Journal of Purchasing & Supply Management 27 (2021) 100659

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Journal of Purchasing and Supply Management

journal homepage: www.elsevier.com/locate/pursup

Editorial

Notes and debate paper: Should merchandising and sourcing be worlds

apart? The opportunity for more integrated strategic sourcing research
Remko van Hoek *, Rodney Thomas
University of Arkansas, Walton College of Business, United States

A R T I C L E I N F O A B S T R A C T

Keywords Whereas retailers are some of the biggest buyers that have some of the highest percentages of external spend as a
Strategic sourcing share of revenue, they are not typically included in strategic sourcing research. Strategic sourcing research
Retail originated with a focus on supplies for manufacturing. But the strategic sourcing of merchandise by retailers is
Manufacturing
not as commonly studied. Merchandise sourcing is often approached very differently from manufacturing
sourcing and often different teams of buyers with different roles and responsibilities are involved. Leveraging
author industry experience and interviews with strategic sourcing executives in manufacturing and merchandise
sourcing this notes and debate paper compares strategic sourcing across these domains and identifies fruitful
research opportunities for developing a more comprehensive supply chain approach to strategic sourcing
research.

1. Introduction
Going back to the original call to action from Kraljic (1983), the role
of purchasing has evolved from a tactical buying process to a strategic
corporate initiative (Kim et al., 2015; Ellram and Carr, 1994; Smeltzer
et al., 2003). As supply chains have become more dynamic and complex
(Omar et al., 2012), the traditional purchasing function has developed
into a source of competitive advantage (Ashenbaum and Terpend,
2012). And the concept of strategic sourcing has emerged as an essential
component of supply chain management. It is viewed as a set of inter­
related business processes devoted to maximizing the value of externally
procured goods and services (Anderson and Katz, 1998) and it can result
in reduced costs, improved quality, and shorter delivery times (Kern
et al., 2011) to help companies achieve competitiveness (Faes and
Matthyssens, 2009). Increasingly the scope and focus of strategic
sourcing includes a focus on improving environmental sustainability in
the supply chain (Guinipero et al., 2012), improving corporate social
responsibility and focusing more on collaboration with suppliers, even
to the point of engaging suppliers in enabling innovation (Wowak et al.,
2016).
Although sourcing has elevated to a strategic role in modern supply
chains, research in this area is somewhat limited in scope due to a
manufacturing-centric focus (Ellram et al., 2004). Faes and Matthyssens
(2009) point out that the Kraljic (1983) perspective now dominates
everyday life of industrial buyers. Studies that provide insights into the
make/buy decision tend to assume organizations have manufacturing
capabilities (Ho et al., 2010). The supplier selection literature generally
focuses on relevant manufacturing criteria (Choi and Hartley, 1996). In
many ways, the sourcing literature is dedicated to efficiently obtaining
raw materials needed in production facilities. While in
non-manufacturing service environments strategic sourcing is often
focused on so called “indirect” procurement, that is the strategic
sourcing of goods and services unrelated to the core business of the
company (Mena et al., 2018) and this domain and that of sourcing ser­
vices is seen as a recent domain expansion of strategic sourcing (Eltan­
tawy et al., 2014; Ellram et al., 2004). Unfortunately, this view of
strategic sourcing is less inclusive of critical sourcing needs and ap­
proaches of retailers as key supply chain participants.
Retailers have long been acknowledged as the most powerful entities
in their supply chains (La Londe et al., 1994; Defee et al., 2009). With
annual sales approaching two-thirds of Gross Domestic Product (Farfan,
2012), retailers are also the largest sourcing organizations in most
supply chains. Whereas external spend in manufacturing companies may
approach 45% of revenue and 15% of revenue in service organizations,
in retailers it may be as much as 75% of revenue (CAPS, 2017). How­
ever, retailers have sourcing requirements that differ from those of up­
stream supply chain members. Rather than sourcing raw materials or
commodity components with clear quality standards and design

* Corresponding author.
E-mail address: rvanhoek@uark.edu (R. van Hoek).

https://doi.org/10.1016/j.pursup.2020.100659
Received 3 April 2020; Received in revised form 27 September 2020; Accepted 2 November 2020
Available online 9 November 2020
1478-4092/Published by Elsevier Ltd.
R. van Hoek and R. Thomas
specifications, retail buyers make sourcing decisions based on the
desirability of shelf-ready finished goods that carry their own brand
equity (Kaufman et al., 2006). This distinction is important because it
means that in addition to basic sourcing considerations, retail buyers
must also evaluate the potential consumer appeal of each sourced
product. Traditional supplier selection criteria like cost, quality, and
delivery are important for retail buyers, but they are not necessarily the
primary drivers of sourcing decisions. Instead, retail buyers must first
consider if an item will sell in stores or online formats and determine
whether the item fits in the overall merchandising assortment.
Unfortunately, the strategic sourcing literature on retail-specific
sourcing issues is far less prolific than that on manufacturing and ser­
vice sourcing and calls for greater coverage of retail sourcing go back
over two decades (Liu and McGoldrick, 1996). Progress has been made
in recent years (Matopoulos et al., 2019; Kumar et al., 2018; Bloom and
Perry, 2001) but many questions about driving forces, the decision
making process, obstacles and barriers in merchandise sourcing, raised
by Liu and McGoldrick (1996), are not fully answered still today.
Research on merchandise sourcing could also benefit from more
empirical research; Chen and Guo (2014) develop a non-empirical
theoretical model for retail sourcing, Matopoulos et al. (2019); Oke
and Gopalakrishnan (2009); Mattila et al. (2002); Bloom and Perry
(2001) all study data from one retailer only. Clearly there is room to
suggest valuable directions for further empirical research in this domain.
Recent development around the COVID-19 pandemic, sending retail and
manufacturing supply chains into very different sourcing challenges
(van Hoek, 2020), imply that these questions have not lost any relevance
today.
