The Hazards of Sole Sourcing RelationshipsChallenges, Pract.docx

The Hazards of Sole Sourcing Relationships:
Challenges, Practices, and Insights
Mark O. Lewis, Appalachian State University
Scott D. Hayward, Appalachian State University
Vijay Kasi, AT Kearney's Supply Chain Practice
Introduction
Fueled by advances in information technology,
supply chain management has moved from a
back office administrative function to a board
room imperative. Today, companies work more
closely with their suppliers to be more respon-
sive to customers' changing needs and to build
competitiveness. Many firms have significantly
reduced the number of suppliers they use,
sometimes to a single, trusted source to enable
tight integration between firms. Operations
management scholars continue to examine the
effects of tight supplier integration and often
point to the positive relationship between in-
tegration and performance (Handfield, Ragatz,
Peterson, and Monczka, 1999; Kulp, Lee, and
Ofek, 2004; Rosenzweig, Roth, and Dean Jr,
2003). With a relationship built on a foundation
of trust, single supplier relationships potentially
offer many benefits. The buyer and a single
supplier can better coordinate shipments and
production, share technological knowledge to
integrate the input into production, and com-
municate design changes to mutual benefit.

Multiple sourcing, in contrast, may weaken the
ties between the firm and its suppliers making
communication, control, and standardization
more difficult.
Though the potential benefits of single sourc-
ing and tight integration are many, the strategy
has its drawbacks. For example, Horwitch and
Thietart (1987) uncovered the costs of coordina-
tion, compromise, and rigidity that may follow
from especially tight firm-supplier relationships.
Similarly, Das (2006) argued that the increased
virtual span of control stemming from tight inte-
gration may lead to coordination costs that offset
savings incurred from single-sourced relation-
ships. In addition to the explicit costs of integra-
tion, Sorenson (2003) focused on other costs of
tight integration that were less measurable, such
as the absence of learning that may come from
limiting a firm's contact with its external envi-
ronment. Clearly, management scholars disagree
about the utility of developing tight firm-supplier
relationships, such as those that might arise from
sole sourcing strategies.
Against this backdrop, this paper offers two
core contributions. First, while grounded in a
real life case study of a large consumer products
company, it offers a theoretical explanation of
the perils of single-sourcing relationships. In
doing so, it shows the actual drivers of bound-
ary drift, a term we develop to represent the
change in organizational boundaries that result
from sourcing decisions. Furthermore, we show
how such a phenomenon can lead to unintended,

and potentially detrimental, strategic outcomes.
Second, by following the focal firm as they
design a new sourcing strategy, we offer impor-
tant insights for practicing managers who might
face similar challenges. In the next section, we
provide a theoretical explanation of boundary
drift including drivers and consequences. We
then discuss the methodology that guided this
study before applying the theoretical lens to the
case and illustrating the six-step process used
by the focal firm to re-design their sourcing
strategy. We conclude with a summary of contri-
butions, limitations, and opportunities for future
research.
28 SAM Advanced Management Journal — Summer 2013
Drivers of Boundary Drift: Trust, efficiency,
and asset ownership
Governing the single-source relationship
Interorganizational relations, including sole-
sourcing supplier relationships, are intermediate
forms of organizing, resting somewhere be-
tween pure markets and pure hierarchies. Like
other forms of organizing, they are governed
along three dimensions: incentives, authority,
and ownership (see Makadok and Coff, 2009).
Incentives include not only the rewards avail-
able for good performance, but also the mea-
sures that define good performance. Authority is
the power or right to control how one conducts
an activity and what activities to engage in.
Organizational hierarchies establish authority
relationships and determine-through official

norms-which activities fall under the control
of which positions within the firm (Thompson,
1956). Asset ownership grants property rights
to determine when and how critical assets are
used. While seemingly overlapping, control and
ownership of key assets may be allocated in dif-
ferent ways given the relative financial strength
and capabilities of the two firms (Elfenbein
and Lemer, 2003). At one end of the spectmm,
for example, in a typical market-based, buyer-
supplier relationship, suppliers determine how
to do the work, own the key assets to conduct
the work, and are rewarded according to their
output. At the other end, in a typical hierarchy,
the employees performing the work are subject
to their superior's authority on which activities
to perform and how, do not own the key as-
sets, and are rewarded based on the inputs they
provide. Single-supplier relations incorporate
to varying degrees each of these dimensions
to create a supply-chain solution helping both
firms reach agreed upon goals.
Efficiency goals
The nature of these goals becomes a critical
point in the incentives provided to the employ-
ees and managers responsible for implementing
the relationship. Eirms enter into close relation-
ships with other organizations for a multitude of
reasons: to lower costs and improve efficiency
(e.g., Williamson, 1985), to gain power over
extemal resources (e.g., Pfeffer and Salancik,
1978), to build legitimacy and prestige (Baum
and Oliver, 1991), and to leam from others (Doz,
1996). Here, we argue, once the relationship is
established, managers of these relationships tend

