Supply Chain Management: Relational Sourcing

INTRODUCTION

Supply chain management (SCM) has evolved as a prime element in shaping the effectiveness of the organisations. In the current competitive market, enterprises have eventually noted that the individual entrepreneurial capabilities are not the only driving factor for competitive advantage instead the capability of a compact supply chain plays a vital role (Prajogo and Sohal, 2013). Supply chain management can be defined as the stream of goods, materials and information within and between the entity, co-related by a range of tangible and intangible stimulators, involving activities, partnership, processes and incorporated information systems (Peck, 2004). SCM has been exposed to dramatic rapid changes over last few years which are

Going hand on hand, the importance of the sourcing practice as well has been increased over years and it is essential for enterprises to settle on and choose the most profitable sourcing strategy. According to Eng, Chew, and Lee (2014), since the paradigm shift from traditional sourcing, this increased urge for organisational sourcing in the current business environment can be described from three perspectives; the first one is the relational perspective, which slots that individual inter-organisation connections are the driving force of relational rents which can be explained as; abnormal profits generated in cooperation to the interactive relationship that cannot be created by organisation working independently and only can be created during the cooperative individual contributions of explicit grouping partners (Buetow, 2007). However, on a traditional sourcing perspective, outside sectorial and domestic requirements of the companies, the current representations of the supplier association appear to be branded by a certain co-operational factor. Against the earlier entrepreneurial independency and competitive individualism attitude, and facilitated by developed manufacturing and administrative methods, the traditional models anticipate an extra stretched functional collaboration throughout the supply chain which result in

Strategic sourcing is a vital initiative of lashing down the cost all over the supply chain. Regardless, the expected availability of specialized assets coupled with low cost labour advantage, the functionality of a compactly interfaced international manufacturing system lead to a flexible enterprise in the course of prospective dual sourcing and shifting the manufacturing in reaction to the demand and cost variations (Flaherty, 1986). However, there are quite a few conflicts amongst the scholars in the industry regarding the cost – benefit equation of International sourcing. For instance, Reich (1991), points to the entrepreneurial and the subsequent technological development that substantially shrink the cost and expedite the information flow and the physical transportation making the international sourcing possible. However, Curtain (1987) finds that the organisations outsourcing habitually miss to consider the added costs of sourcing, specially, intangible costs like the low flexible and the prospective competitive loss in primary