Retailers occupy a unique position in supply chains because they are
typically the only supply chain members that have to simultaneously
manage traditional B2B sourcing relationships while also considering
dynamic B2C purchasing trends. However, the retail industry may have
not been highly focused on the potential of strategic sourcing outside of
merchandise sourcing. Walmart for example, is known for building its
business around the ability to source product in a way that enables
everyday low prices for consumers and high on shelf availability. Yet it
was not until 2018 that the company hired its first chief procurement
officer to focus on non-merchandise sourcing. Disney very recently
promoted its head of merchandise sourcing (sourcing several hundred
million dollars of merchandising) to the SVP level and integrated
merchandise sourcing for both its parks and retail businesses into one
integrated and centralized organization. While doing this, the company
kept all of its other manufacturing and services strategic sourcing, across
all of its business and $15bn + spend decentralized in its businesses,
with a functional head at the VP level, managing a small central team.
This begs the questions, if both teams conduct strategic sourcing, does it
make sense to have these organized in different ways, with different
hierarchical positions and completely separate leadership? Is there no
opportunity to learn from each other, share investments in technology
and capability development? And can research support the development
of strategic sourcing capabilities across both domains?
The purpose of this notes and debate paper is to begin to explore both
(1) similarities and differences between merchandise sourcing and
strategic sourcing in manufacturing environments and (2) to identify
opportunities for cross-fertilization and research that can enable capa­
bility development across a more complete spectrum of sourcing do­
mains. This notes and debate paper aims to make a contribution to
literature by initiating discussion about extending the scope of strategic
sourcing research, identifying important new sourcing themes and
criteria, and suggesting future research opportunities. Given the prom­
inent role of retailers in modern supply chains, this can shed light on
critical supply chain players previously not as widely considered in
strategic sourcing literature as manufacturing companies. Finally, given
the limited retail specific sourcing literature, we pull from the authors
firsthand experience in both strategic sourcing in manufacturing and
merchandising. We also drive preliminary qualitative insights based
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Journal of Purchasing and Supply Management 27 (2021) 100659
upon interviews with retail executives in order to begin to provide
research direction into a much needed expansion and enhancement of
strategic sourcing research and practice. While it is not the purpose of
this note to conduct a full systematic literature review or a full blown
empirical study, we do aim to share from our own experience and the
experience of other sourcing executives, to start a debate and inspire
consideration in industry and new avenues in research.
1.1. Differences and similarities in strategic sourcing between
manufacturing and merchandising
Table 1 offers an overview of differences and similarities between
merchandise sourcing in retail and strategic sourcing in manufacturing,
covering driving forces, decision making process and obstacles and
barriers as recommended by Liu and McGoldrick (1996). In this section
we will explore those based upon literature and author experience,
Table 2 offers quotes from buyers in the two domains to illustrate dif­
ferences and similarities from an industry perspective. While a full
empirical study would be beyond the scope of a notes and debates paper
we do aim to provide additional illustrative perspective from industry.
1.2. Driving forces – different position – different stakeholder
environment
Fig. 1 frames the manufacturing, service and merchandise sourcing
domains in the context of the supply chain. Strategic sourcing has been
defined as the systematic analysis of existing and past organizational
procurement expenditure, leading to opportunities for improved costs
savings (Monczka et al., 2016) but this definition may be more relevant
for manufacturing and service sourcing than for merchandise sourcing.
Both domains can however be framed within the supply chain context
and both domains are commercial in nature, engaging with supplier and
(internal) customer markets to drive business results. However, the
orientation of manufacturing sourcing tends to differ from that of
merchandise sourcing and this is partially driven by differences in
supply chain position between the two and a resulting difference in
stakeholder environment. From a stakeholder perspective a key question
is what internal and external stakeholders managers need to pay
attention to and really care for (Freeman, 1984; Laplume et al., 2008)
and there is a distinct difference in internal stakeholder environment
between merchandise sourcing and manufacturing sourcing.
Liu and McGoldrick (1996) explain how merchandising strategies
are focused on consumer market and sales opportunities and that these
drive sourcing approaches. They points out that a major difference be­
tween manufacturing and retail sourcing is that manufacturers source
raw materials or intermediate products that are to be used to produce a
final product, while retailers generally source finished products for
consumption and are more driven by retail strategy, consumer re­
quirements, competitors and target markets. As a result, Wagner et al.
(1989) point out that the retail buyer is unique, serving as both pur­
chasing agent and marketing manager. Kalchschmidt et al. (2020)
demonstrate that the geography of retail locations is consumer market
focused whereas that of suppliers is supply market focused, resulting in
very different networks. The merchandise sourcing focus on revenue and
growth, business development in consumer markets drives consider­
ations around brand equity, innovation, and category management.
Brand equity is defined as “a set of brand assets and liabilities linked to a
brand, its name and symbol that add to or subtract from the value
provided by a product or service to a firm and/or to that firm’s cus­
tomers” (Aaker, 1991). High levels of brand equity have been linked to
greater revenue, increased perceptions of quality, increased purchase
intentions, and competitive advantage (Fischer et al., 2010; Washburn
and Plank, 2002; Golicic et al., 2012).
Manufacturing sourcing tends to concentrate on ensuring the supply
of materials and supplies for the manufacturing of products that are
delivered to customers, including retail customers, and on optimizing
R. van Hoek and R. Thomas
Table 1
Differences and similarities across manufacturing, service and merchandise sourcing.
