Exploration of Factors That Influence Failure in The    Electronics Hardware Outsourcing Industry.                 Oral Pr...
}  Research Problem:}  Failure in outsourced manufacturing       –  Survey: Only five percent achieve significant benef...
}    Research Problem Background      ◦  $370 Billion Industry      ◦  Global Industry      ◦  Much Intellectual Property...
}    Main Research question:      ◦  What did participants perceive as major factors that         influence failure in EH...
}    Market Drivers      ◦  Cost Reduction:    (Merrifield, 2006; Kroes, 2007; Griffiths, 2003; Harland, Knight,       La...
}    General Capabilities:               (Dastmalchi, 2007; Handfield & Lawson, 2007;      Buckley, 2009, Baloh et al. 20...
}    Product Life-Cycle:             (Hua & Wemmerlov, 2006; Ulku, Toktay & Yucesan,      2005)}    Outsourcing wrong pr...
Literature    Communication   People   Capabilities   Flexibility   Goalsreview FactorsCapabilities          X            ...
}    Rationale for Qualitative Research      ◦  Complex and interrelated Human factors such as         trust, commitment,...
}    Criterion-based Purposeful Sample selected (Electronics Hardware      Executives, 10+ yrs).}    Develop Interview &...
}    Rationale: Needed to have experience executives that      have experienced failure and discuss details of factors.}...
}  Primary data collection tool is the recorder    during interviews.}  Recorder provided ability to:      ◦  evaluate v...
}    Read, re-read, listen to transcripts and annotate Data in NVivo.}    Assign Preliminary categories based on on tran...
Business               Culture            Text Query                 4%         Flexibility            9%                 ...
A	  Code	  Query	  searches	  for	  associations	  with	  two	  or	  more	  codes	  assigned	  in	  data.	  
Manual Code association References80706050403020                                        References10 0
}    Main Research question:      ◦  What did participants perceive as major factors that         influence failure in th...
Manual code References              Business Culture                    4%Flexibility   9%                                ...
}    Finding #2: The majority (65% of participant      code association references) cited      commitment & capabilities ...
Par$cipant	  Code	  Associa$on	  References	           (Capabili$es	  and	  Commitment)	  70605040302010 0
}    Sub-Question 1How did participants perceive alignment of capabilities and goals influence failure in the EHMO indust...
Manual	  Code	                                   References	  Flexibility   10%          Value                 8%         ...
Sub-question 2:} What did participants perceive as failure?Finding #4: 96% of participants cited  misalignment of relatio...
Finding #5: 39% of participant references cited  not meeting a critical goal (product price,  quality, delivery, or functi...
Finding #6: 34% of participant references cited problems with       relationships and communications related to failure.  ...
Finding #7: 4% of participant references cited a  “significant loss” related to failure.  Significant loss is defined as a...
Finding #8: 100% of participant references cited a  skilled communicator, dedicated, & Flexible as the  necessary type of ...
Critical Incident Report                                   Code References                Communication                   ...
Code Association References504540353025201510 5 0                                 References
}    Failure occurs when one, some, or all of the      following are misaligned:      ◦  Communications      ◦  Flexibili...
}    Outsourcing cannot sustain non-achievement      of certain critical organizational goals (price,      delivery, qual...
}    Misalignment of goals, trust, commitment &      communications are “Fundamental Factors” to most      failures. All ...
}    Trust, Communications, & Commitment are      key building blocks of a CEM and OEM      outsourcing relationship.    ...
}    Capabilities and Goal alignment is not      enough to prevent failure. OEMs and CEMs      must be committed to each ...
}  Only (10) participants.}  (5) Participants contributed much more in    Content to the study.}  Limited on the impact...
The Outsourcing Factor Iceberg                        Hard FactorsVisible &                    Goalsmeasureable           ...
}    Emphasizes “Soft Factors” when evaluating      Outsourcing partners.}    Emphasizes managing and improvement of    ...
