An ongoing challenge in supply chain management is to reduce costs while continuously improving customer service levels. Providing “value” to the customer is a significant, yet increasingly difficult component of this challenge as customers continue to demand high quality sustainable products delivered at their door in minimum time and at a minimum cost. This dissertation focuses on how sourcing contributes to best value supply chains. This work introduces a “value sourcing” framework with a set of mathematical models that support the foundation of the framework. In the form of three essays, the dissertation provides insights for establishing responsive supply chains in today’s competitive business landscape and contributes to meeting the challenges of managing suppliers in a global supply chain.
The first essay establishes a conceptual framework for value sourcing. We define value sourcing as “the process of procuring goods and/or services to meet the needs of the customer via a set of customer-focused supply management initiatives that enables an organization in the selection and management of suppliers”. The second essay defines a mathematical framework that links the value sourcing initiative of supplier evaluation to a supplier’s delivery performance. We minimize the costs associated with untimely delivery and investment to improve delivery performance and present a model to enhance responsiveness in the supply chain. Finally, the third essay uses an optimization model to link costs of penalty and improvement to supplier selection and management, the decision outcomes of value sourcing. In this final essay, guided by a prescribed budget constraint for continuous improvement, we optimize the buyer spending for improvement in supplier delivery performance that contributes to supplier capability, buyer-supplier alignment, and supplier management.
This dissertation contributes to academia and practice in three ways. First, the value sourcing framework addressed in the first essay maps supplier performance to buyer cost, thereby supporting supplier evaluation and selection. In mapping cost to decision making, the framework also addresses supplier development. Second, a penalty cost model for untimely delivery in the second essay quantifies supplier delivery performance in metrics (probability and cost) that is of importance to researchers and practitioners alike. Third, the mathematical model optimized in the third essay addresses the issues of supplier capability and supplier management by the buyer, guided by the buyer’s budgetary constraint for continuous improvement.
Put together, the three essays contribute to a comprehensive understanding of value sourcing practices in a supply chain.