Strategic Sourcing
Manufacturing and service sourcing
Driving Position in Upstream; Manufacturing supplies and
forces supply chain WIP/raw materials
Market Supply markets
orientation
Focus Sourcing categories of commodities, parts
and services, optimization of existing and
past spend to drive cost savings (Monczka
et al., 2016; Mena et al., 2018)
Process Sourcing process (Monczka et al., 2016;
orientation Blackstrand et al., 2019)
Decision Time horizon Life cycle and total cost of ownership (
making Ellram and Siferd, 1993; Ferrin and Plank,
process 2002; Hasan et al., 2020)
Role Service to multiple stakeholders, aligning
and engaging as a business partner,
supporting business decision making (
Godsell et al., 2010; van Hoek et al.,
2014)
Contribution Facilitating the sourcing process aimed at
fulfilling business needs with supplies (
Mena et al., 2018; Blackstrand et al.,
2019)
Target Business improvement and optimization
of historical spend (Mena et al., 2018)
Top KPI’s Costs, quality and delivery (Liu and
McGoldrick, 1996; Mamic, 2005; Ho
et al., 2010)
Obstacles Development Supplier collaboration and supplier
and ambition enabled innovation (Wagner, 2012;
barriers Wagner and Bode, 2014; van Hoek et al.,
2020)
Scope Sustainability, supplier diversity and
expansion I corporate social responsibility (Van Hoek
and Johnson, 2010; (Hasan et al., 2020;
van Hoek et al., 2020; Schulze and Bals,
2020)
Scope Derisking the supply chain (Kumar et al.,
expansion II 2018; Mena et al., 2019; Pournader et al.,
2020; van Hoek, 2020)
Emerging New(er) technologies such as blockchain
technology and robotics (Bals et al., 2019; van Hoek,
2019)
categories of external spend via strategic sourcing, with historical spend
in those categories as a basis (Mena et al., 2018). Merchandise sourcing
focuses on the sourcing of products from manufacturers for the purpose
of merchandising those to consumers in retail outlets. The sourcing of
services can take place throughout the supply chain and is focused on
non-product related or indirect supplies, including those that are “not
for resale” in the retail environment. This figure clarifies that while
merchandise sourcing may occupy a different position in the supply
chain, there may be supply chain relevance in considering the strategic
sourcing domain more holistically.
The orientation in manufacturing sourcing is on expenditure or
spend in commodities, parts and services needed in manufacturing or­
ganizations and the development of sourcing strategies in collaboration
with internal stakeholders that represent the business need and budgets
used in those purchases (Monczka et al., 2016). Manufacturing sourcing
organizations target maturation of sourcing capability by achieving ever
greater coverage of external spend by strategic sourcing, this is done by
growing the internal stakeholder environment and covering more spend
categories. Ardent Partners (2019) for example indicates that on average
sourcing organizations have 63% of their external spend under
Journal of Purchasing and Supply Management 27 (2021) 100659
Merchandise sourcing Differences and similarities
Downstream; Finished goods Both are commercial functions with suppliers
as stakeholders but merchandise sourcing is
Consumer markets less focused on optimization of historical
spend and more on new merchandising being
Revenue growth through brand equity, market commercialized and sourced. Manufacturing
positioning, innovation and category sourcing has more internal stakeholders and
management (Chen and Guo, 2014; Fischer merchandise sourcing has internal
et al., 2010; Washburn and Plank, 2002) stakeholders that are more market-facing.
Commercialization and merchandising process (
Liu and McGoldrick, 1996; Matopoulos et al.,
2019)
Seasonal and market patterns (Liu and Both can be seen as “enabling functions” but
McGoldrick, 1996; Kumar et al., 2018) the role of merchandise sourcing is less about
service to many parts of the business, across
Driving and leading business decision making, all enterprise spend and less about facilitating
supported by other functions. Both buyer and the process. Instead it focuses on running a
marketer (Wagner et al., 1989; Liu and key part of the merchandising process, with a
McGoldrick, 1996) focus on revenue generation over production
cost reduction, and merchandise spend only.
Running the merchandising process and As a result its boundaries partially overlap,
managing categories of merchandise (Liu and while the span of merchandise sourcing
McGoldrick, 1996; Kumar et al., 2018) theory may be more narrowly focused
Market competitiveness, generating future Cost are key in both domains but merchandise
spend (Chen and Guo, 2014; Matopoulos et al., sourcing focuses more on revenue, inventory
2019) availability and margins for the season/
Revenue and market share/competitiveness, product line
margin on inventory with cost as a secondary
lever (Fairhust and Fiorito, 1990; Mattila et al.,
2002; Chen and Guo, 2014; Matopoulos et al.,
2019)
Greater supply agility and market Merchandise sourcing is already more
responsiveness in order to ensure product relationship and joint innovation focused (see
availability and responsiveness to consumer for example Matopoulos et al., 2019)
trends (Mattila et al., 2002; Corsten and Kumar,
2005; Chen and Guo, 2014)
Consumer orientation towards sustainability Sustainability is important to both B2B and
and corporate social responsibility (Fearne et al., B2C customers
2005; Mamic, 2005; Yadlapalli et al., 2019)
Derisking the supply chain, including balancing COVID-19 supply chain disruptions impacted
sources to shorten the product pipeline (Oke and both merchandising and manufacturing
Gopalakrishnan, 2009; Kumar et al., 2018; van sourcing
Hoek, 2020)
Newer technologies such as blockchain (van Blockchain pilots and new technologies are
Hoek, 2019) being piloted and rolled out across retail and
manufacturing
management through strategic sourcing. In the development of this
strategic sourcing capability in manufacturing environments, there has
been a consistent focus on process-models (Backstrand et al., 2019) to
structure and conduct strategic sourcing projects at a spend category
level. Spend categories are discrete areas of external spend for which a
sourcing strategy can be developed based upon business needs and this
strategy informs supplier selection and contracting (Mena et al., 2018).
Category management in manufacturing sourcing refers to the
management of an external spend categories. In merchandising it refers
to the planning, allocation, and management of resources designed to
maximize the performance of a retail assortment (Gajanan et al., 2007).
It involves issues such as promotional schedules, financial analysis,
endcap allocation, pricing, coordinating reset schedules,
cross-merchandising, and consumer behavior (Gooner et al., 2011).
Most retailers and suppliers agree that category management is a critical
issue (Lindblom and Olkkonen, 2006) and research suggests that intense
category management efforts result in improved financial performance
(Gooner et al., 2011).
In summary, while both domains are commercial in nature and
involve making buying decisions, merchandise sourcing focuses on
3
R. van Hoek and R. Thomas
Table 2
Illustrative quotes from manufacturing and merchandise sourcing managers.
