There is increasing interest in outsourcing part or all of the supply function, but little empirical knowledge of the drivers of this phenomenon. Based on a survey of 126 chief purchasing officers, internal purchasing outperforms third parties when strategic buys are involved. For nonstrategic purchases, performance is about equal for internal and third party purchasers, except where tight systems connections or strategic input are critical. Accompanying case studies support these conclusions and illustrate the approaches used by leading firms to position internal purchasing for maximum efficiency and effectiveness.
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