Thank you
Outsourcing Electronic Manufacturing
Outsourcing Electronic Manufacturing
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Outsourcing Electronic Manufacturing

  1. 1. Exploration of Factors That Influence Failure in The Electronics Hardware Outsourcing Industry. Oral Presentation Submitted to the Faculty of Argosy University Campus, College of Business. In partial fulfillment of the requirements for the Degree of Doctor of Business Administration David O. Chavez 8-18-11
  2. 2. }  Research Problem:}  Failure in outsourced manufacturing –  Survey: Only five percent achieve significant benefits (Lonsday, 1999). –  Survey considered 37% outsourcing engagement failures, (Barthelemy, 2003).}  Limited data exists in Electronic Hardware Manufacturing Outsourcing (EHMO) because: ◦  Publicity damage reputation and stock prices. ◦  High Technology Intellectual capital secrecy ◦  Competitive pressures
  3. 3. }  Research Problem Background ◦  $370 Billion Industry ◦  Global Industry ◦  Much Intellectual Property involved ◦  Over 4000 Contract Electronic Manufacturers supporting Multinational Original Equipment Manufacturers. ◦  Impacts Manufacturing in the following industries: –  Medical Device –  Consumer Electronics (Cell phones, Tables, PCs, etc) –  Aerospace Electronics –  Military Electronics (Communications, etc.) –  Industrial Controls –  Communications (Infrastructure Hardware)
  4. 4. }  Main Research question: ◦  What did participants perceive as major factors that influence failure in EHMO industry? -Sub Questions: 1  How did participants perceive the alignment of capabilities and goals as influencing failure in outsourcing in the EHMO industry? 2  What did participants perceive as failure in the EHMO industry? 3  What did participants perceive as the necessary types of people needed for a successful outsourcing relationships?
  5. 5. }  Market Drivers ◦  Cost Reduction: (Merrifield, 2006; Kroes, 2007; Griffiths, 2003; Harland, Knight, Lamming, & Walker, 2005; Agrawal, Ferrel & Remes, 2003; Doig, Ritter, Spechals & Woolson, 2002; Value Cration, 2007) ◦  Increased Flexibility: (Lee, 2004; Loh & Vankatraman, 1992; Gottedson, Puryear, & Phillips, 2002; Harland et al. 2005; Ulric & Ellison, 2005) ◦  Access to Innovation: (Bozarth, Handfiel & Das, 1998; Harland et al. 2005, Gaio et al. 2005, Baloh, Sanjee & Yukika, 2008; Handfiel & Lawson, 2007; Baloh et al. 2008) ◦  Improved Quality: (Bozarth et al. 1998, Harland et al. 2005) ◦  Improved Time-to-market: (Webster, Alder & Muhlemann, 1997; Oberoi & Kamba, 2005)
  6. 6. }  General Capabilities: (Dastmalchi, 2007; Handfield & Lawson, 2007; Buckley, 2009, Baloh et al. 2008; Oberoi et al. 2005)}  Time: (Aron, 2005; Al-Salim, 2007, Gilley, McGee & Racheed, 2004; Lackow, 1999, Dastmalchie, 2007)}  New Product Introduction Stage: (Dastmalchie, 2007; Tatikonda & Stock, 2003; Sousa & Voss, 2007)}  Mix and Volume Capabilities: (Dostaler, 2001; Sousa et al. 2007; Ulrich & Ellison, 2005)
  7. 7. }  Product Life-Cycle: (Hua & Wemmerlov, 2006; Ulku, Toktay & Yucesan, 2005)}  Outsourcing wrong processes: (Harland, Knight, Lamming & Walker, 2005; Gottfredson et al. 2005; Baloh et al. 2008)}  Trust: (Jennings & Whitaker, 2010; Mashal & Szabo, 2010; Daz & Teng, 2001; Oberoi et al. 2005)}  Globalization Risks (Communication, culture, and language): (Whitman, 2008; Aron et al. 2005, Scheiderjans & Zukweiler, 2004; Dankbaar, 2007; Waehrens et al. 2008; Cateora, Gilly & Grahm, 2009; Rodenbaugh, 2010)
  8. 8. Literature Communication People Capabilities Flexibility Goalsreview FactorsCapabilities X X X XOutsourcing X X X XWrongProcessesIntegration X X X X XRisksNPI/NPT X X X X XRisksProduct Mix X X X X Xand VolumeRisksProduct Life X X X X XCycle RisksCosts X X X X XInnovativeness X X X XQuality X X X XTime Related X X XLack of Trust X X X X XGlobal Risks X X X X X!