Manufacturing and service sourcing
Driving forces Market
orientation
“The focus of strategic sourcing is on considering historical spend of
the company and bringing the various business teams that generate
that spend together in a multi-functional team to develop a strategic
Focus approach to getting the best terms and service out of the market. As
you advance with strategic sourcing you will get more and more areas
of external spend under management over time.” Sourcing director IT
company
Decision Targets “It is key to not only focus on purchase price but also on related cost
making items such as maintenance, delivery charges etc. This avoids “being
process penny wise and pound foolish” in IT procurement for example
purchase price may only be 30% of your total costs once you also
consider implementation costs associated with selecting a new
technology, system upgrade costs over the period that you use the
technology, staff training costs.” IT procurement executive.
Role “For effective strategic sourcing it is key to be seen as a business
partner by your colleagues. We bring a process and a toolkit to the
table and can facilitate the team of sourcing and business people
through this process aimed at developing a strategic approach to the
spend but in the end the business needs to own the final decision,
after all it is their spend and budget” CPO of a medical products
manufacturer
Obstacles and Development “Once a procurement organization has reached the maturity level at
barriers ambition which the majority of spend is influenced with category sourcing
strategies that have been implemented through stakeholder
engagement and collaboration, sourcing events, and rolled out into
day to day spend management, supplier relationship becomes a
natural focus area. […] Engagement will move beyond strategic
sourcing aimed at identifying suppliers that can meet current
business needs. Beyond that, engagement will include new
collaborative initiatives that impact end-customer value, not just
meet current business needs in the buying firm.” Sourcing manager
Scope expansion “As sourcing function we have a tremendous opportunity to impact
the sustainability of our supply chain; we work with so many
suppliers and if we successfully engage them in our sustainability
agenda we can do much more than we ever could on our own.” CPO
chemicals manufacturer
Emerging “Historically we have used technology to automate purchasing
technology activities so that we can focus more on strategic sourcing, now newer
technologies are coming to the sourcing process.” Sourcing manager
Fig. 1. Strategic sourcing domains in the supply chain.
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Journal of Purchasing and Supply Management 27 (2021) 100659
Merchandise sourcing
“We want good brands and we are willing to pay a higher price for
them because consumers trust a good brand, consumers will pay
more for a good brand, and consumers will be loyal to retailers that
offer good brands. I tell all my merchandise buyers that they need to
source from suppliers with good brands that will differentiate us in
the marketplace.” Retail Merchandising Vice President
“I want suppliers that understand consumers and know how to
manage an assortment. I don’t just want a manufacturer, anyone can
do that. I want know-how and market knowledge. I personally have
responsibility for dozens of categories and I cannot be an expert on
all of them. Therefore, I need suppliers that can help me manage a
category. I consider this one of the most important criteria when
selecting a supplier or awarding business.” Retail Merchandise Buyer
“Because we have to work very quickly to develop product for
merchandising using strict quality standards and cost control we
tend to turn to suppliers that we work with well over and over again
to work together on the development of product samples. Once the
product line is developed we only have a number of suppliers that
we know that can turn that product around fast enough for us to hit
the time to market window. We really rely on these suppliers and
need to work closely with them to hit our targets.” US merchandise
sourcing executive
“We have a banner in the lobby over our supplier meeting rooms that
says, ‘Innovate, Differentiate, Accelerate …. and be quick about it!’ I had
this put there to remind my merchandise buyers and suppliers that
we want innovative products that will differentiate us and we cannot
afford to wait on innovations or let our competitors get things first. If
suppliers do not bring us fresh, desirable, new products, then we will
source from someone else.” Retail Senior Vice President and General
Merchandising Manager
“We have accelerated our merchandising process to enable much
shorter time to market and through the collaboration with suppliers
in near and far markets, are creating the ability to update and evolve
assortments and product mix much more responsively than in the
past. Coupled with a focus on sourcing more near or in market we
are able to shorten our pipeline and reduce time to market risks. The
use of RFID technology is enabling greater visibility throughout the
supply chain, in an effort to deliver faster and more reliable.” US
retail executive
“We now grow greens for our in-store restaurants outside our stores,
on site. This is driven by consumer appreciation for reduced shipping
and more localized supply chains to reduce CO2 impact of the supply
chain, coupled with an appreciation for healthy produce. Consumers
appreciate this and rewards us for it.” European retail executive
“We are using some new technologies, including robotics to enable
in-market postponement and customization of products. This also
enables us to be less dependent upon lengthy and slow product
supply lines from global manufacturing sources” US retail executive
R. van Hoek and R. Thomas
customer demand, manufacturing sourcing on internal business de­
mands. As a result of this difference in position and orientation the
stakeholder environment differs between the two domains. While both
have suppliers as external stakeholders, merchandise sourcing will be
more directly involved in customers as external stakeholders also.
Manufacturing sourcing has a larger internal stakeholder environment
involving business managers from the various categories of spend they
support, ranging from operations to supply chain, to logistics and en­
gineering. Merchandise sourcing will likely have a more narrow internal
stakeholder environment that may include brand management, store
design and marketing and be more customer and market oriented. The
difference in position, stakeholder environment and driving forces leads
to differences in decision making process between the two domains.
1.3. Decision making process
How decisions are made in the two domains may vary as a conse­
quence of the differences in supply chain position and stakeholder
environment. As a result, the boundaries of manufacturing and
merchandise sourcing theory may overlap and have differences in range.
Boundaries conditions are defined as place limitations on propositions
generated in a theoretical model (Whetten, 1989) and the range of a
theory denotes the context in which its constructs can be applied with
the same intended meaning (Busse et al., 2017).
In manufacturing sourcing it is advised that buyers collaborate in
multi-functional teams to develop sourcing strategies and establish
criteria for supplier evaluation and selection (Monczka et al., 2016;
Mena et al., 2018). This collaborative approach is founded in the
approach that buyers should facilitate the process leading to the supplier
selection but that the business users should drive specifications and, as
budget holders, make the final supplier selection. This leads to a role for
buyers in aligning and engaging as a business partner that serves mul­
tiple stakeholders, enabling and supporting, but not owning, business
decision making (Godsell et al., 2010; van Hoek et al., 2014). Elantawy
et al. (2014) for example, evaluate procurement’s status in the organi­
zation by considering the degree to which it is considered a business
partner by stakeholders in the business and seen as a valuable contrib­
utor. Procurement technologies such as e-auctions and e-sourcing suites
for conducting RFP’s online are found to enable the impact of strategic
sourcing on company performance (Kim et al., 2015).
