Outsourcing of supply chain processes: evaluating the impact of congruence between outsourcing drivers and competitive priorities on performance

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Kroes, James Raymond
Ghosh, Soumen
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The outsourcing of elements of supply chain processes is now an integral component of the operationalization of a firm s competitive business strategy. While the purported goal of outsourcing is usually to derive a competitive advantage in the marketplace, it is not clear whether the outsourcing decisions made by firms are always strategically aligned with their overall competitive strategy. To shed light on this important issue, this research study empirically examines the performance impact of the alignment (congruence) between a firm s competitive priorities (cost, flexibility, innovativeness, quality, and time) and the drivers of its outsourcing decisions. First, we develop and validate a survey instrument used to collect data for this study from manufacturing firms operating in the United States. Next, we use structural equation modeling to examine the impact of alignment between individual competitive priorities and related groups of outsourcing drivers. This analysis finds a significant positive relationship between outsourcing alignment and performance for a number of competitive priorities. Finally, we use cluster analysis to develop a taxonomy of manufacturing strategies which are tested to determine the relationship between the alignment of outsourcing decisions and performance. The taxonomic investigation identifies three unique clusters of firms based on their competitive priorities and then determines alignment between each cluster strategy and outsourcing to be significantly associated with better performance. To the best of our knowledge, there are no studies in the literature that address the issue of strategic congruence between the outsourcing drivers and competitive priorities of a firm, and the impact of such congruence on firm performance.
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