Globalization, aided by rapid technological innovation, is changing the basis of competition in today's business scenario. Sourcing in the traditional meaning was limited to functional activity, but today it has acquired strategic implications. In order to make their value chains more elastic and organizations more flexible, successful companies are re-looking closely at their core capabilities and redefining how and where to source every single key activity in the value chain. Outsourcing has become strategic in the sense that core functions like design, manufacturing, HR, R&D, marketing, logistics are moved offshore so that companies achieve competitive edge in the market place. Strategic sourcing helps a business enterprise to achieve process improvements, faster-to-market, and create long-term value to its customers, thereby dramatically improving its competitive position in the market place.
We
live today in a hyper-competitive world. Globalization is
inextricably linking the world's major economies. Today's
goal of business excellence is not just best-in-class but
best-in-world. In this global economy, every enterprise
must compete against customer choices that are available
from anywhere and everywhere. Barriers to the market place
are vanishing rapidly with newer and newer competitors entering
the field all the time.
The
single most visible result of this hyper-competitive environment
is rapid commoditization. In this age of intense competition,
even the most innovative products/services are fast turning
into commodities, thereby seriously curtailing the ability
of the producers to command higher prices for their offerings. At
the same time, stakeholders' expectations for profitability
and growth are mounting. Increased shareholder value is
the common demand. Disappointments on any of these fronts
are severely punished in the capital markets, making it
difficult for the enterprises to raise funds for their future
operations.
Against
this backdrop of hyper-competition and increasing pressure
for performance, the very structural integrity of organizations
is beginning to break down. The classical view was that
organizations should be, by design, vertically integrated
and self-sufficient; vertically integrated through a hierarchical
command and control structure; self-sufficient in terms
of setting out to own, manage, and control as many of the
factors of production as possible. |
