Outsourcing Professionals Should Use Nobel Laureate’s 10 Lessons to Improve Performance

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The purpose of the white paper was to translate the advice of Dr. Williamson into a practitioner-friendly white paper.

"Williamson’s views about how to contract with suppliers respond to the industry-wide need for companies to work smarter with their suppliers." -co,author Kate Vitasek

Companies looking to improve how they work with their suppliers and outsource partners can now turn to the work of Nobel Prize winner Dr. Oliver Williamson. Dr. Williamson’s teachings are the subject of a white paper, titled Unpacking Oliver: Ten Lessons to Improve Collaborative Outsourcing, which identifies key principles outsourcing professionals/practitioners can apply to increase profit and performance in their outsourcing relationship.

Unpacking Oliver: Ten Lessons to Improve Collaborative Outsourcing is co-published by the University of Tennessee Center for Executive Education, Georgia Southern University, Cranfield University School of Management and the International Association of Contract and Commercial Management. The purpose of the joint effort was to translate the advice of Dr. Williamson into a practitioner-friendly white paper.

Oliver Williamson, professor emeritus of business, economics and law at the University of California, Berkeley, has spent his life devoted to the study of what is known in the world of academia as “transaction cost economics.”

In October 2009, Dr. Williamson received the Nobel Prize for his analysis of economic governance, especially the boundaries of the firm. This work has significant implications for the outsourcing and supply chain management industries, but few professionals outside of academia know of the work and its sweeping implications, if adapted. This work has significant implications for the outsourcing and supply chain management industries, but few professionals know of the work and its sweeping implications, if adapted.

Kate Vitasek, a faculty member in the University of Tennessee’s Center for Executive Education (CEE), and author of Vested Outsourcing: Five Rules That Will Transform Outsourcing, said, "Williamson’s views about how to contract with suppliers respond to the industry-wide need for companies to work smarter with their suppliers. Companies have been focusing on ‘lowest price’ versus ‘best value,’ which creates hidden transaction costs. Dr. Williamson’s work shows this approach is myopic and inefficient. Instead, companies should be creating business relationships in which both parties have a vested interest in each other’s success. It is the only way both the company and its supplier can create a positive and truly collaborative working relationship."

Authors (in order of their association) Kate Vitasek, Karl Manrodt, Ph.D., Richard Wilding, Ph.D., and Tim Cummins believe that too many practitioners have not taken the time to read the highly academic works of Dr. Williamson. "We wanted to write a practitioner-friendly white paper that challenges business professionals to take notice of Dr. Williamson and his important work in supply chain and outsourcing. We have translated what we believe are the 10 most important lessons from Williamson’s work that is applicable for the outsourcing community and supplier management professionals. Our applied case based research has validated Dr. Williamson's lessons, showing that companies can work with their suppliers to drive transformational improvements in cost structures and performance levels."

The 10 lessons covered in the white paper are:

1:    Outsourcing is a continuum, not a destination.
2:    Develop contracts that create “mutuality of advantage.”
3:    Understand the transaction attributes and their impact on risk and price.
4:    The greater the bilateral dependencies, the greater the need for preserving continuity.
5:    Use a contract as a framework – not a legal weapon.
6:    Develop safeguards to prevent defection.
7:    Predicted alignments can minimize transaction costs.
8:    Your style of contracting matters; be credible.
9:    Build trust; leave money on the table.
10:     Keep it simple.

Each lesson is covered in detail and followed by concrete advice for practitioners in the white paper.

The white paper is available with registration (no fee) at http://www.vestedoutsourcing.com

ABOUT THE AUTHORS
Kate Vitasek is a nationally recognized innovator in the practice of supply chain management and outsourcing. She is the founder and lead researcher in the concept of vested outsourcing, which was developed in conjunction with the University of Tennessee. Vitasek also is the author of Vested Outsourcing: Five Rules That Will Transform Outsourcing (February 2010), and teaches the newly launched executive education program on vested outsourcing for the University of Tennessee.

Karl Manrodt is a professor in the Department of Management, Marketing & Logistics at Georgia Southern University. His research interests revolve around the role of information in logistics systems, metrics and performance measurement, and strategic sourcing. The author of three books and more than 50 scholarly articles, his publications have appeared in journals such as the Supply Chain Management Review, Transportation Journal, the International Journal of Physical Distribution and Materials Management, Interfaces and the Journal of Business Logistics. His annual study on trends in logistics is now in its 19th year, making it one of the longest continuous studies in the discipline.

Richard Wilding is the chair (full professor) of Supply Chain Risk Management at the Centre for Logistics and Supply Chain Management, Cranfield School of Management U.K. He is a highly acclaimed presenter and regularly speaks at industrial conferences, and has undertaken lecture tours of Europe and Asia at the invitation of local universities and confederations of industry. He has published widely in the area of supply chain management and is editorial advisor to a number of top journals in the area. In 2010, his biography was entered into Who’s Who, described as "Britain's most famous reference book."

Tim Cummins is the founder and CEO of the International Association for Contract & Commercial Management (IACCM), a non-profit organization that has become the global forum for innovation in trading relationships and practices. IACCM offers cross-industry, cross-functional, multinational insights into the complex world of business and negotiation at a time of unparalleled change.

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Janet Appel

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