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4 Analysis outsourcing of the procurement

4.1.2 The procurement form as institutional arrangement

Also in practice to finding organization forms of the procurement process can be examined from transaction-cost-theoretical view.
In this context two possible organization forms come into question: "outsourced" and the enterprise-internal procurement.
"outsourcing, a word creation out" outside "and" resourcing ", generally designates the external supply of services." 107
In this work one regards the outsourcing and/or paging of the procurement service, whereby one locks with one or more selected service company(s) a contract and to it/them the tasks of procurement hands over, which are not to be settled any longer internally. From the possible contractual relations result two main organization forms outsourcing of the procurement .
"(...) no firm partnership between enterprises and service supplying company can be determined, i.e. the enterprise selects and/or the most economical service supplying company most suitable in each case for each procurement transaction." 108
The contractual relationship is thus short term and is limited to the exchange of the achievement "procurement" with the return "money", the determination of the contractual item and the contract conditions is very exact and the possible conflicts on the course of law is solved.
Here it concerns a classical contract (market situation), in which very efficient incentive -, control and (autonomous) adjustment mechanisms exist.
If a certain partnership with a service supplying company is specified, the planned relations duration is usually medium-term, the definition of the contractually agreed upon achievement and return is less clear, so that enterprises and supplier count on contractual adjustment need.
Due to the open regulation need the completion of the transaction is required still limited not on the discrete act of the procurement, but also after contract conclusion a certain measure of decision, tuning and co-operation of the contracting parties.
"(...) E.G. itself the service supplying company can also around additional service, like transport and logistics cares." 109
This corresponds to the neoclassical contract form. Compared with the market mechanisms outsourcing after the classical contract are more weakly pronounced the characteristics outsourcing after the neoclassical contractual relation: Beyond the contractual additional incentive and control mechanisms are necessary.
In addition this kind of Outsuorcing offers a not completely autonomous adaptability.
During the enterprise-internal procurement the own purchase department implements the tasks, which takes over with the outsourcing of the Supplying service company, so that the contractual relation comes within the enterprise.
With this relational contract the contracting parties plan a very long-term relationship by openness in the determination of the contractual article. The solution method of possibly arising conflicts is certain in the context of the contract.
Regarding the incentive and control mechanisms the internal procurement for the reasons mentioned in chapter 3.1.2 is a costly institutional arrangement. It shows however advantages in view to the efficient (bilateral) adaptability and the faster and more economical information exchange, which make possible also a better protection from opportunistic behavior.
The following table compares the paged out with the internal procurement regarding the organization form characteristics from the transaction cost theory.

Tab. 5: Comparison between paged out and enterprise-internal procurement regarding the organization form characteristics from the transaction cost theory.

107 O.V. (2003), in:
108 Marino V.: Interview, P. xix.
109 Marino V.: Interview, P. xix.

4.1.3 the procurement form decision after the basic model of the transaction cost theory

From main statement transaction cost theory follows that the procurement can be organized and completed the more efficiently, the better the characteristics of the organization form the requirements resulting from the procurement dimensions corresponds.
Thus the basic model of the transaction cost theory applied to the procurement looks as follows:

Fig. 10: The basic model of the transaction cost theory applied to the procurement.

As already seen, the procurement process for B and C-parts is not connected with special specific investments.
For these products therefore the market situation (outsourcing) represents the most favourable procurement form due to its strong incentives and the effectiveness of the competition mechanism, which opportunistic behavior makes limited and economical autonomous adjustment processes possible. Also with increasing procure-specific investments the Ousourcing (with B and C-parts) in form of a neoclassical contractual relation can ensure the optimal solution.
The outsourcing of the procurement for the A-parts (with those high specific investments to be transacted) would mean the foreign assignment of a enterprise-strategic function, which direct control and co-ordination require.
Therefore here the outsourcing of the procurement of the A-goods is not applicable. The connection illustrated in the following illustration applies thus only to B and C-parts.

Fig. 11: Cost process of the different procurement organization forms as a function of the extent of procure-specific investments under uncertainty.

Thus the transaction cost theory justifies not only the existence outsourcing of the procurement and the external Supplying service company, but designation rather for B and C-parts the outsourcing as the cost-most efficient organization form of this process.
The next section tries however to quantify the advantage outsourcing in relation to the internal procurement on the basis a cost calculation.


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