Retailers, in order to survive and prosper, must formulate retail
strategies to adapt to the constantly changing environment (Liu and
McGoldrick, 1996). An analysis of market/customer requirements,
competitors, and the company is at the core of a strategy formulation
process. As an important part of merchandise strategy, sourcing strategy
involves the identification and purchase of merchandise. And while
sourcing in both domains plays an enabling role, merchandising sourc­
ing plays a role in product commercialization for customer-market
success from one season to the next. In this process decision factors
and KPI’s might differ from those in manufacturing sourcing. Mattila
et al. (2002) study KPI’s for retailers showing how sales, revenue,
margin, inventory turns and service levels/availability are key. They
clarify that source location is considered unrelated to revenue and that
as a result global sourcing can improve margins. This very clearly
demonstrates that cost considerations are relevant but second to margin
and revenue management, the primary focus of retail buyers. Fairhust
and Fiorito (1990) indicate that retail buyers are focused on margin on
inventory and Kumar et al. (2018) found that retailers are focused on
market potential with a focus on procurement cost as a secondary
consideration in case of reduced market potential.
On the contrary, a review of the supplier selection literature shows
that cost, quality, and delivery performance are the most common
criteria employed by decision makers (Ho et al., 2010). Cost refers to
attributes such as the price of products, the strength of price competition
in the marketplace, efforts to reduce costs, and price fluctuations.
Quality includes attributes such as conformance to specifications, defect
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Journal of Purchasing and Supply Management 27 (2021) 100659
and rejection rates, continuous improvement efforts, and quality control
systems. Delivery performance considers attributes such as meeting
shipment schedules, reliability of deliveries, shipment lead-times, and
mistakes made in the delivery process. A number of other supplier
evaluation criteria exist in the literature ranging from manufacturing
capabilities (Azadegan et al., 2008) to sustainability efforts (Guinipero
et al., 2019). However, cost, quality, and delivery appear to be regarded
in the literature as the most important and most frequently used supplier
selection criteria (Choi and Hartley, 1996). Fitting with the focus on
manufacturing, the time horizon recommended for supplier selection is
that of the life cycle of usage of purchased items and the total cost of
ownership associated with the item, over the life cycle of use, beyond
just purchase price only (Ellram and Siferd, 1993; Ellram and Carr,
1994; Anderson and Katz, 1998; Ferrin and Plank, 2002).
While there is some overlapping span of constructs in merchandise
and manufacturing sourcing, the boundaries of the two domains show
clear differences. Consider for example the role of inventory. In
manufacturing sourcing managers will focus on ensuring material and
parts availability in order to avoid production shutdowns. In merchan­
dise sourcing finished product inventory is focused on in an effort to
avoid lost sales and avoid the negative margin impact of obsolete in­
ventory. Or consider the role of supplier selection criteria. While in
manufacturing sourcing suppliers are selected to provide parts to be
used in production, in merchandise sourcing supplier products are sold
to consumers and as such become part of the brand and market propo­
sition of the retailer.
The above examples illustrate differences in boundary spanning roles
for manufacturing and merchandise souring. The span of merchandise
sourcing reaches into marketing, branding and consumer focus.
Manufacturing sourcing is more solidly focused on the reliable supply of
inputs to production at the right cost and quality levels and the
boundaries of manufacturing sourcing reach across many categories of
spend and suppliers. It should also be noted that these boundaries are
dynamic in nature, in particular in the context of barriers and obstacles.
1.4. Barriers and obstacles
Boundary conditions are dynamic and the study of possible amend­
ment of constructs and moderators are recommended as a focus from a
boundary spanning perspective (Busse et al., 2017). There are several
developments in manufacturing and merchandise sourcing that impact
span and boundaries of the domains, some of these are shared, others are
different.
A widely shared ambition in manufacturing sourcing is to engage
suppliers in innovation and for strategic sourcing teams to grow their
contribution beyond ensuring supply against historical needs into sup­
porting creation of new market propositions and related future spend
(van Hoek et al., 2020). Innovation refers to new and improved products
and services that provide additional value to customers (Wagner, 2012).
Innovative products and services are often associated with greater rev­
enues, increased profitability, and competitive advantage (Wagner and
Bode, 2014; Zacharia and Mentzer, 2007). In a retail environment,
merchandise buyers often seek to source innovative new products but in
manufacturing sourcing buyers have traditionally been further removed
from innovation (Monczka et al., 2016). While merchandise sourcing
has traditionally had innovation within the span of its boundaries, re­
tailers are focusing on growing responsiveness to market developments
and growing their agility, for example by increasing the number of
seasons and shortening merchandising pipelines. Zara for example is
introducing new product every 5–6 weeks and is able to be more agile
with inventory due to near and in market sourcing capability.1
Stakeholder theory explicitly suggests a focus on external
1
https://digital.hbs.edu/platform-rctom/submission/inditex-king-of-fast
-fashion/.
R. van Hoek and R. Thomas Journal of Purchasing and Supply Management 27 (2021) 100659

stakeholders involved in corporate social responsibility (CSR) and opportunities for cross-fertilization between the two domains in future
company sustainability efforts (Laplume et al., 2008). These stake­ research.
holders are relevant for both manufacturing and merchandise sourcing, Interrelations in the supply chain and the role of vertical integration
as is the focus on expanding the boundaries of the two domains to in strategic sourcing.
