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Performance Impacts of Strategy, Information Technology Applications, and Business Process Outsourcing in U.S. Manufacturing Plants
Author(s) -
Bardhan Indranil,
Mithas Sunil,
Lin Shu
Publication year - 2007
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/j.1937-5956.2007.tb00293.x
Subject(s) - outsourcing , knowledge process outsourcing , business , process management , production (economics) , industrial organization , business process , process (computing) , operations management , knowledge management , marketing , computer science , economics , work in process , microeconomics , operating system
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.