Procurement Strategy: One Master Contractor, Many Subcontractors. Conversely to the multi-sourcing strategy, in the “general contractor” model, the enterprise customer might hire one contractor to supervise other contractors. Typically, this procurement strategy becomes an option when the number of suppliers and the complexity of managing them becomes suddenly overbearing.
Maturity Issues. A “general contractor” role might also be useful in different scenarios relating to its supply chain:
- Building a New Supply Chain. In one scenario, the enterprise customer might want to restructure its existing suppliers under a new master contractor so that the contractor can have control and responsibility.
- M&A Consolidation. In another scenario, the enterprise customer looks to the general contractor to integrate many companies and their supply chains after a series of mergers. After a series of mergers, each merger brings with it a suite of new service providers with redundant services. Over time, the “general contractor” could have a role of integrating or terminating such multiple service providers.
Control. In either event, the enterprise customer gives up some control, since it cannot deal directly with the individual “sub-contractors” or “supervised contractors” without endangering its claim to hold the general contractor accountable under the master services agreement.
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