include CSR and sustainability. In strategic sourcing influence over The interrelations between retailers and manufacturers in shared
suppliers can be used to drive sustainability progress in the supply chain. supply chains hold impact on the strategic sourcing. Differences in
This focus represents an expansion of the scope of procurement’s busi­ power between retailers sourcing merchandising from manufacturers
ness partnering and contributions and can lead to the inclusion of can impact profitability on both sides of the relationship (Bloom and
additional considerations in supplier selection and KPI’s (Lintukangas Perry, 2001) and there is a risk of unfairness towards manufacturers in
et al., 2019; Schaltegger and Burritt, 2014). Yet the difference in posi­ merchandise sourcing (Fearne et al., 2005). On a positive note, retailers
tion and orientation between manufacturing and merchandise sourcing may also provide market access to manufacturers and customer
leads to a difference in span and shareholder orientation. Whereas in responsiveness may require retailer to manufacturer collaboration in
manufacturing sourcing the focus is on sustainability as part of their strategic sourcing (Corsten and Kumar, 2005). In fact, agility in sourcing
business to business proposition, in merchandise sourcing the focus is can improve margins for both retailer and supplying manufacturer
more directly related to consumer interest and reputational damage (Chen and Guo, 2014).
risks (Harrison et al., 2015). Vertical integration and scope of the retailer may impact the nature
Kumar et al. (2018) state that supply risks have become a critical of collaboration in sourcing. A more specialized retailer that is less
sourcing consideration for both manufacturers and retailers in recent vertically integrated may need to rely on sourcing capabilities of man­
years. The COVID-19 pandemic may only have increased the relevance ufacturers more. A “big box” retailer on the other hand, may choose to
of that finding and there is a focus on balancing sources to shorten the develop private labels and integrate its supply chain upstream. Zara (as
product pipeline in retail and on reducing the risk profile of the supply referenced before) vertically integrates upstream to drive agility and
chain in manufacturing (van Hoek, 2020; Handfield et al., 2020). Newer speed of response to consumer market trends. This raises several
technologies such as blockchain and robotics to further enable strategic research questions:
sourcing capability and impact are widely considered relevant for po­
tential adoption (Guinipero et al., 2019). A recent study of blockchain - What is the role of vertical integration in retail on merchandise
adoption in the supply chain included industry pioneers from sourcing collaborative approaches?
manufacturing, service and retail companies (van Hoek, 2019) illus­ - Will forward integration of manufacturers lead to the (partial)
trating that (newer) technologies may be considered for adoption across adoption of merchandise sourcing focus and orientation in
manufacturing and merchandise sourcing. It was found that for manufacturing sourcing?
manufacturing sourcing blockchain benefits include improved visibility - Will upstream integration of retailers lead to merchandise sourcing
into incoming supplies, while in merchandise sourcing it included visi­ strategies that are more multi-faceted or will it pull manufacturing
bility into product availability. Table 3 summarizes similarities, differ­ sourcing towards retail strategy considerations?
ences and dynamics from the stakeholder and boundary spanning - Can manufacturing sourcing capability balance out customer market
perspective. power of retailers or will merchandise sourcing set the pace for the
supply chain?
- What are collaborative models for strategic sourcing that aligns
1.5. Emerging research themes and opportunities for cross-fertilization manufacturing sourcing more with merchandise sourcing in search
of market responsiveness and agility?
Given the dynamic boundaries and span of manufacturing and - Will manufacturing and merchandise sourcing organizations begin
merchandise sourcing there are several emerging themes and to reflect more similar organizational models or will they remain
more distinguished from each other?
Table 3
Overview of stakeholder and boundary spanning similarities, differences and
1.6. The blurring of retail and manufacturing due to omni-channel
dynamics.
Manufacturing sourcing Merchandise sourcing With the rising importance of omni-channel interrelations between
Shared Suppliers Suppliers manufacturers and retailers may only grow and become more diverse,
stakeholders leading to a blurring of retailing and manufacturing. For retailers the
Differing Internal users of procured Stakeholders more closely rise of omni-channel means that customer focus moves up in importance
stakeholders goods (operations, related to consumers in comparison to brand focus and that distribution and retail channels
engineering, supply chain) (branding, marketing) become blurred (Verhoef et al., 2015). And just as omni-channel is
Scope of Broader and growing with More narrow and focused on
changing retailer distribution models as part of a larger business model
stakeholder increased coverage of spend a product-range/market
environment categories segment transformation (Davis-Sramek et al., 2020; Saghiri et al., 2017; Mena
Shared boundary Costs a key consideration Cost matters and Bourlakis, 2016), so can it be expected to impact strategic sourcing
Differing Functional focus on ensuring Cost is secondary to revenue, of merchandising. At the same time manufacturers may be forward
boundaries supply brand, inventory availability
integrating into retailing. Nike has started to reduce the number of re­
to enable sales
Range More narrow focus on reliable More broadly focused on
tailers it works with while growing its consumer-direct channel and
supply at cost and quality branding, marketing developing a supply chain strategy that engages with the consumer
Shared boundary Growing importance of sustainability and CSR, derisking the directly, online and in its own retail channels.2 These developments
dynamics supply chain and considering new technologies mean that manufacturers and retailers may not only become more
Different Greater focus on innovation Growing agility
interrelated, they may also become more direct competitors. Depending
dynamics
Shared Growing importance of CSR and sustainability stakeholders
stakeholder
dynamics 2
https://news.nike.com/news/nike-inc-is-accelerating-a-consumer-led-tran
Different CSR as part of the B2B CSR as part of the consumer sformation-to-ignite-its-next-phase-of-long-term-growthhttps://www.market
stakeholder proposition proposition
place.org/2020/08/27/as-nike-tightens-control-its-swoosh-may-disappear-fro
dynamics
m-some-retailers-shelves/.

6
R. van Hoek and R. Thomas
upon the degree of vertical integration it means that difference in supply
chain position and focus between merchandise and manufacturing
sourcing reduces. As a result, manufacturing sourcing may begin to
include more merchandise sourcing aspects and considerations and vice
versa. This raises several interesting questions:
- Will manufacturers that forward integrate develop completely
separate merchandise sourcing teams or will they integrate them
(partially) into existing strategic sourcing teams?
- Will retailers that vertically integrate include manufacturing sourc­
ing considerations into their sourcing strategies or will they continue
to center on merchandise sourcing with manufacturing as an up­
stream, not an integrated, consideration?
