Maintaining and improving supplier relations with auditing– A study at ABB Sweden and Singapore

Abstract

Background: In today’s globalized world, many producing companies depend on large
supplier networks. Supplier relations require maintenance and a tool for that is
supplier auditing. ABB is a leader in power and automation technologies that
enable industrial customers to improve performance while lowering
environmental impact. ABB business division Process Automation (PA) and
business unit Control Technologies (CT), abbreviated as PACT, has established
close partnerships with many of their suppliers. This emphasizes the importance
of conducting audits, since a supplier partnership means mutual dependence
between the parties. ABB PACT has to be able to rely on the contracted
supplier’s performance, while the supplier has to be able to rely on ABB as a
strong and long-term customer. Key actors within auditing at ABB PACT
express that there is room for improvement within the audit processes.
Purpose: The purpose of this Master Thesis is divided into two parts. The first part is to
find out whether there is improvement potential of the audit processes and the
use of audits at ABB PACT both in Sweden and Singapore. The second part is to
find out how the audit processes could be improved.
Research questions:
By introducing generic research questions that do not focus on a specific case,
this Master Thesis has potential to contribute with findings for the academy in
general as well.
This study will answer the following research questions in order to achieve the
purpose:
Frequency
• What is an appropriate frequency for conducting supplier audits in
order to maintain and develop supplier relations?
Measurement
• What is an appropriate design for a measurement system that facilitates
and motivates for supplier performance improvements?
vi
Consistency
• What is an appropriate way of administrating and documenting audits
in a consequent manner in order to facilitate information sharing and
communication between auditors?
Competence
• What is an appropriate level of competence for auditors in order to
conduct efficient audits and how can it be achieved?
Method:
A mixture of the systems approach and the actors approach are used in this
Master Thesis. The systems approach includes both qualitative and quantitative
data collection and the actors approach is used since many personal opinions
have played an important role in the study. Furthermore, an abductive research
strategy is used, since the study results are derived from critically evaluating a
combination of obvious values and observed processes. Mostly qualitative data
from interviews and a survey is used. The survey and old audit material also
contribute with some quantitative data. The data collection methods are a
literature study, interviews, a survey, and a case study.
Findings:
This study proves that there is improvement potential regarding the policy for
when to conduct audits, the measurement system in the audit templates, the
consistency in the audit process and the level of competence among the
auditors.
A prerequisite for the following recommendations to be useful is a clear
supplier audit organization. The following suggestions are the authors’
recommendations to ABB for how more consistent, efficient and probably
better audits will be achieved:
• There should be clear instructions regarding the annual supplier KPI
update and the result of it should show clearly if an audit has to be
conducted or not.
• All audit templates should use the same scoring system with a passing
level at 50% and each graded question should be commented and
motivated.
• Each audit guide should contain a Gantt chart clearly showing the
activities in the audit process and the documents used in each step of
the process.
• The responsibilities pre, during and post audit should be clearly stated
and communicated.
• Classroom training of internal audit procedures should be offered
vii
The following conclusions apply to the research questions.
An appropriate frequency for when to conduct an audit was not found. Instead,
the findings show that the importance lies within having a well implemented
and communicated policy for deciding whether a supplier has to be audited or
not. If such a policy is not already implemented, it should be done and
communicated clearly.
An appropriate design for a measurement system was found. The same scoring
system should apply for all audits, it should contain an appropriate scoring scale
that notices and motivates potential improvements and it should require the
auditor to comment and motivate the given scores.
An appropriate way of administrating and documenting audits in a consequent
way was found. The audits should contain a clear schedule for the different
steps, tasks and documents used in an audit. The audit responsibilities should
also be clearly communicated. The documentation of an audit should be
administrated through a global database.
A competent auditor should have both process and audit knowledge. However,
an appropriate level of competence is hard to decide on. In the ABB case, the
general opinion is that the auditors’ process knowledge is big but that the
auditors lack in specific audit competence. By providing internal audit training
for the auditors, the appropriate level of holistic competencecould be achieved.

• author: Ericsson, Elisabeth and Wahlstedt, Elisabeth
• supervisor: Bertil Nilsson
• organization: Production Management
• course: MIO920
• year: 2012
• type: M1 - University Diploma
• subject: Technology and Engineering
• keywords: Supplier auditing, supplier relations, supply chain, risk
• other publication id: 12/5429
• language: English
• id: 3217855
• date added to LUP: 2012-11-30 11:45:27
• date last changed: 2012-11-30 11:45:27