  9. 9. }  Rationale for Qualitative Research ◦  Complex and interrelated Human factors such as trust, commitment, communication and business culture. ◦  Qualitative research is good for: –  Providing Rich explanation of complex Phenomenon. –  Discovery of Human experiences and perceptions. –  Explore of evolving concepts or theories. –  Further understand human relationships and patterns. (Rubin & Rubin, 2005; Cronbach, 1975; Hoepfl, 1997; Bloomberg & Volpe, 2008)
  10. 10. }  Criterion-based Purposeful Sample selected (Electronics Hardware Executives, 10+ yrs).}  Develop Interview & critical incident questions & Demographic survey.}  (1) Pilot Sample}  Refine Research Design}  (8) Semi-Structured, In-depth, telephone interviews}  (1) Semi-Structured, In-depth, Face-to-Face Interview}  Data is recorded, transcribed, coded, & analyzed in Nvivo and Synthesized.}  Findings, conclusions & Recommendations
  11. 11. }  Rationale: Needed to have experience executives that have experienced failure and discuss details of factors.}  Total of 10 executives}  Electronics Hardware Executives with average of 10 year experience with CEMs, or OEMs.}  Participated in electronic outsourcing selection process.}  Manager, Director, CEO level experience}  Experience working either engineering, management, quality, supply Chain, procurement, or sales.
  12. 12. }  Primary data collection tool is the recorder during interviews.}  Recorder provided ability to: ◦  evaluate voice inflexion, ◦  emphasis on certain topics ◦  ability re-listen to details not gathered in live interview.}  Memos, Annotations of Data, Notes}  Survey filled during interview
  13. 13. }  Read, re-read, listen to transcripts and annotate Data in NVivo.}  Assign Preliminary categories based on on transcripts and literature review.}  Translate Categories to “Free nodes” in Nvivo.}  Consolidate Free nodes to broad nodes in NVivo.}  Cross-code to capture data from prompted & non-prompted responses.}  “Coding-on” and break down some codes to further define (Tree Nodes in Nvivo).}  Validate Data (Text and Code association query)}  Synthesis of Data.
  14. 14. Business Culture Text Query 4% Flexibility 9% GoalsCommitment 25% 10% Capabilities Communications 16% 19% Trust 17% Flexibility Business Culture Manual code References 9% 4% Trust 11% Capabilities 21% Commitment Communication 17% 20% Goals 18%
  15. 15. A  Code  Query  searches  for  associations  with  two  or  more  codes  assigned  in  data.  
  16. 16. Manual Code association References80706050403020 References10 0
  17. 17. }  Main Research question: ◦  What did participants perceive as major factors that influence failure in the EHMO industry? ◦  Findings #1 1  Capabilities, 2  Communications, 3  Goals (cost, quality, delivery, functionality & financial), 4  Trust, 5  Flexibility, 6  Commitment 7  Business Culture.
  18. 18. Manual code References Business Culture 4%Flexibility 9% Capabilities Trust 21% 11% CommunicationCommitment 20% 17% Goals 18%
  19. 19. }  Finding #2: The majority (65% of participant code association references) cited commitment & capabilities combined with other factors to influence failure with other factors the most.