- Where can manufacturing sourcing, given its historical focus on
delivery, cost and quality, support merchandise channel develop­
ment and operation in omni channel and
- Where can merchandise sourcing, given its historical focus on brands
and consumers, assist manufacturers in forward integrating into the
retail channel?
- Will omni-channel distribution lead to a greater integration of
manufacturing and merchandise sourcing or will different teams and
priorities simple co-exist within companies, just as they have be­
tween retail and manufacturing?
1.7. The impact of the pandemic
A third factor that makes this paper’s discussion only more timely
and interesting is the COVID-19 pandemic. The supply chain impact of
the pandemic has been felt in both retail and manufacturing, yet in
different ways (Handfield et al., 2020). Whereas retailers may have
initially experienced mostly demand risks, manufacturers initially pre­
dominantly experienced supply risks (van Hoek, 2020). However, the
responses to these risks lead to a further interrelation between
manufacturing and merchandise sourcing. Oke and Gopalakrishnan
(2009) point at the need to vary mitigation to specific risks faced and use
an example of the impact of the avian flu in Asia on demand risks. The
authors point out that retailers may also experience supply risks and call
for research that considers different risks at different points in the supply
chain. In the context of the COVID-19 pandemic this recommendation
rings even more valid. While manufacturers suffered from supply risks in
strategic sourcing first, the effects of the demand risks experienced in
retail worked their way up the supply chain to manufacturing as re­
tailers began to alter merchandise sourcing strategies (van Hoek, 2020)
and there may be opportunities to jointly map risks for greater resil­
ience. Retailers began to cancel orders of already produced merchandise
in certain categories, including apparel3 and increased orders for other
categories. Manufacturers in turn faced supply challenges in categories
with increased demand (Handfield et al., 2020).
In short, the pandemic may only have increased the interrelation
between merchandise and manufacturing sourcing and it may have only
grown opportunities for cross fertilize between the two domains. Spe­
cific questions that can be posed include:
- How to approach strategic sourcing contributions to supply chain
resilience in a more integrated manner recognizing the interrelation
between demand and supply risks experienced in retail and
manufacturing?
- What are differences in levers to mitigate and recover from risks
depending upon position in the supply chain and degree of vertical
integration of supply chain participants?
3
https://www.wsj.com/articles/retailers-canceling-apparel-orders-amid-cor
onavirus-torments-clothes-makers-11588683151.
7
Journal of Purchasing and Supply Management 27 (2021) 100659
- Do risk management decision making approaches differ from normal
manufacturing sourcing and merchandise sourcing decision making
processes due to their urgent and dynamic nature?
- Are there opportunities to jointly map supply chain risks across
multiple tiers in the supply chain, from retailer to manufacturer and
from manufacturer to tier 1 and 2 suppliers?
- How to avoid needing to relearn lessons about risk recovery in the
future (see avian flu lessons vs COVID-19 lessons) and how to build
supply chain resilience into the strategic sourcing toolkit more
structurally?
- How to ensure ongoing collaboration between merchandise sourcing
and manufacturers in times of disruption and resist game theoretical
and short term tendencies to use strategic sourcing to pass risk
consequences on, upstream in the supply chain?
1.8. Opportunities for research that cross fertilizes across the full sourcing
domain
In the context of today’s dynamics in boundaries and span of
manufacturing sourcing and merchandise sourcing there are several
opportunities to learn across the two domains and to learn together in
the two domains. As discussed, strategic sourcing in manufacturing
environments is focused on the sourcing process involved in optimizing
historical spend with upstream suppliers on commodities, parts and
services to drive savings and ensure delivery and quality over the life
cycle of usage. In this process procurement takes on the role of a business
partner that support decision making and optimization and facilitates
the sourcing process. Maturity in strategic sourcing capability is often
benchmarked in terms of the percentage of external spend under man­
agement using strategic sourcing in categories of spend. In merchandise
sourcing alternatively, the focus is on retail and merchandise category
management to drive revenue growth in the downstream consumer
markets from one season to another. While savings, delivery and quality
play a role as KPI’s and supplier selection criteria, they are secondary to
revenue and growth. Merchandise buyers lead the commercialization
process and decision making about categories and product ranges, not as
a business partner or a service, but as owners of a core commercial
process in retail companies. And they focus on creating future and new
spend instead of optimize existing and past spend.
Whereas Tables 2–3 identified differences and similarities in stra­
tegic sourcing between manufacturing and merchandising, Fig. 2 builds
upon this by identifying areas where the two domains can both learn
from each other, as well as, learn together;
- Areas where research into manufacturing sourcing may benefit from
merchandise sourcing insights and experience are on the left of
Fig. 2,
- Areas where research into merchandise sourcing may benefit from
manufacturing sourcing insights and experience are on the right of
Fig. 2 and
- Areas where research across the two domains may advance together
are in the center of Fig. 2.
The future oriented agenda in both strategic sourcing in
manufacturing environments and in merchandise sourcing creates
interesting opportunities for cross-fertilization across the two sourcing
domains and the opportunity for more integrated development and
research. The ambition in manufacturing sourcing to grow collaboration
with suppliers to enable supplier enabled innovation for example, is a
newer development in manufacturing and service strategic sourcing,
whereas in merchandise sourcing there is much more historical experi­
ence with joint innovation of products and services. This experience in
consumer-centricity and joint innovation can support progress in
manufacturing sourcing as it aims to drive future revenue, not just
optimizing current spend, and becomes more consumer oriented and
more directly linked to consumer demand, not just focused upon
R. van Hoek and R. Thomas
Fig. 2. Opportunities for learning from each other for learning together.
upstream supplies, alike merchandise sourcing already is. Further to
that, this ambition enables the broadening of KPI’s beyond quality, costs
and timely delivery, alike in merchandise sourcing. Finally, this may
enable a change in a buyer’s role as business partners in which they are
now taking on greater ownership of sourcing decisions about future
spend, rather than just informing them. In this process, research into
manufacturing sourcing may be greatly informed by merchandise
sourcing insights and experience as buyers in the retail space already
have much greater ownership of sourcing decision making, use quality,
costs and delivery KPI’s as a complement to innovation and merchan­
dising considerations in responding to consumer demand and market
trends. Resulting research questions include:
- How to combine manufacturing spend optimization with future
spend creation through joint innovation?