to focus on efficiency gains, putting the firm at
odds with other motives.
Figure 1. Drivers of Boundary Drift and
Strategic Rigidity in Single-Source Relation-
ships
Inter-
organizational
= = = -I ;=trust:l ;
Primacy of
efficiency goals
Focus on asset
ownership
Strategic
rigidity
Efficiency measures how well the relation-
ship improves the focal firm's ability to meet
its output objectives given the resources it con-
sumes. A single-supplier strategy can improve
the buyer's efficiency through standardized
inputs that allow the focal firm to have a more
consistent end-product and a more standardized
process for creating it. In the face of uncertainty
about consistent suppliers, a firm may find
locking-in a durable relationship with one firm
to be preferable than procuring the input on the
market. While efficiency is often a key motivator
to initiate a relationship, without continual reex-
amination, most relationships will feel the pull
of efficiency goals. "Efficiency" has a taken-

for-granted value in society; adjustments made
for the sake of efficiency are rarely questioned
for their motivation (Meyer and Rowan, 1977).
Eurthermore, efficiency goals are relatively user-
friendly for the line manager. Most organizations
maintain records of their expenses and their
production, so they have data to determine how
much was produced at what cost. While stra-
tegic concerns may consider what to produce,
line managers tend to focus on how much they
produce and at what expense. In most cases we
should expect that during implementation most
interorganizational relationships will begin to
focus on the efficiency of the assets and activi-
ties engaged.
Hierarchy and trust
Trust is a fundamental component of successful
sole-sourcing relationships. While the responsi-
bilities of each party may be determined at the
SAM Advanced Management Journal — Summer 2013 29
formation of the relationship, once the relation-
ship begins to operate, repeated interactions and
shared goals between both organizations and
employees builds an expectation that the other
can fulfill its obligations (Anderson and Weitz,
1989) and will act fairly even with the possibil-
ity of opportunism (Anderson and Narus, 1990;
Bromiley and Cummings, 1995). While the
possibility of betrayal is always present, trust
between the employees and organizations can
reduce conflict and facilitate mutually agreeable

adjustments to the relationship. Ultimately, trust
should improve the relationship performance
in terms of supplier price, delivery, quality, and
flexibility (Zaheer, McEvily, and Perrone, 1998).
As the relationship meets expectations and
trust develops, line managers seek ways to
improve the relationship's efficiency. The rela-
tionship's initial hierarchy granted authority to
coordinate activities and routines in their current
form. Yet, when units are asked to cooperate to
resolve issues requiring new routines, the hierar-
chy may prove too rigid (Adler, 2001; Burns and
Stalker, 1994). Instead, trust between the buyer
and supplier may offer a better coordinating
mechanism allowing those with the most abil-
ity and knowledge to take over the task (Adler,
2001). To implement, managers decompose the
relationship into activities. Actively or passively,
they re-allocate those activities according to the
relative capabilities (or eagerness) of the two
firms. Under efficiency goals, the steps taken to
improve performance are valid as long as they
increase production or lower costs. Thus, we see
boundary drift as a natural outcome of the focus
on organizational efficiency and interorganiza-
tional trust.
The boundary between any two organizations
reflects an atomistic and evolutionary process.
As Santos and Eisenhardt (2005) note, under
the logic of efficiency, boundaries result from
a series of decisions about which activities to
conduct and which to let others conduct. As an
organizational concern, it can be described as
"logical incrementalism" in which incremental

changes are made in response to opportunities
(Quinn, 1978). Managers aware of boundaries
take purposeful steps in their sphere of influence
to improve performance.
Asset ownership
Throughout this process, asset ownership may
remain constant. Asset ownership provides some
protection for boundary drift, as the owner can
always "take his ball and go home." Yet, focus-
ing on asset ownership may provide a partially
false sense of security and obscure the true shift
in organizational boundaries. First, current theo-
ry suggests that homogenous, marketable assets
will not be a source of sustainable performance
advantages (Barney, 1986). Rather, the activities
built in the firm and the firm's processes lead to
long-term performance advantages (Teece and
Pisano, 1994). Therefore, reallocating control
of an activity outside of the firm's hierarchy
may provide short-term efficiencies but lead to a
long-term "hollowing out" of the firm's ability to
compete.
Second, a focus on asset ownership may
obscure the true shift in organizational boundar-
ies. Companies tend to define the boundaries of
their firm by the assets they own. This makes
sense because describing boundaries is difficult,
and ownership laws provide perhaps the clean-
est way to describe where one firm ends and
the other one begins. Still, this definition can be
troubling. When employees go to work at anoth-
er's site, are they still part of their original firm?
While one firm may pay their salary and have

