Special issue in: "Procuring and Managing Complex Performance"
Article Type: Guest editorial From: International Journal of Operations & Production Management, Volume 34, Issue 2
About the Guest Editors Mickey Howard is an Associate Professor in purchasing and supply management at the University of Exeter Business School, UK. After a decade of working in automotive and retail product design where he gained his MBA from the University of Durham, he joined the School of Management at the University of Bath to complete his PhD. His research today investigates the implementation of supply chain strategy including service-based innovation or "servitization", complex performance, and sustainability initiatives such as low carbon procurement and closed-loop supply systems. A recipient of a Chartered Institute of Purchasing & Supply Scholarship, he publishes widely, complements his multi-sector research with private advisory work and has lectured in business schools around the world. He is the Co-Editor with Nigel Caldwell of Procuring Complex Performance: Studies of Product-Service Innovation, Routledge, New York.
Nigel Caldwell is a Senior Lecturer at the Logistics Research Centre, Heriot Watt University. After working for the then biggest automotive manufacturer in the UK, his academic career started with an MBA at Bradford Management Centre followed by operations management lecturing post at Plymouth University, and a PhD and research career at the School of Management, University of Bath. His specialism is purchasing and supply management, and he publishes widely in the field and is the Co-Editor with Mickey Howard of Procuring Complex Performance: Studies of Product-Service Innovation, Routledge, New York.
This special issue on Procuring and Managing Complex Performance examines the multiple challenges of managing operations in environments that have complex infrastructural and performance requirements. As an emerging area in business-to-business research it seeks to combine theory on complexity, purchasing and supply, markets and innovation management. The traditional combination of hierarchy, linear project management and high levels of contractual control has increasing difficulty adapting to the dynamics of emergent customer requirements particularly across capital intensive sectors such as construction, healthcare, aerospace and defence. Complex performance implies the bundling of product and infrastructure with long-term, often multi decade service support requirements, a combination which produces a number of significant operational and supply decisions, namely: through-life asset management, product upgrade strategies, cost and risk modelling, new forms of contractual control and adoption of new business models. Adding a procurement perspective highlights the need for a more co-ordinated and upfront approach to buying made necessary by the task being so composed of sub-elements that it cannot be achieved by the sequential or additive achievement of individual transactions. The diminished importance of the individual transaction in managing complex performance and the rise of more embedded knowledge in supply relationships create a need for buyer-supplier agreements focused on outcomes rather than tightly specified inputs or products across organisational boundaries. Put simply, the buying or commissioning of complex performance means going beyond managing the buyer-supplier interface, and involves a mindset shift from production centric delivery towards the coordination of assured service.
It seems a considerable span of time has now passed since we held the first colloquium on procuring complex performance (PCP) hosted by the University of Bath in December 2007. Since then, interest has grown steadily in the subject with further events held at the universities of Bath, Reading and Heriot-Watt, and accompanied by numerous papers, doctoral studies[1], and the publication of an edited book in 2011. This special issue in the International Journal of Operations & Production Management, therefore, aims to assemble a selection of new papers, to build on existing knowledge and we hope expose new arguments, areas of research and industry sectors which offer opportunities for further insight and investigation. In total, 35 papers were submitted as a result of the call for papers, of which seven were selected by the guest editors to be taken forward for double-blind peer review. First paper was rejected after the first round, with the remaining six papers receiving a further two to four rounds of reviews before provisional acceptance prior to the journal editors final decision. We gratefully acknowledge the assistance of Professors Steve Brown and Andi Smart, as well as 12 anonymous reviewers for their support throughout. We are also grateful for the ongoing encouragement from academics at Aarhus, Bath, Brighton, Erasmus, Exeter, Imperial, Lancaster, Reading and Twente universities who continue to enthusiastically contribute – and occasionally challenge – this important yet still emergent field of research.
The following papers adopt a mix of theoretical and practical perspectives to procuring and managing complex performance, with rich empirical research included from both the public and private sectors, e.g. railways, office maintenance, capital equipment, highways, defence. A common theme that runs throughout the special issue are the concerns over articulation of the term complexity, going beyond descriptions of physical attributes such as the number of contracts or product interfaces, towards an understanding of whole contemporary settings including interconnected firms, which draws on resource-based and transaction cost economics literature (Penrose, 1959; Williamson, 1979; Langlois, 1992; Jacobides and Winter, 2005; Lavie, 2006). Allied to complexity is the emergent term of "value co-creation" that implies both the process and culmination or outcome of effort generated by multiple organizations as part of a coordinated strategy orientated towards the customer. As it transpires, the authors below tackle these issues from a variety of standpoints and theoretical lenses.
In the first paper, Spring and Araujo present a theoretical perspective by exploring indirect capability and complex performance. They argue that indirect capabilities: the ability to access other organizations capabilities, are an important and neglected part of firm strategy in PCP settings, and that this is especially so if these settings are treated as genuinely complex rather than merely complicated. Identifying elements of indirect capabilities, the paper draws on complexity notions and Penroses analysis of endogenous innovation to drive a disequilibrium-oriented discussion of the capabilities required by firms in a PCP setting. Six inter-related elements of indirect capabilities are proposed that are considered important in PCP and other operations and supply settings, and provides the basis for an operations and supply strategy more attuned to the demands of shifting inter-organizational networks.
