Strategic outsourcing through specifications

Outsourcing is one of the top priorities on the strategic agenda of original equipment manufacturers (OEMs) in many industries. The decision of outsourcing an activity as opposed to doing it in-house and the development of a part or parts system is one of the most complex decisions facing today's industrial managers. Several models have been developed in order to aid in this process. The present paper analyses some of these models, and proposes an extension based on the role that specifications might play in outsourcing decisions, Based on how the specification is generated and on the nature of the data it contains, it can be of significant help in outsourcing decisions. The research reported in the paper is based on a longitudinal study of one automotive OEM (global family), one truck OEM and four medium-sized expert suppliers, all located in Europe. A procurement matrix is developed in which guidance for outsourcing decisions is provided in terms of specification generator, type of supplier, and contract relationship. (C) 2000 Elsevier Science Ltd. All rights reserved.