them under contract, the more they interact with
another's employees, the more they identify with
the other firm (Ashforth and Mael, 1989).
Boundary drift and strategic rigidity
As the structure of the single-source relationship
evolves through trust and efficiency goals, the
boundaries of the firm may shift. Trust and ef-
ficiency goals become the necessary conditions
for boundary drift, as motivated by the man-
ager's drive for better performance. As opportu-
nities appear to improve the buyer's efficiency
by replacing its authority over an activity with
trust in the supplier, some of those opportunities
may run counter to other strategic goals of the
relationship. After returns from efficiency-based
initiatives begin to lessen or level off for the
buyer, the goals of the relationship often change.
Strategic goals often expand from efficiency-
based to innovation-based, as the buyer looks for
new ways to enhance its competitive position. If
vendors do not perceive innovation practices as
potentially profitable, the following issues may
arise: reduced autonomy, reduced competencies,
and reduced identity.
Reduced autonomy. Efficiency gains may
not take into account current or future sources
of strategic uncertainties that influence perfor-
mance (Pfeffer & Salancik, 1978; Thompson,
2007). Firm boundaries define the activities over
which the firm has influence. For activities that

are unimportant to the firm's ability to reach its
goals, outsourcing may make sense. But other
activities are critical to the firm's ability to con-
sistently produce its product or service, namely,
those that create significant value to the final
customer, are necessary steps in the production
process, and have no alternatives. These must be
controlled by the firm so that it does not become
dependent on the supplier. Without power over
the relationship, the firm is at the mercy of its
supplier's continued goal alignment and trust-
worthiness.
Reduced competences. Efficiency gains may
not take into account current or future sources of
firm-specific, resource-based advantages (Chan-
dler, 1993; Penrose, 1995). Firm boundaries
define the organizational resources and capabili-
ties that make it unique and provide potential
competitive advantages (Barney, 1991; Werner-
felt, 1984). Boundary drift changes the portfolio
of the firm's resources. Decisions over which
activities to engage in and which to outsource
should take into consideration the value of the
portfolio, including not only the value of the
activity but also how that activity complements
others. While a supplier may be able to perform
any given activity more efficiently than the
buyer, re-allocating the activity to the supplier
may erode the buyer's abilities in other activi-
ties. In the future, these activities, too, may be
logically outsourced, further reducing the firm's
potential advantages.
Reduced identity. Efficiency gains may not

take into account how organizational members
define the firm and their identity. Recent studies
in organizational theory shed light on the impor-
tance of the organization's identity, which can
both categorize it within an industry and distin-
guish it from competitors. For external audienc-
es, the firm's identity helps in assessing its value
and future performance (Porter, 1998; Zucker-
man, 1999, 2000). For managers and employees,
the firm's identity can inspire emotional attach-
ment and commitment (Kogut, 2000). Within
the organization, Elsbach (1999) suggests that
values and activities are intertwined; "who we
are" defines "what we do" and vice versa. Out-
sourcing particular activities may lead to identity
inconsistencies affecting employee motivation
(Kogut, 2000) and managerial decision-making.
Methodology
This study was guided by an action research
methodology, which is an iterative process com-
bining theory and practice by bringing research-
ers and practitioners together to create learning
that is actionable and useful to organizations
(Avison et al., 1999). Action research has the
dual objective of contributing to the practical
concerns of people in an immediate problem-
atic situation while at the same time advancing
the current state of knowledge in management
science (Rapoport, 1970). We realized early on
in our collaborations with the focal firm, a large
consumer product goods company that we call
MultiBrand, that its current situation—where
existing tight linkages with suppliers were in-
hibiting innovation—presented a perfect oppor-

tunity to contribute to practice and management
research simultaneously. With our research
experience in relational governance and process
innovation, we sought to help MultiBrand man-
agers design new relational linkages with the
firms that made up their supply base for poly
wrap, the clear plastic wrap that covers many of
MultiBrand's paper products. In the spirit of ac-
tion research, we sought to work coUaboratively
with MultiBrand's management team to design
and implement a multi-phased intervention that
would help alleviate some of the company's
problems associated with its current sourcing
strategy. In turn, we observed the intervention's
effects on the performance of the poly wrap
sourcing function.
Research roles and approach
In action research, the researcher and the client
coUaboratively pursue intervention design and
research activities (Rapoport, 1970), the client
not only learns about implementing existing
practices, but also contributes to theory building
in a particular discipline (Whyte, Greenwood,
and Lazes, 1989). In a traditional sense, re-
searchers are seen as the expert and are in charge
of research design, data collection, and analy-
sis, whereas in more collaborative situations,
these duties are shared among the researcher
and the client (Liischer and Lewis, 2008). Since
one member of our research team was part of
the strategic sourcing team in the focal firm, he
acted as the liaison between both groups, play-
ing a crucial role in bridging the objectives of
both teams. Our study started when the focal
firm realized it was in a conspicuous place rela-

