Performance Impacts of Strategy, Information Technology Applications, and Business Process Outsourcing in U.S. Manufacturing Plants

Authors


4bardhan@utdallas.edu

5smithas@umd.edu

6shulin@csufresno.edu

Abstract

This paper develops a conceptual model to study the role of outsourcing strategies and plant-level information technology (IT) application infrastructure in the outsourcing of production and support business processes, as well as their subsequent impact on overall plant performance. We validate this model empirically using cross-sectional survey data from U.S. manufacturing plants. We find that some IT applications are more effective at enabling the outsourcing of business processes than others. For example, the implementation of enterprise management systems is associated with the outsourcing of both production and support processes, whereas operations management systems are not associated with the outsourcing of plant processes. Plants with a low-cost outsourcing strategy are more likely to outsource support processes than plants with a competency-focused outsourcing strategy. However, both cost- and competency-based strategies have a positive and similar impact on the outsourcing of production processes. In terms of implications for plant performance, our findings indicate that the outsourcing of production and support processes is associated with higher gross margins. Although plant IT infrastructure is positively associated with favorable on-time delivery rates, there is no positive association between the incidence of plant outsourcing and on-time delivery rates. These results have implications for crafting plant-level outsourcing strategies and for investments in IT systems to facilitate the outsourcing of business processes for enhanced plant performance.

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