectives must be combined with an intended governance approach in order to develop an appropriate strategy for external resource management. As a part of this research, a categorization model for management situations is developed. The buyer-supplier relationships can be arranged according to the dimensions of relationship focus – between cost and innovation, and governance approach – between bilateral and unilateral governance. For each of the situations it is necessary to adapt a suitable managerial practice. Findings from the research suggest, that the practices related to orchestration of external resources can be divided to four broader clusters: value positioning, product and network architecture, relationship governance practices, and operative management practices.
|Translated title of the contribution||Orchestration of External Resources|
|Publication status||Published - 2015|
|MoE publication type||G4 Doctoral dissertation (monograph)|
- external resource management
- supply base management