Hartmann, Roehrich, Frederiksen and Davies examine how public sector buyers transition from procuring single products and services to PCP in public infrastructure. Their paper explores the change in interactions between buyer and supplier, the emergence of value co-creation, and the capability development during the transition process. The transition is described as a learning process which cumulates the knowledge and experience in the client-supplier interaction accompanied by changing contractual and relational capabilities. In public infrastructure this process is not initially motivated by the benefits of value co-creation, but is politically driven. The study proposes three generic transition stages towards increased performance and infrastructural complexity moderated by contract duration. These stages may help managers of public agencies to identify the current procurement level and the contractual and relational challenges they need to master when facing higher levels of performance and infrastructural complexity.
Van der valk and Wynstra investigate the purchase of cleaning services from suppliers. The services differ with regard to how they are used as part of the value-proposition to customers (train and station cleaning) or as part of the support processes (office cleaning). The authors find that for a technically homogenous service, fundamental differences in required interaction arise as a result of different usage-situations. These differences are reflected in the sourcing decision and the design of the service delivery management process. In order to develop appropriate sourcing and service delivery management strategies, practitioners need to consider the use of the service purchased and how it relates to their value proposition. The research shows that pooling volume for services that are used differently may enable price reductions, but could also reduce supplier performance and customer satisfaction.
Roehrich and Lewis present what they term the implications for "exchange governance complexity". While previous studies explored the argument that allies the notion of complexity to the complex product-service (PS) offerings being procured, this explores whether there is a corollary with exchange governance complexity. More specifically, the paper analyzes the relationship between systemic complexity and complexity of contractual and relational exchange governance in PCP arrangements. A multiple, longitudinal case study method is used to examine the relationship between systemic complexity and exchange governance complexity. Preliminary conclusions suggest that as a response to increasing systemic complexity, organizations respond with increasing contractual governance complexity. However, better performing procurement arrangements illustrate that the use of simplified contractual governance in form of working agreements in combination with relational governance such as inter-personal relationships may be more effective to counteract complexity.
Smith, Maull and Ng provide insight into the management of the PS transition – often known as "servitization" – and resulting product-service system (PSS) offerings. They adopt a service-dominant logic view of value creation to explore value propositions of the PS transition and operations design. The paper presents the case of an original equipment manufacturer of durable capital equipment who over a period of five years, has expanded offerings to include use and result-orientated PSS. It identifies a number of generic attributes which are abstracted into four nested value propositions: asset value proposition, recovery value proposition, availability value proposition and outcome value proposition. In examining the operations design for delivery, the role and importance of contextual variety increases as the organisation moves through the value proposition phases. The paper demonstrates the complexity involved in the transition from a product to service context. Service cannot be seen as a "bolt-on" extra to the product offering, where complexity caused by interactions and changes to the core offering requires a systems perspective and consideration of both the firms and customers skills and resources.
In the final paper, Caldwell and Howard (2011) define the impact of new contractual arrangements in limited or oligopolistic markets, providing insights into the challenges facing the UK military procurement. Two cases of major platforms in naval and air defence are selected to examine through-life maintenance or "contracting for availability" and build theory on PCP. Propositions are developed from the literature which are tested and extended from the analysis. The paper reveals the significance of a procurement perspective in the UK military not present in fast moving high volume supply chains. In oligopolistic markets such as defence, the Ministry of Defence (MOD) represents a market of one, seeking ambitious and non-incremental innovation from Prime Contractors during the procurement process. New contractual arrangements show the increasing shift in responsibility to the Prime Contractor who coordinates service support and supply chain incentivisation over extended platform lifecycles. Compounded by economic and politically charged conditions, procurement by default increasingly plays a new shaping role in large-scale programme management driven by outcome-based contracting. Customers such as the MOD must understand their role under these new contractual arrangements, providing leadership and engaging with future contracting capability and innovation.
January 2013
Guest Editors
Mickey Howard and Nigel Caldwell
Note
[1] For example, past and present doctoral students working in a similar or related field include: Dr Jens Roehrich and Charlotte Backholer (both at the University of Bath, UK), Dr Thomas Ekstrom (Lund University, Sweden), and Chris Wright (Lancaster University, UK).
References
Caldwell, N. and Howard, M. (Eds) (2011), Procuring Complex Performance: Studies of Innovation in Product-Service Management, Routledge, New York, NY
Jacobides, M.G. and Winter, S.G. (2005), "The co-evolution of capabilities and transaction costs: explaining the institutional structure of production", Strategic Management Journal, Vol. 26, pp. 395–413
Langlois, R.N. (1992), "Transaction-cost economics in real time", Industrial and Corporate Change, Vol. 1 No. 1, pp. 99–127
Lavie, D. (2006), "The competitive advantage of interconnected firms: an extension of the resource-based view", Academy of Management Review, Vol. 31 No. 3, pp. 638–658
Penrose, E. (1959), The Theory of the Growth of the Firm, Basil Blackwood, Oxford
Williamson, O.E. (1979), "Transaction-cost economics: the governance of contractual relations", Journal of Law & Economics, Vol. 22 No. 2, pp. 233–261