  20. 20. Par$cipant  Code  Associa$on  References   (Capabili$es  and  Commitment)  70605040302010 0
  21. 21. }  Sub-Question 1How did participants perceive alignment of capabilities and goals influence failure in the EHMO industry?Finding #3: The overwhelming majority (82% of participant references) cited commitment, capabilities and goals influence failure.
  22. 22. Manual  Code   References  Flexibility 10% Value 8% Capabilities 35% Commiittment 23% Goals 24%
  23. 23. Sub-question 2:} What did participants perceive as failure?Finding #4: 96% of participants cited misalignment of relationships, communications & goals as influencing failure. Percep$on  of  Failure   Significant Loss References   4% Relationship 21% Goals 39% Communication 36%
  24. 24. Finding #5: 39% of participant references cited not meeting a critical goal (product price, quality, delivery, or functionality) as a failure.
  25. 25. Finding #6: 34% of participant references cited problems with relationships and communications related to failure. Code Association References3025201510 5 0 Communication Communications Relationships & Communcation & Goals & Relationhships & & Relationships & Goals Goals Significant Loss Significant Loss Significant Loss
  26. 26. Finding #7: 4% of participant references cited a “significant loss” related to failure. Significant loss is defined as a loss of large customer, opportunity, or catastrophic event.
  27. 27. Finding #8: 100% of participant references cited a skilled communicator, dedicated, & Flexible as the necessary type of people needed for successful outsourcing relationships.Finding #9: 52% of participant references cited a dedicated as necessary characteristic for outsourcing relationship. Successful  People     Manual  Codes  References   Flexible 11% Skilled Dedicated communicator 52% 37%
  28. 28. Critical Incident Report Code References Communication 8% Goals Capabilties 13% 29%Flexibility 15% Business Culture 18% Committment 17%
  29. 29. Code Association References504540353025201510 5 0 References
  30. 30. }  Failure occurs when one, some, or all of the following are misaligned: ◦  Communications ◦  Flexibility ◦  Commitment ◦  Goals ◦  Business Culture ◦  Capabilities ◦  Trust
  31. 31. }  Outsourcing cannot sustain non-achievement of certain critical organizational goals (price, delivery, quality, & functionality).}  Goals were listed: ◦  Top 3 (Main Question) ◦  Top 2 (Sub-Question 1) ◦  Top 1 (Sub-Question 2) ◦  Top 5 (Critical Incident)
  32. 32. }  Misalignment of goals, trust, commitment & communications are “Fundamental Factors” to most failures. All within Top 4-5 factors in Code references Goals Communication Trust Commitment Capabilities Flexibility Business Culture
  33. 33. }  Trust, Communications, & Commitment are key building blocks of a CEM and OEM outsourcing relationship. Communication Trust Relationship Commitment
  34. 34. }  Capabilities and Goal alignment is not enough to prevent failure. OEMs and CEMs must be committed to each other. Code Association Analysis & Interviews.}  “Many-to-Many” communications lead to “Many-to-Many” relationships to reduce failure. Code Analysis & Interviews.}  Significant loss: non-achievement of critical goals, or loss of key customer relationship.
  35. 35. }  Only (10) participants.}  (5) Participants contributed much more in Content to the study.}  Limited on the impact of factors on specific Industries (medical, military, industrial, consumer, etc.)}  Limited on the impact of factors on other geographic cultures, languages, markets and technologies.}  Researcher interviewing and probing skills.}  Researcher Interpretation of data.
  36. 36. The Outsourcing Factor Iceberg Hard FactorsVisible & Goalsmeasureable CapabilitiesNot Visible &hard tomeasure Soft Factors Relationships: Communication, Trust, & Commitment Business Culture Flexibility
  37. 37. }  Emphasizes “Soft Factors” when evaluating Outsourcing partners.}  Emphasizes managing and improvement of soft factors over time.}  Transcends to other outsourcing industries such as: ◦  Pharmaceutical, ◦  Call Centers, ◦  Mergers and Acquisitions ◦  Strategic Supplier relationships.
  38. 38. Thank you
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