Framework for Selection of Sustainable Outsourcing Supplier

Construction of a Framework for Selection of Sustainable
Outsourcing Supplier

Table of Contents
Chapter 1 Introduction.....................................................................................................................1
1.1 Project background...........................................................................................................1
Significance of Study.............................................................................................................4
Chapter 2- literature review.............................................................................................................5
2.1 Introduction......................................................................................................................5
2.2 Balance Score card - The drawback ..............................................................................11
2.7 Analytic Hierarchy Process............................................................................................16
2.8 Application of Analytic hierarchy process.....................................................................17
2.9 Sustainability of outsource partner ................................................................................20
Chapter 3 - Design methodology ..................................................................................................26
3.1 Design mythology..........................................................................................................26
3.2 Phase 1 – Identify Building............................................................................................27
3.3 Phase 2 – Strategic Analysis...........................................................................................28
d. i.........................................................................................................................................30
e) Phase 5a- Implementation and measurement...................................................................36
Phase 5b................................................................................................................................38
3.1 Supplier Coding Process.................................................................................................40
Chapter Four – Application Case Study........................................................................................49
4.1 Case background............................................................................................................49
4.1.2......................................................................................................................................53
3. Strategic definition...........................................................................................................66
4. Implementation.................................................................................................................67
CHAPTER 5 : Results and discussion...........................................................................................80
5.1 Measure Company_S performance using balance scorecard.........................................80
CHAPTER 6: CONCLUSION......................................................................................................96
6.1 Overall project done.......................................................................................................96

6.2 Achievement of the project............................................................................................96
6.3 Limitation.......................................................................................................................97
6.4 Recommendation in the future.......................................................................................97

Illustration Index
Illustration 1: Theme 1...................................................................................................................55
Illustration 2: Theme 2...................................................................................................................56
Illustration 3: Theme 3...................................................................................................................57
Illustration 4: Theme 4...................................................................................................................58
Illustration 5: Theme 5...................................................................................................................59
Illustration 6: Theme 6...................................................................................................................60
Illustration 7: Strategy Evaluation.................................................................................................68
Illustration 8: Balance Scorecard Process......................................................................................71
Illustration 9: Supply quality score................................................................................................76
Illustration 10: Sustainability.........................................................................................................78

Chapter 1 Introduction
1.1 Project background
Under the evolution of paradigm of globalization over the years, Outsourcing is defined
as the operation of shifting from internal governance to external under a long-term contract,
frequently involving the transfer of staff to vendor (Barthélemy, 2003; Quélin & Duhamel, 2003)
Outsourcing supply chain become another strategies for gaining the higher competitive
advantage than domestic (on-shore) manufacturing. China value proposition is more complex
and mature on supply chains, sophisticated upstream processes, well developed infrastructure,
and a wide range of electronics suppliers offering various specifications, technical competencies
of knowhow and capacity. As of 2013, global EMS (electronic Manufacturing Services) industry
is around $440 million business, producing over half of the world’s electronic products. There
are over 40 countries providing EMS service, and China is one of the biggest market shares.
China occupies about 53% of the global production value of the EMS industry in 2012. (Keith,
2013)
According to Hao, outsourcing manufacturing bring out several benefit compared to in-
house manufacturing, they are 1. Reduce the developing schedule 30% - 50%, 2. reduce to the
development cost, 3. change or improve to the quality of product and production, Outsourcing
vendor provides a more reliable parts and component, avoid any change in the future. 4. More
competitive edge if outsource vendor is more mature and reliable than competitors. 5. Increase to
the effectiveness of technology research (Hao 2013).
Wendin suggested that are two major trends are affecting the electronic manufacturing
industry. One is the pricing pressure up growing continuously so to make the electronic-based
product become more standards-base. This results product company outsources additional
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functions to reduce to the cost for more margins in the pricing competition. Secondly, Merging
to China and Asia countries is necessary to survive on cost control, low cost manufacturing
locations and also it labor cost, technical and engineering supports to the low cost of pricing.
Moreover, potential new market opportunities has shift to China and Asian domestic electronics
market. And thus the outsourcing manufacturing in China and Asia area is still under a need on
pricing competition factor. (Wendin, 2005)
Theoretically, the more vendors on the list keeps in the vendor database helps to
Company for more selection during new order item enquiry received.
However, in actual situation, due to the resource of the Company on outsource vendors’
management, the size of active vendor running to the project that should be optimized and
minimize to Company’s effort. Therefore, right selection to the vendor or finding a suitable
vendor is critical for Company’s project development.
For a new supplier, each time the Company has to overcome to a running in period to
suppliers to under both side’s vision, requirement and culture to another party. A closed vision
and consensus suppliers working on the supply chain, which result to results including shorten of
the product develop lead time, reduction of cost and also improve to competitive advantage. [14]
From the point of view in supplier relationship, it is very costly and longer time has to
pay into running in period. Time to market is very important condition to succeed against
competitors. It has to be a collaborative partnership to outsourcing suppliers and both of each
side could understand each other. The less of period on spending on learning from the supplier,
the more effective time on the running the project, and consequently more accurate to the time
line - Once the project confirmed, the time-line has set, if the vendor should be completed to the
order before the timeline. If the vendor is not the right suitable to Company’s standard and
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requirement, the project will be affect in terms of quality and time management. Project launch
time should be right to the market, once the project completion schedule is delay, the go to the
market schedule will be delay. Especially in consumer electronic product, the delay of time to
the market will dramatically decrease the competitive ability.
To conclude, the company should optimize this vendor list for lease effort of vendor
management. However, at the same time the active vendors keep to Company side should be
provide capable to provide with required quality and standard. Therefore, sourcing with a
suitable vendor for partnership is critical to make the merchandizing business successful.
Therefore, a long term relationship to a supplier would be very important on the supply
chain management. However, below discussion is the consequential problem statements of issues
on holding the relationship on the outsource suppliers. High wages labour cost in China The
rapid economic growth and the new revolution of central government policies resulted to the
rising of operation cost and increase in wages. Particularly, the inflation of Pearl River Delta
and Shanghai is much more obvious than interior Chinese regions and also the neighbouring
countries in Southeast Asia. And this come with buying office and turnkey office move out into
inland China, or some of them be shift to near-shore or on-shore production.
Source: http://www.industryweek.com/supply-chain/five-emerging-trends-impacting-asian-
manufacturing
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Significance of Study
There are thousands of factory providing outsourcing services in China. low cost
facilities and labour and also high technical support company, the Company manager has to
select right supplier catered to the Company’s project difficulties and Company operation policy.
Thus, a systematic analytic tool and framework for evaluation is highly necessary for the
standardization to evolution and selection of supplier.
The Outsourcing activity in China
About two-thirds of China’s electronic manufacturing revenues comes solely from
foreign-funded or Sino-foreign joint ventures. The world’s top ten electronics manufacturers
have all invested in China and consider China to be a key region in the global manufacturing
revenues in 2005.
Figure xxx shows to the ranking of outsourcing countries. Though under the increasing of
operation cost, China has the largest labour population over the world. Besides, China has
developed to both manufacturing and retailer’s opportunities in the same place, in which keeps
China to the key player in the global outsourcing industry.
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