Objective of the case is to analyse Triton’s current purchasing mechanisms and provide alternatives to Mrs. Donna Rock, who heads the Global Sourcing Task force in formulating a suitable hybrid sourcing policy. This includes providing suggestions both on the sourcing procedures as well as structuring the performance evaluation framework of such a policy.

1. DESIGNING A HYBRID GLOBAL SOURCING
STRATEGY FOR TRITON LABS
ABSTRACT
Objective of the case is to analyse Triton’s
current purchasing mechanisms and provide
alternatives to Mrs. Donna Rock, who heads the
Global Sourcing Task force in formulating a
suitable hybrid sourcing policy. This includes
providing suggestions both on the sourcing
procedures as well as structuring the
performance evaluation framework of such a
policy.
By Sachin Mathews
Strategic Supply Chain Management
Trimester 2A, 2015

2. 1
Table of Contents
Sl No. Title Page No
1. Introduction 2
2. Objective 2
3. Background 2
4. Recommendations in formulating the Hybrid Sourcing Strategy 3
6. Conclusion 4
7. References 5

3. 2
1. Introduction
The case under consideration “Designing a Hybrid Global Sourcing Strategy” is about “supply
chain rationalization” and “role-shifting” in terms of the changes that needs to be incorporated
in sourcing policies of Triton Labs, a key player in the pharmaceutical industry that would help
it reduce costs and improve efficiency at the same time. The sector was undergoing major
transition, mainly attributed to two raising issues, one the patent protection of top selling drugs
were ending affecting profit margins and the search for new drugs were becoming more
expensive. To increase the market power, reduce costs through budgets cuts many top players
were merging such as Glaxo-SmithKline, Pfizer-Warner Lambert. Triton has to revisit and re-
engineer it sourcing policies to stay afloat in this highly competitive market.
2. Objective
The main objective of the case is to analyse Triton’s current purchasing mechanisms and
provide alternatives to Mrs. Donna Rock, who heads the Global Sourcing Task force in
formulating a suitable hybrid sourcing policy. This includes providing suggestions both on the
sourcing procedures as well as structuring the performance evaluation framework of such a
policy.
2. Background
Triton’s current purchasing mechanisms is revolved around a de-centralized strategy having 7
distinct purchasing groups located across Asia, Europe, Latin America and US. This has its
own benefits providing the firm with greater flexibility, especially in terms of the
responsiveness and the technical expertise it had gained in meeting the requirements of its local
operations. However on conducting an S.W.O.T analysis, there were opportunities for cost
reduction through a more centralized approach. The team felt this would offset the threat of
mergers and the increasing cost of “blockbuster” drugs by leveraging the collective bargaining
power it would gain by consolidation. It would also benefit from standardization of products,
improved coordination, more purchasing control and lessen the duplication of work. The saving
seemed to be substantial. But there was also flip side, making this paradigm shift would cost
and considering the complexity it wasn’t possible to make a complete change any time soon.

4. 3
Hence the team felt the best way forward would be to have “Hybrid” sourcing strategy combing
the benefits of both and reduce negatives of each.
3. Recommendations in Formulating the Hybrid Sourcing Strategy
First and foremost the team needs to decide what supplies needs to go through a centralized
purchasing structure and what needs to decentralized. This requires a degree of
“rationalization” as pointed out by (Fawcett 2006) which involves a process of supply-base
optimization involving decisions regarding “which” suppliers to choose from, “how many” and
“how much” depending on the firms current requirement. This must be done only once supply
chain is mapped, customer needs are identified and costing systems put in place (Fawcett 2006).
As for the decentralized sourcing, the focus should be on flexibility and improving the
responsiveness, while for centralized sourcing the focus should be to reduce cost and achieve
economies of scale. As mentioned in the case, there also needs to be a proper mechanism to
integrate and synergize the two in terms of people, processes, and technologies (Faes 2000). In
addition the roles and responsibilities for each of these structures have to be identified and
integrated smoothly without causing a “culture shock” in the organization.
Donna and her team could use various analytical techniques both for identifying the core
supplies as well as the core activities in terms of the affect it has on cost involved, lead time,
criticality etc. Techniques such as ABC Analysis derived from Pareto’s 80/20 rule, VED (Vital,
Essential and desirable), FSN (Fast, Slow and Non- moving), SOS (seasonal or off seasonal)
could help her team in laying the foundation of her purchasing structure. The portfolio
purchasing model" developed by (Kraljic 1983) is another technique which would help her
team to further classify supplies and activities performed under each structure based on the
profit impact and the supply risk as strategic, leverage, non-critical and bottleneck supplies
/activities. The leverage items that have low supply risk but high profit impact would come
under the centralized structure. However the difficulty in using this approach is that not all
strategic and bottleneck supplies or activities can come under the centralized structure as some
of the risks can only be tackled through its local suppliers or the de-centralized structure. The
team would need to analyse the ability to handle uncertainty and risks both in terms of the
sourcing of supplies under the two structures as well as in the migration process. It would
require a cross examination of both the quantitative and qualitative factors and appropriate