tive to its existing sourcing strategy and needed
to make some important changes to increase
future competitiveness. At this point, we began
to hold weekly and often biweekly meetings
with the person who was a member of both the
strategic sourcing team at the focal firm and of
our research team. Meetings focused on describ-
ing details of the situation as it was evolving in
practice, reflecting on theoretical explanations of
current observations, and discussing useful de-
sign elements to improve the existing situation.
As the intervention was implemented, the con-
versations shifted to issues of efficacy and ongo-
ing evaluation to create an important feedback
loop to aid learning. In the following section, we
utilize the theoretical framework developed in
the prior section to describe the boundary drift
and strategic rigidity that occurred at Multi-
Brand.
Boundary Drift and Strategic Rigidity at
MuitiBrand
According to MultiBrand sourcing executives,
the clear packaging (poly wrap) that covers
many MultiBrand products, such as paper towels
and toilet paper, plays a surprisingly important
role in the overall profitability of a given product
set. First, poly wrap packaging plays an im-
portant role in top-line growth, as it has a large
effect on brand equity and identity. In fact, poly
wrap is often considered more important than

the actual product to drive sales and create brand
equity; it shapes purchasing decisions in retail
stores, as the messaging and graphics are often
what customers remember and rely on during
repeat purchases. Second, it plays an equally
important role in bottom-line initiatives, because
it not only has an obvious impact on direct mate-
rial costs but also affects indirect costs resulting
from rework and associated opportunity costs
resulting from downtime (i.e., no packaging
- no product output = no sales). According
to MultiBrand executives, though poly wrap
only represents about 2% to 5% of the finished
product cost, out-of-stock poly (resulting from
the wrong poly, defective poly, no poly) would
halt production and lead to tens of thousands of
dollars every hour in opportunity costs. Third, in
addition to the sales and marketing significance,
packaging represents one of the most complex
components of MultiBrand's global supply chain
due to a plethora of product SKUs with unique
and often changing requirements. For these
reasons and more, poly wrap is seen as a stra-
tegically important component of MultiBrand's
global supply chain.
A focus on efficiency and asset allocation
As MultiBrand continued to focus more intently
on packaging as a core element affecting its
competitive performance, it strives to achieve
high degrees of standardization (of poly wrap)
across both products and locations. Standardiza-
tion provided an opportunity to cut costs through
greater economies of scale and also helped
ensure consistency across product groups, which

enhanced the overall quality of the MultiBrand
brand. As a result, MultiBrand standardized the
available colors product groups could choose
among, as well as the look and feel of the pack-
aging across numerous locations throughout the
corporation. To achieve such brand standardiza-
tion and consistency across its many product
groups and manufacturing facilities, MultiBrand
pursued another strategic initiative: it slowly
reduced the number of suppliers from about 10
in 1995 to about four in 2001. As the reduction
in its supply base continued, MultiBrand chose
to move business from smaller suppliers to
WrapCo due to WrapCo's superior performance
in quality, consistency, and delivery. As a result,
WrapCo benefitted mightily as its sales to Multi-
Brand increased from about $15 million in 1995
to nearly $40 million by 2001.
Between 2001 and 2004, MultiBrand realized
much greater consistency in its poly wrap sourc-
ing initiatives and was very satisfied overall with
the performance of WrapCo. Consequently, in
2004, when the end of contracts with its suppli-
ers drew near, MultiBrand made another bold
decision to continue on the path of increasing
operational efficiencies. Instead of distributing
its business across four suppliers, MultiBrand
decided to give it all to one, WrapCo. After
intense negotiations with WrapCo, they agreed
on the following objectives:
• MultiBrand moved all the flexible packaging
production to WrapCo, thereby increasing
the business to $80 million annually.

• WrapCo invested in two new W&H flexo-
graphic printing presses to offer a consistent
quality to MultiBrand.
• WrapCo guaranteed to provide MultiBrand
with any help necessary to expedite orders.
• WrapCo agreed to work closely with the
mills to provide them any necessary support
and to improve the overall process of sup-
plying flexible packaging to the mills.
Increasing trust and changes in hierarchy
As WrapCo became their only poly wrap pro-
vider, MultiBrand gradually allowed it to take on
more operational responsibility in coordinating
with the manufacturing tmlls. An indication of
this was that MultiBrand relinquished tight con-
trol over the poly film specifications within each
manufacturing facility (e.g., coefficient of fric-
tion, dart, tensile, strength, etc.). Therefore, just
a few years after pursuing a singular sourcing
strategy, MultiBrand stopped keeping track of
these specifications altogether. It shifted its at-
tention away from the operational aspects of the
packaging process and instead focused on the
innovation and design of new packaging strate-
gies. To WrapCo's credit, the company worked
continuously on refining the specifications for
each mill in an effort to achieve a high level of
efficiency. After a few years, WrapCo's knowl-

