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Keywords:

  • outsourcing;
  • procurement/purchasing processes;
  • risk/risk assessment;
  • supplier management;
  • supply chain management;
  • conceptual

Typically, a triad of actors is involved in any outsourcing situation: the buyer, the supplier and the buyer's customer. In manufacturing, the buyer acts as a bridge between its supplier and its customer and maintains this bridge position before, during and after the outsourcing. However, in services, the relationship structures among the three actors change before, during and after the outsourcing. Before outsourcing (i.e., during the contract negotiation stage), the buyer is the “bridge” between its supplier and its customer. During implementation, this bridge position begins to “decay” as its supplier comes in direct contact with the buyer's customer. Post-implementation, the bridge position is intended to be “transferred” to the supplier. However, if left unmanaged, this state of transferred bridge position has serious performance implications for the buyer. The supplier is now the bridge and thus enjoys the leverage inherent in being a bridge. This point has been missed in many services outsourcing ventures by major multinational corporations. To mitigate this effect, we propose that the buyer should continue to actively interact with its customer and closely monitor the supplier in order to prevent the supplier from solidifying its bridge position.