CSCMP's Supply Chain Quarterly
December 16, 2017
Supply Chain Executive Insight E-Newsletter
Each week the Supply Chain Executive Insight e-newsletter will include brief articles about developments that are often overlooked by other supply chain publications. We will present you with summaries of the latest research as well as new ideas on how to make your supply chain operations more effective. And we'll offer commentary that sheds light on what's happening in supply chains today.
Sign up now!

Most Read Articles

News from our sister publication
DC Velocity
Afterword
Afterword

Outsourcing lessons from a master

Comment
It's just a hunch, but I'm going to guess that your summer reading list did not include anything by Oliver Williamson.

It's just a hunch, but I'm going to guess that your summer reading list did not include anything by Oliver Williamson. Williamson, who is professor emeritus of business, economics, and law at the University of California, Berkeley, is an internationally acclaimed economist who specializes in the arcane subject of transaction-cost economics. If his name sounds familiar, it might be because he—with co-recipient Elinor Ostrom—was awarded the Nobel Memorial Prize in economic sciences in October 2009.

What brings Williamson to mind is a note that recently arrived in my inbox from a couple of good friends, Kate Vitasek and Karl Manrodt. (Vitasek is a faculty member at the University of Tennessee's Center for Executive Education, and Manrodt is on the faculty at Georgia Southern University.) They were writing to tell me about their efforts to raise awareness of Williamson's work within the supply chain community. His research, they wrote, "has significant implications for the outsourcing and supply chain management industries, but few professionals outside of academia know of the work and its sweeping implications, if adapted."

There's a simple reason for that. Williamson's work covers very complex issues, in a very, well, complex way. It's not the kind of reading most of us are likely to keep on the nightstand or toss in a bag on our way to the airport.

In hopes of bringing Williamson's research to a wider audience, Vitasek and Manrodt have joined forces with Richard Wilding of the U.K.'s Cranfield School of Management and Tim Cummins, founder and CEO of the International Association for Contract & Commercial Management (IACCM), to produce what essentially amounts to a translation of Williamson's work. The result is Unpacking Oliver: Ten Lessons to Improve Collaborative Outsourcing, a white paper that outlines principles supply chain professionals can apply to their outsourcing relationships.

What makes Williamson's work so compelling is its insight into what makes an outsourcing arrangement succeed, says Vitasek, who is herself the author of a book on the subject, Vested Outsourcing: Five Rules That Will Transform Outsourcing. "Williamson's views about how to contract with suppliers respond to the industrywide need for companies to work smarter with their suppliers," she says. "Companies have been focusing on 'lowest price' versus 'best value,' which creates hidden transaction costs. Williamson's work shows this approach [to be] myopic and inefficient. Instead, companies should be creating business relationships in which both parties have a vested interest in each other's success. It is the only way both the company and its suppliers can create a positive and truly collaborative working relationship."

The white paper's authors have broken down Williamson's work into lessons on topics like how to develop contracts that create "mutuality of advantage," how to fully understand the transaction attributes (and their impact on risk and price), and the importance of using a contract as a framework—not a legal weapon. In addition to the lessons, the paper includes concrete advice for practitioners. The white paper is available (at no charge) with registration at the "Resources" section of www.vestedoutsourcing.com.

Mitch Mac Donald is Group Editorial Director of AGiLE Business Media.

Join the Discussion

After you comment, click Post. If you're not already logged in, you will be asked to log in or register.


Want more articles like this? Sign up for a free subscription to Supply Chain Executive Insight, a monthly e-newsletter that provides insights and commentary on supply chain trends and developments. Click here to subscribe.

We Want to Hear From You! We invite you to share your thoughts and opinions about this article by sending an e-mail to ?Subject=Letter to the Editor: Quarter 2010: Outsourcing lessons from a master"> . We will publish selected readers' comments in future issues of CSCMP's Supply Chain Quarterly. Correspondence may be edited for clarity or for length.

Want more articles like this? Subscribe to CSCMP's Supply Chain Quarterly.