edge of the overall packaging process and how
it integrated with MultiBrand's global supply
chain operations far outweighed MultiBrand's
knowledge of its own processes. Ultimately,
WrapCo became the owner of the specifications
and managed interactions with each mill inde-
pendently without a corporate-wide MultiBrand
liaison. The mills still retained bits and pieces of
information, but, collectively, MultiBrand had
fully outsourced these interactions to WrapCo.
Printing standards, such as delta-E, densities,
and dot gain, were managed by WrapCo, thereby
delivering the quality needed. Eurthermore,
WrapCo directly worked with the mills and their
specific setups and issues and was responsible
for implementing changes at all MultiBrand
locations.
Efficiency gains were realized in several ways
as WrapCo worked closely with the mills. Lead
times for new SKUs were reduced from four to
five weeks to two to three weeks. Rush orders
could be filled in three to four days where the
standard lead time was three weeks. Techni-
cal support was available within 24 hours, and
WrapCo even handled vendor-managed inven-
tory programs at three MultiBrand locations. As
a result, MultiBrand achieved faster and cheaper
SKU changeovers along with improved quality.
The onset of strategic rigidity
Despite the early successes of its sole-sourcing
strategy, MultiBrand began to face some chal-
lenges after several years of the new contract.
In 2004, when establishing WrapCo as the sole
supplier of poly wrap, MultiBrand identified

"down-gauging" as a key area where it expected
WrapCo to deliver improvements and innova-
tions. Down-gauging is the process of reducing
the thickness of the wrap while still maintaining
or improving its strength. This is not only a cost-
saving benefit but is also more eco-friendly, an
important aspect of MultiBrand's sustainability
initiatives. Unfortunately, despite continuous
questioning from MultiBrand sourcing execu-
tives, WrapCo did not fulfill this down-gauging
obligation. Much to their dismay, MultiBrand
discovered that its gauge was about 30-40%
higher than competitors for some SKUs. Eur-
thermore, MultiBrand learned that WrapCo
was innovating with other customers on down-
gauging initiatives and had actually made some
technological advances in printing that would
have enabled higher-quality plastic wrap with re-
duced costs. Despite the fact that WrapCo was at
the leading edge of these technological advances
in the mid-2000s, MultiBrand did not receive
any of the benefits.
To better understand the situation, Multi-
Brand's strategic sourcing group did some com-
petitive analysis and found that other companies
were using the down-gauged film for their
processes but that these firms actually had older
assets than MultiBrand's. Through continuous
inquiry, MultiBrand sourcing executives basi-
cally determined that WrapCo was unwilling to
innovate within this relationship for the follow-
ing reasons:
• Down-gauged film means "less" flexible

film, which would effectively reduce an-
nual revenue at WrapCo, and as its margins
were propoitional to annual revenues, down-
gauged film would mean fewer profits, too.
• Down-gauged film would require WrapCo
to make some technological advancements,
as the variability in its current process would
not allow the company to produce the down-
gauged film without significant problems.
• Therefore, from WrapCo's perspective,
MultiBrand was asking the company to
invest more money into the relationship to
earn fewer profits.
MultiBrand's inquiry generated a greater
understanding of WrapCo's lack of interest in
investing in the relationship, but it also provided
insight into other aspects of the relationship
that created some metaphorical red flags for
MultiBrand executives. MultiBrand found that
WrapCo was unwilling to share important in-
formation related to key process specifications,
because it realized MultiBrand would likely use
this information for benchmarking purposes as
it pursued future requests for proposals (REPs)
with new suppliers. Eurthermore, the executives
learned that WrapCo was actually in control of
the interface to MultiBrand's internal processes.
For example, MultiBrand's strategic sourcing
group approached a few manufacturing locations

Figure 2. AT Kearney Strategic Sourcing Process
O G O
Assess Evaluate D
Current ) Supplier ) s
Situation / base / í
Evaluate Determine
Supplier ) sourcing
base / strategy
Commit-
ment
GO
Implement
plans
to compare certain efficiency and quality specifi-
cations with other companies, and to its surprise,
the locations were not even sure of the actual
film that was being run on their manufacturing
lines. The tnill supervisors repeatedly directed
the team back to WrapCo saying "WrapCo
knows our specifications better than we do."
MultiBrand had lost control; they were feeling
the effects of strategic rigidity.
Six Steps to Change: Re-designing their
Sourcing Strategy
As the first step to gain control of the situation,
MultiBrand established a center of excellence
for flexible packaging. This group was led by

the strategic sourcing group and involved other
relevant functions, such as marketing, graphics,
packaging engineering, production planning,
product supply functions, and manufacturing
operations. A group of about 12 professionals
from all the groups was established to form the
Packaging Transition Team (PTT).
MultiBrand decided to utilize the following
six-staged strategic sourcing process framework
to redesign its sourcing strategy (see Figure 2):
Step 1. Assess current situation
The PTT started the strategic sourcing process
by assessing the current situation to understand
the various requirements for flexible packaging
across the company. Assessing the current situ-
ation included various stages to analyze spend
and volume across the entire system; to analyze
the various SKUs by each brand, manufacturing
mill, etc.; and to analyze the packaging speci-
fications that meet manufacturing and market-
ing requirements. As discussed, the PTT faced
tremendous challenges in this initial step of the
process, as WrapCo was in total control of the
situation and had no incentive to share infor-
mation. According to the MultiBrand sourcing
team, a process that should have taken about a
week took about four to five months for the PTT
to complete.
Step 2. Evaluate supply base
The PTT evaluated the supply base by issuing a
request for information (RFI) to more than 100
suppliers in the market to understand supplier

