Supplier selection or collaboration? Determining factors of performance improvement when outsourcing manufacturing

An empirical study was designed to determine factors of performance improvement when outsourcing manufacturing. Findings from a survey of 136 manufacturing plants in Sweden show that most of them achieve their outsourcing motives, but not without tradeoffs. Factors of performance improvements such as economies of scale or operations in low-cost countries can improve one performance dimension, such as product cost, yet negatively impact volume flexibility, speed or product innovation. The results show part characteristics and supplier operating capabilities are more important than supplier relationship strategies when outsourcing manufacturing, meaning that supplier selection trumps supplier collaboration in the make-or-buy decision.