5. 4
techniques that combines the two, such as Analytic Hierarchy Process (AHP) (Nydick 1992),
or ones coupled with fuzzy logic method (Kahraman 2003) which would be more suitable. As
suggested by (Trautmann 2009), in addition to the strategic importance Donna and her team
needs to consider the synergy potential aspect as well while deciding the kind of purchase under
each structure. The centralized structure should focus on the strategic and leverage items where
the buying power can be better leveraged to gain higher margins at the same time not severely
impacting the responsiveness. As most of these supplies would be related to the blockbuster
drugs, Donna and her team should work on building stronger relationships with these suppliers.
With this the de-centralized teams would be able to better collaborate and work closely with
centralized teams and their suppliers in information and knowledge sharing. The non – critical
or the supplies needed for day to day activities should come under the de-centralized structure.
The team should also improve the relationships of these suppliers even though they have lesser
impact on profit or lower supply risk as they can further improve their responsiveness and
leverage other benefits such as to gain insights on local market and technological trends. The
intranet and extranet technologies already in place could further facilitate the data-warehousing,
data-mining and other data analysis techniques. The improved sharing of this real time
information can lead to better section and evaluation of supplier’s performance and in
implementing an optimal purchasing strategy.
The huge shift in purchasing structures at a global scale, will need to factor in the socio-culture
aspects of change in the organisation. This need to be done both at the internal, functional level
as well with suppliers under the new structure. It would require an investment made in cross-
cultural training and building global competencies (Steers 2013), that would help employees
across the organization to better adapt to new structure. In addition, to keep the purchasing
managers in the local operations interested, would require closer integration and greater
participation in the centralized mechanism, revision of the existing HR policies, incentive
mechanisms for performance that would eventually lead to a higher role in the centralized
mechanism as well as in the organization.

6. 5
4. Conclusion
Organization change is a necessary but is a complex process and various aspects needs to be
considered. As seen in this case study a shift in in the global sourcing structures from a de-
centralized to a hybrid sourcing structure requires careful analysis on what fits best in the
existing environment in terms of people, processes and performance. When done for the right
reasons and implemented properly, role shifting can provide significant benefits to an
organization both in terms of cost savings and efficiency.

7. 6
5. References
Faes,W.,Matthyssens,P.,Vandenbempt,K.,.2000.“The pursuitof global purchasingsynergy.”
IndustrialMarketing Management pp.539-553.
Fawcett,E.,Stanley.,Ellram,M.,Lisa.,Ogden,A.,Jeffrey,.2006. Supply Chain Mangement:FromVision
to Implementaion .
Kahraman,C.,Cebeci,U.,Ulukan,Z.,.2003. “Multi-criteriasupplierselectionusingfuzzyAHP,Vol.16.”
Logistics Information Management pp.382-394.
Kraljic,Peter.1983. “PurchasingMust Become SupplyManagement.” Harvard BusinessReview.
Nydick,R.,L.,Hill,R.,P.1992. “Usingthe AnalyticHierarchyProcesstostructure the supplierselection
procedure.”InternationalJournalof Purchasing and MaterialsManagementVol.28(2)
pp.31-36.
Steers,M.,Richard.,Nardon,Luciara.,Sanchez-Runde,J.,Carlos.2013. Managementacrosscultures.
Cambridge UniversityPress.
Trautmann,Gerhard.,Bals,Lydia.,Hartmann,Evi.,.2009. “Global Sourcinginintegratednetwork
structures:The case of HybridPurchasingOrganisation.” Journalof International
Managementpp.194-208.