Buyer's Efficient E-Sourcing Structure: Centralize or Decentralize?

Author List: Dai, Rui; Narasimhan, Sridhar; Wu, D. J.;
Journal of Management Information Systems, 2005, Volume 22, Issue 2, Page 141-164.
Strategic sourcing, defined as a firm's key business process to identify, evaluate, configure, and negotiate purchases in important spend categories while managing long-term supplier relationships, is playing a significant role in sourcing strategies. The adoption of e-sourcing, defined as the use of business software (for example, using application service providers to conduct online procurement auctions) to automate or augment the aforementioned key business process, has been growing rapidly in recent years. One often-cited benefit of e-sourcing is the predicted savings, which is appealing, given the increasing pressure on cost competitiveness faced by firms. Using queuing techniques, this paper develops an economic model that captures fundamental trade-offs in a firm's e-sourcing business process as characterized by communication complexity, frequency of use, and cost of delay. This allows comparisons of two widely adopted structures for e-sourcing; the centralized structure versus the decentralized structure. Conditions under which the centralized structure is favored over the decentralized structure and vice versa are identified and illustrated with numerical examples and case evidence. These findings are robust in other settings. The paper concludes with a discussion of managerial implications.
Keywords: communication complexity; e-sourcing; economic analysis; organization structure; procurement; queuing; reverse auction
Algorithm:

List of Topics

#277 0.138 structure organization structures organizational centralized decentralized study organizations forms decentralization processing communication sharing cbis activities appropriate provide identify organizing communications
#102 0.110 choice type functions nature paper literature particular implications function examine specific choices extent theoretical design discussion value widely finally adopted
#44 0.090 approach analysis application approaches new used paper methodology simulation traditional techniques systems process based using proposed method present provides various
#69 0.089 process business reengineering processes bpr redesign paper research suggests provide past improvements manage enable organizations regarding focal cycle creating issues
#182 0.078 percent sales average economic growth increasing total using number million percentage evidence analyze approximately does business flow annual book daily
#165 0.064 uncertainty contingency integration environmental theory data fit key using model flexibility perspective environment perspectives high conditions processing examine issue uncertain
#151 0.057 costs cost switching reduce transaction increase benefits time economic production transactions savings reduction impact services reduced affect expected optimal associated
#202 0.052 online uncertainty reputation sellers buyers seller marketplaces markets marketplace buyer price signaling auctions market premiums ebay transaction reverse literature comments