capabilities related to the following key strategic
attributes:
• Supply assurance
• Quality performance
• Service history and commitment
• Cost position and structure
• Innovation capability
• Sustainability commitment
Step 3. Determine sourcing strategy
MultiBrand established an RFI combined with
reverse auctions as the suitable sourcing strategy
to get the best pricing from the market for the
required specifications. The strategy was to seg-
ment all the requirements into different market
baskets by "brand type," such as premium,
mainstream, and economy. This enabled Multi-
Brand to convey the different levels of quality
requirements. A detailed RFI was issued, which
included all the SKUs for the MultiBrand portfo-
lio with volume information. About 52 suppliers
were selected to move to the next round of the
bidding process after scoring and assessing each
on the above dimensions.
Steps 4-6, Engage, negotiate, and implement
Based on the results from the auctions, the top-
performing suppliers were invited for negotia-
tions. Pricing was set from the reverse auctions,
but the negotiations ensured commitment around
quality, supply assurance, service, and other re-
quirements. Even before the negotiations ended,
the PTT was preparing for the implementation
of new suppliers. Thus, as soon as the auction
ended, the team performed several trials with the

"potential" suppliers' films.
Outcomes of intervention
As a result of this intervention, MultiBrand
achieved a number of important objectives.
First, the company realized tremendous cost
savings of about 18-20% annually, providing a
great benefit to bottom-line cost savings. Sec-
ond, MultiBrand eliminated full dependence
on one supplier, awarding business to three
Table 1. Signals of Boundary Drift
Signals
1. Imbalanced
goals
2. Diminished
returns
3. Reduced
autonomy
4. Decreased
competency
5. Confused
identity
Description

Relational governance should balance short-
term (efficiency oriented) and long-term
(strategically oriented) goals and objectives.
Capturing low hanging fruit by improving
operational efficiency is fine, but pay atten-
tion to the trajectory of returns. If returns
continue to get smaller and smaller and a pat-
tern is obvious, use this as a red flag that the
emphasis may weigh too highly on efficiency
metrics.
Control and decision authority is important,
and who has it can change and become al-
lusive over time. Intentional awareness and
purposeful reflection are necessary for keep-
ing issues of power and control in check.
The building blocks of an organization are
its resources, capabilities, and competencies
that enable it to create value for stakehold-
ers. Such competencies can grow or attenu-
ate over time, and organizations need to
continually assess their evolution across core
dimensions (core, product, market, internal
coordination, external coordination, etc.).
The firm's identity can both group it within
an industry and distinguish it from competi-
tors. For internal employees it also provides
boundaries to clarify "who we are" relative
to other flrms within a given ecosystem.
When such boundaries become blurred,
employee motivation can take a hit, as the
firm's identity can stimulate emotional at-
tachment and cultivate commitment.

Questions to Ask
• Do we have a mix of both short-term
(0-12 months) and long-term (1-3 years)
objectives?
• How has the relative importance of short-
term and long-term goals and objectives
changed throughout the relationship?
• How have cost savings changed as a
percentage of relational expenditures
over time?
• Has the relationship hit a "brick wall" in
terms of value that is being created for
both firms?
• Do we need our supplier's consent
when setting the procurement budget?
• Do we know and decide how and where
that money is actually spent?
• Who determines the work and production
schedules?
• How much consent do we need from our
supplier?
• Core - do we employ groups of people
with the critical knowledge or routines
for working together that drive our sourc-
ing effectiveness?

• Product - do we employ groups with key
knowledge and routines for making and
improving the product?
• Market - do we employ groups with the
knowledge and routines driving customer
satisfaction and market development?
• Internal coordination - do we have
routines that encourage and monitor
information flows across activities within
the firm?
• External coordination - do we have
routines that encourage and monitor
information flows across organizational
boundaries with our supplier?
• Employee self-perceptions - do our
employees believe our firm acts in ways
and does things that match their own
sense of who they are and what they want
todo?
• Employee expectations - do our employees
believe our company acts in ways and
does things it should to fulfill our
mission?
new suppliers to reduce the dependence on
WrapCo. Third, it regained control of intemal
specifications and knowledge, as the trial and

