An Analysis of the Role of Distributors and Contract Manufacturers

ABSTRACT

As both supplier and consumer markets have gone global, businesses have had to rethink how they organise their supply chains in order to take advantage of price, skill set, and other advantages available in different regions. By having suppliers handle some of the production, you may more easily respond to opportunities in other regions. Material supply can be impacted in terms of delivery reliability, lead times, and product quality when production is outsourced because it requires a shift from in-house to external material supply. This thesis examines the effects on material supply brought about by the shift from in-house production to outsourcing. The goal of the thesis as a whole is to learn how to keep the outsourcing process running smoothly by ensuring a steady stream of high-quality raw materials. From the time a choice is taken to outsource, before any physical transfer takes place, through the point where a steady state is attained with a continuous supply from the new source, the entire process is covered. The results of six papers are used to address three research issues in the thesis. Altogether, the six publications draw from five studies: two single-case studies, two multiple-case studies, and one simulation study. The case studies empirical data largely came from interviews with outsourcing firms employees. In order to ensure a smooth supply chain transition, start-up, and steady state after physical transfer, the first research question seeks to determine what logistical considerations are necessary at each stage of the general outsourcing process. The second study question offers a framework for assessing the after-effects of outsourcing, including the effects on fixed costs, product quality, customer service, and the adaptability of delivery. In addition, the simulation study demonstrated that supply chain performance can be enhanced by optimising the use of the various components of the supply chain, which can be done with a sourcing strategy of sourcing reliable demand internationally and handling unpredictability locally. The third study question explains how supply chain performance is impacted by the selection and implementation of a material planning strategy at the time of production transfer and start-up.

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