Sourcing Strategies of Manufacturing Firms: Transaction Cost Implications

Developing the right sourcing strategy in managing the firm’s supplies is critical for today’s managers. They realize the long-term impact of their sourcing strategies (make or buy, supply-base structure, and nature of customer-supplier relationship) on the profits and the efficient functioning of the organization. The study examines and evaluates changes in these strategic choices. The study revealed the following: small and lower labor productivity firms rate their internal suppliers better than external suppliers; obtaining supplies nationwide from a limited number of suppliers is the prevalent supply-base structure; and customer-supplier relationship is deepening.