qualification of the new suppliers further im-
proved MultiBrand's intemal knowledge base.
Eourth, through gain-sharing arrangements,
MultiBrand ensured that new suppliers would
bring innovative ideas to the relationship, which
would translate to both cost savings and qual-
ity improvement. Finally, by regaining control
of specifications and introducing capable new
suppliers into its sourcing strategy, MultiBrand
ensured that it would keep abreast of the fiexible
packaging market.
Conclusion, Implications, and Limitations
We began by asking: How do single-source rela-
tionships go wrong? Conventional wisdom holds
that single-source suppher relations require tmst
and a long-term view of the relationship to be
successful. As we saw in the case of MultiBrand,
tmst allows for reduced monitoring, thus en-
hancing efficiency and reducing the operational
costs of the relationship. Despite the benefits of
tmst and efficiency gains, both if left unchecked
as drivers of relational performance may sow the
seeds of the single-source relationship's future
discontent. As tmst develops and managers seek
greater efficiencies, the firm's boundaries shift in
ways that may eventually lead to strategic de-
pendence and rigidity. This we called boundary
drift. Over time, firm boundaries shift in ways
that improve current efficiencies but may lead to
longer-term reduction of autonomy, growth, and
coherence.
At the heart of boundary drift are managers
making operational decisions. Given the devel-
oping trust those managers have with managers

from the partner, efficiency-seeking managers
deconstmcted the relationship into activities,
and reallocated them accordingly. In our case,
managers faced with the challenge of integrating
two firms delegated responsibility for produc-
tion to those who designed the input, basically
integrating the poly wrap product rather than the
knowledge itself, allowing the supplier to tackle
the integration issue intemally. Rather than
fixing the integration issue, the firm aggravated
the problem by pushing the required knowledge
further out of reach. This meant that any kind of
direct infiuence through authority was no longer
possible. Even an attempt to change the incen-
tives would be more complicated, because they
had to fit with the suppher's organizational goals
for the relationship.
Nevertheless, despite the negative ramifica-
tions that may result from boundary drift and
strategic rigidity, our study showed that through
intentional redesign sourcing strategies can
provide efficiencies and flexibility through a
focus on teaming. After recognizing that bound-
ary drift had led to dependence on the single
supplier, our company unwound the relationship
and shifted to a multi-suppher sourcing strategy.
Companies in mature markets still require ef-
ficiency gains through standardization, but these
gains may be available through a multi-partner
knowledge-sourcing strategy. A successful
knowledge-sourcing strategy requires a deep un-
derstanding of one's own capabilities and needs,
particularly as they relate to the industry envi-
ronment. A knowledge-sourcing strategy also
requires a careful selection of partners including

a clear understanding of their capabilities and
needs. Once in place, knowledge from multiple
suppliers may still lead to standardization ef-
ficiencies, but it requires the firm to focus less
on leveraging the partner's abilities and more on
leaming, integrating, and intemalizing knowl-
edge from across partners. Managers should be
aware of the signals of potential boundary drift
and be prepared to act upon early detection (see
Table 1 for signals of potential boundary drift).
As with all studies, this one has limitations.
Studying only one relationship can lead re-
searchers away from general trends, focusing
instead on issues and events particular to a given
situation (Markus et al., 2006). As a result, gen-
eralizing the findings is always a potential issue
with single case studies. However, to develop
new insights into designing sourcing strategies,
this study was purposefully organized as a form
of action research. According to Van de Ven
(2007), "The status quo approach to social re-
search has many variations, but it tends to reflect
an unengaged process of inquiry." Instead, we
followed Van de Ven's guidance and organized
this study around one core principle: A deep
form of knowledge related to the firm-supplier
relationships would only result from close and
ongoing interaction between academic and prac-
ticing members of the research team.
Before joining academia. Dr. Lewis was a busi-
ness analyst with IBM Global Services. His
research, which has been published in various
journals, now focuses on the strategic use of
information technology within global supply

chains and on patterns of collective action in
and among organizations. Dr. Hayward's re-
search focuses on the intersection of economic
geography and innovation, and he uses case
studies and interviews to examine the manage-
ment of inter-organizational relationships. Dr
Kasi, a manager at AT Kearney's Supply Chain
Practice, specializes in global sourcing. He
has published widely in technology- and supply
chain-related journals and conferences.
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RETRACTION
Understanding Strategic Alliances from the Effectual
Entrepreneurial Firm's Perspective -
An Organization Theory Perspective
By: Eugene Geh
SAM Advanced Management Journal, Volume 76, Number 4,
2011, pp. 27-36 and 46.
A part of this article appears to be copied without appropriate
citation of the publication:
Do Effectual Approaches to Entrepreneurship Destroy Value?
Ye, Q., Fitzsimmons, J. and
Douglas, E. (2008). Retrieved at

https://fusionmx.babson.edu/entrep/fer/2008FER/chap-
ter_04/paperfr_iv_2.html
Copyright of SAM Advanced Management Journal (07497075)
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Advancement of Management and its content may not be copied
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Week 2: Sociopolitical Skills
Amy Farrell posted Oct 8, 2019 7:07 AM
Good morning,
Your early efforts are crucial in a new leadership role. By
establishing yourself early with your team, they will be able to
see what kind of leader you will be. In order to be successful,
being able to show the employees that you are committed and
want what is best for the organization is a key factor. Many of
the items on the list have been learned by watching leaders
before me as well as taking classes. Some items are learned by
trial and error, especially when you are new and are still
learning the organization’s structure. The organizational
structure also impacts the leadership style as well as the
organization’s learning (Janicijevic, 2013). Being able to
utilize the structure will allow for a more centrally focused and
cohesive team. This will also help in your overall success.
Having a mentor will also be an asset to learning some of the
needed skills the organization’s employees will be expecting.
By learning from the mentor, you can have better enduring