- How to enrich the supplier market orientation in manufacturing
sourcing with a focus on consumer markets and how to translate
consumer market opportunities to upstream supply market
opportunities?
- What will be the relative weight of traditional manufacturing
sourcing KPI’s when innovation gains prominence and how to bal­
ance new KPI’s and priorities with the ongoing need to ensure
quality, delivery and costs?
Likewise, merchandise sourcing research can be informed by insights
and experiences from manufacturing sourcing research. Manufacturing
sourcing insights may enhance rigor in supplier selection, beyond
category management considerations in merchandising. Including TCO
and historical spend perspectives can enrich sourcing decision making
and reduce the risk of driving “growth at all costs” in merchandising.
Hasan et al. (2020) for example recently suggested that TCO consider­
ation might lead to alternative merchandise sourcing arrangement in
Bangladesh. Additionally, manufacturing sourcing research on business
alignment and stakeholder management may enable engagement of a
wider stakeholder environment more comprehensively, including in
newer topics such as sustainability, where there may also be opportu­
nities to learn together. Resulting research questions include:
- How to translate TCO approaches into merchandise sourcing and
consider them as part of “total delivery costs”?
- How to engage a wider stakeholder environment in merchandise
sourcing (manufacturing, logistics etc.) to improve supply chain
embeddedness of merchandise sourcing, as an alternative to
merchandise sourcing “on an island of its own”?
8
Journal of Purchasing and Supply Management 27 (2021) 100659
- How to incorporate manufacturing sourcing supplier selection
criteria to enable improved supply chain-wide decision making,
while ensuring a focus on brand and design?
- Developing supplier scorecards for total evaluation rather than just,
“It looks pretty and will sell.”
- Considering supplier development approaches in merchandise– i.e.
Toyota helps suppliers improve and develop – could/should retailers
take on a similar role?
Sustainability has been a focus in manufacturing strategic sourcing
for some time. Sustainability is rapidly becoming a core factor in con­
sumer decision making, driving merchandise buyers to include sus­
tainability considerations into their category management. This creates
not just the opportunity to leverage strategic sourcing capabilities
already developed in manufacturing, it also creates opportunities for
further research across the two domains. The same applies to risk
management in the supply chain which can require a more compre­
hensive supply chain focus not limited to merchandise sourcing only but
including a focus on global sources and changing demand pattens.
Newer technologies such as blockchain are considered both in terms of
manufacturing sourcing use cases and merchandise sourcing use cases
today (Ksherti, 2018). And companies across manufacturing, service and
retail are exploring pilots and benefits such as visibility, traceability of
products throughout the supply chain – from shelve to material source
and back (van Hoek, 2019; Srai and Lorentz, 2019). These appear to be
example areas where a more supply chain comprehensive focus on
strategic sourcing across manufacturing and merchandising, may lead to
the development of new capability, consumer value, competitiveness
and value add of buyers. Resulting questions include:
- How to scale emerging technologies across the supply chain and
develop ROI equations that span use cases across the supply chain,
not just to in manufacturing or merchandise sourcing?
- How to avoid imbalanced contributions to capability development
and the risk of power usage by dominant supply chain participants,
while ensure fast-paced progress in response to evolving consumer
needs?
- How to drive and report upon sustainability progress in meaningful
ways that avoid just reporting downstream in the supply chain the
returns on far upstream progress?
- How to extend joint risks management approaches between retailer
and manufacturer and between manufacturer and upstream sup­
pliers for those approaches to become more supply chain-wide?
R. van Hoek and R. Thomas
Finally, and perhaps a bit outside of the topical areas listed so far, a
potentially rich area for learning together is the development and defi­
nition of competencies and skill requirements for professionals in stra­
tegic sourcing. In the manufacturing sourcing domain there has been
some evolution over time but there have also been very consistent focus
areas. Whereas there has long been a call for more strategic orientation
(Spekman et al., 1994) and job postings in manufacturing sourcing
reflect this in terms of competency focus on integral thinking, customer
orientation, advising, networking and analytical capabilities (Mulder
et al., 2005). More recently Bals et al. (2019) indicated a continued
importance of strategic sourcing, strategic thinking, and analytical
skills. The question is to what degree this may be the same in
merchandise sourcing. If so, there may be further relevance in managing
the talent in the domains similarly and as one talent pool that has both
merchandise sourcing teams and non-merchandise sourcing teams. It
may also imply that hiring of talent does not have to be within domain
(merchandise sourcing or manufacturing sourcing) but can be across.
This grows the talent pool in a market short of talent and creates exciting
opportunities for professionals to be mobile across greater domains.
These can all proof valuable takeaways for sourcing leaders and
managers.
2. Conclusion
Whereas there are distinct differences between manufacturing and
merchandise sourcing, this notes and debate papercontributes to exist­
ing research by targeting a broader and more comprehensive and ho­
listic supply chain conceptualization of strategic sourcing across
manufacturing and retail domains. The differences between these do­
mains represent cross-fertilization opportunities in research and in­
dustry. The shared ambitions across the two domains for capability
development, scope expansion and the consideration of emerging
technologies represent opportunities to research and learning across the
domains. For managers, the implication of these findings is that there
are opportunities to bring previously separated supply chain constitu­
encies and teams closer together, organizationally. There are opportu­
nities to learn from each other and opportunities to learn together,
resulting in greater impact and supply chain capability, for the good of
the consumer and for competitiveness.
This note was written to suggest a different view, prompt additional
dialogue, and provide a glimpse of an expanded vision of strategic
sourcing. Future research should explore and test a more comprehensive
view of strategic sourcing, including the areas for cross-fertilization
opportunities identified in this note. Newer scope expansions across
both sourcing domains were identified in this paper as areas of oppor­
tunity for research across both domains and as areas where a more
comprehensive approach to strategic sourcing throughout the supply
chain may be warranted.
Declaration of competing interest
There are no conflicts of interest for any of the authors involved in
this paper.
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