success.
Reference
Janicijevic, N. (2013). The mutual Impact of organizational
culture and structure. Economic Annals 58(198). Retrieved
from http://www.doiserbia.nb.rs/img/doi/0013-3264/2013/0013-
32641398035J.pdf
Reply to Thread
Week 2 Discussion: New Leader
Robert Craft posted Oct 8, 2019 7:46 PM
Good Evening Classmates,
My experience with being in new leadership positions has only
been during my time in the Army. Therefore, the
leader/employee network was always established. By taking
time (30, 60 or 90 days) to observe/assess allowed me to sense
key organizational issues upon which to create early vision,
initiatives and value. This was something I learned as a younger
Leader; who often made the mistake of rushing into things,
trying (usually unsuccessfully) to force change. I have always
had a dominant type of personality, which is why I would
normally usurp the norms and try to make things better (even if
they were good already). That caused many subordinates to
initially dislike me, which made it more difficult to identify
organizational blockers and enablers or build bridges with
informal power sources.
But, in the Army, as a leader at any level, I was a member of
the team. I played whatever role was needed. One of the major
lessons learned was not to criticize the person I replaced or my
peers or superiors. This is a key element of being a team player.
The learned behavior of being a leader in the Army starts with
your leaders, how they took care of you and how they did their
job. I learned what to do and what not to do from observing my
previous leaders. Identifying and responding to requirements of

superiors and peers was another learned behavior from
emulating previous leaders. However, when it comes to
subordinates, being a leader means that we take care of our
subordinates’ needs as our first priority/mission. Having ethics,
values and beliefs aligned with the Army (as an organization) is
an expectation and requirement of leaders. They were learned
(and reinforced) from formal training throughout my time in the
Army.
In reflection, my last two leadership roles in the Army were
totally different. I learned from my mistakes of the first time as
a First Sergeant and utilized almost all ten sociopolitical
categories when I changed organizations in my second role as
First Sergeant. The second time around was an opportunity to be
more successful, and learn from my previous experiences.
Robert
Each article review must use the following outline (use a
heading for each bullet point): Comment by Haley Robinson: I
just need you to do the highlighted part this time!
· Cite the article (use same format as bibliography at the end of
the textbook chapters)
· Provide a brief summary/overview of the article (2-4
paragraphs)
<note: the two sections above are limited to one page>
· Was this paper peer reviewed or editorially reviewed? How
was this determined (include a website url if appropriate).
(Peer reviewed papers are received by editors and sent out to
usually two or more people who provide a critique of the article
which informs the editor’s decision as to whether it should be
accepted for publication. Editorially reviewed papers are only
reviewed by the editor.) One way you can determine if an
article is peer reviewed or editorially reviewed is to look up the
publication’s website and look for a section on “information for
authors/contributors.” They will usually specify in that section
how manuscripts are reviewed for possible publication. You

should assume an article was editorially reviewed unless you
have specific evidence that it was peer reviewed.
· Main theme:
· What is the main takeaway from the article? What specifically
did you learn?
· Research method/support:
· How did the author(s) come to their conclusion(s)? (e.g.
personal experience/opinion, case/multi-case analysis, survey-
based research, computer simulation, other?)
· Discuss the particulars of the methodology. For example, if
personal experience/opinion, discuss the author(s) qualifications
(education, experience, etc). If case/multi-case, discuss the
cases. If survey-based, what was the sample, how many surveys
were sent out, how many returned, how was the survey
instrument developed, etc.
· Critically discuss the validity of the author(s) findings based
on the rigor of their methodological approach and execution.
Did the authors adequately support their findings? Can the
findings be trusted? How generalizable are the findings? Is
there any reason to suspect a bias on the part of the author?
Types of articles.
At least four of the articles must be peer-reviewed articles. No
more than two of the articles can be from magazine type sources
(e.g. Newsweek, Forbes, etc.; note these articles are almost
always editorially reviewed). There are some very highly
regarded editorially reviewed business publications such as
Harvard Business Review, California Management Review,
Sloan Management Review, and Business Horizons just to name
a few.
Finding articles should begin with an online search using
specific keywords related to your theme. There is a high
likelihood you can get a full text copy of the article using the
MGA Library’s online search function. If it is not available
immediately, it can be requested through inter-library loan. A

representative from the library will be making a presentation on
using the system at the beginning of the second night of class.
Keep in mind that in many publications, authors cite their
sources at the end of their article. Thus, another source for
articles is the reference lists at the end of many of the articles
that you read.
Format.
Each review should be single spaced, 12 point, Times Roman
font. Each review (including all six sections) is limited to a
maximum of three pages.

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