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Critical Success Factors When Performing a Superior Supplier Evaluation – a Benchmark Study at Sony Ericsson and Tetra Pak

Hultqvist, Therese and Olofsson, Lisa (2007)
Department of Business Administration
Abstract
Problem discussion: Long-term supplier relationships have become more common. Hence, supplier evaluation is a critical activity for many companies. However, making a relevant supplier evaluation is time consuming. Therefore, it is important to decide which of the suppliers to put an extra effort on. Should all suppliers be evaluated in the same way? Previous, focus has been on purchasing of direct material. However, what are the requirements to perform a supplier evaluation within indirect purchasing? Companies tend to invest in ERP systems. In what way can an ERP system be utilized in order to make the supplier evaluation process more effective? Purpose: The purpose of this master thesis is to determine the requirements to perform an... (More)
Problem discussion: Long-term supplier relationships have become more common. Hence, supplier evaluation is a critical activity for many companies. However, making a relevant supplier evaluation is time consuming. Therefore, it is important to decide which of the suppliers to put an extra effort on. Should all suppliers be evaluated in the same way? Previous, focus has been on purchasing of direct material. However, what are the requirements to perform a supplier evaluation within indirect purchasing? Companies tend to invest in ERP systems. In what way can an ERP system be utilized in order to make the supplier evaluation process more effective? Purpose: The purpose of this master thesis is to determine the requirements to perform an effective supplier evaluation of indirect purchasing and critically examine in what ways companies can use an ERP system as a tool to improve the efficiency of the evaluation process. Furthermore, the purpose is to develop a supplier evaluation model, which can be used as a framework when evaluating suppliers. Methodology: A benchmarking process was used in order to conduct this master thesis. The research question required an understanding of the complexity of the purchasing process. Also, the interviewees’ specific opinion had to be taken into consideration when making the conclusions. Hence, a cross-fertilization of the System Theoretical and the Interpretive paradigm was used as a framework when initiating the study. Furthermore, the study had a qualitative approach where the main empirical findings were based on interviews. Conclusions: The findings concluded are separated in a long-term and a short- term perspective. First, three Critical Success Factors, which companies are recommended to focus on, are identified:
• Companies should have knowledge about what they purchase
• Companies should have a controlled supplier base
• Companies should have a homogeneous view of its purchasing processes Hence, in a long-term horizon companies are recommended to focus on categorizing their indirect purchases, striving to have a process oriented purchasing organization and focus on implementation of an ERP system. Second, a Supplier Evaluation Model is developed. This model takes the strategic importance of the purchase and the supplier relationship into consideration. Hence, it is stated that long-term relationships with suppliers not are conducted with strategic suppliers exclusively. The model has four scenarios for how to evaluate the supplier based on the importance and type of relationship. As a short-term action plan, which increases the effectiveness of supplier evaluation, companies should:
1.Categorize their purchases according to Kraljic’s purchasing portfolio matrix in order to define the strategic importance.
2.Decide whether to have long-term or short-term relationship with the supplier.
3.Evaluate the supplier according to the supplier evaluation model, which defines four different scenarios depending on point 1 and 2. (Less)
Please use this url to cite or link to this publication:
author
Hultqvist, Therese and Olofsson, Lisa
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Företagsledning, Management of enterprises, Indirect Material, Critical Success Factors, Purchasing, Supplier Evaluation, ERP System, management
language
Swedish
id
1349854
date added to LUP
2007-05-16 00:00:00
date last changed
2014-11-14 10:02:55
@misc{1349854,
  abstract     = {Problem discussion: Long-term supplier relationships have become more common. Hence, supplier evaluation is a critical activity for many companies. However, making a relevant supplier evaluation is time consuming. Therefore, it is important to decide which of the suppliers to put an extra effort on. Should all suppliers be evaluated in the same way? Previous, focus has been on purchasing of direct material. However, what are the requirements to perform a supplier evaluation within indirect purchasing? Companies tend to invest in ERP systems. In what way can an ERP system be utilized in order to make the supplier evaluation process more effective? Purpose: The purpose of this master thesis is to determine the requirements to perform an effective supplier evaluation of indirect purchasing and critically examine in what ways companies can use an ERP system as a tool to improve the efficiency of the evaluation process. Furthermore, the purpose is to develop a supplier evaluation model, which can be used as a framework when evaluating suppliers. Methodology: A benchmarking process was used in order to conduct this master thesis. The research question required an understanding of the complexity of the purchasing process. Also, the interviewees’ specific opinion had to be taken into consideration when making the conclusions. Hence, a cross-fertilization of the System Theoretical and the Interpretive paradigm was used as a framework when initiating the study. Furthermore, the study had a qualitative approach where the main empirical findings were based on interviews. Conclusions:	The findings concluded are separated in a long-term and a short- term perspective. First, three Critical Success Factors, which companies are recommended to focus on, are identified:
• Companies should have knowledge about what they purchase
• Companies should have a controlled supplier base
• Companies should have a homogeneous view of its purchasing processes Hence, in a long-term horizon companies are recommended to focus on categorizing their indirect purchases, striving to have a process oriented purchasing organization and focus on implementation of an ERP system. Second, a Supplier Evaluation Model is developed. This model takes the strategic importance of the purchase and the supplier relationship into consideration. Hence, it is stated that long-term relationships with suppliers not are conducted with strategic suppliers exclusively. The model has four scenarios for how to evaluate the supplier based on the importance and type of relationship. As a short-term action plan, which increases the effectiveness of supplier evaluation, companies should:
1.Categorize their purchases according to Kraljic’s purchasing portfolio matrix in order to define the strategic importance.
2.Decide whether to have long-term or short-term relationship with the supplier.
3.Evaluate the supplier according to the supplier evaluation model, which defines four different scenarios depending on point 1 and 2.},
  author       = {Hultqvist, Therese and Olofsson, Lisa},
  keyword      = {Företagsledning,Management of enterprises,Indirect Material,Critical Success Factors,Purchasing,Supplier Evaluation,ERP System,management},
  language     = {swe},
  note         = {Student Paper},
  title        = {Critical Success Factors When Performing a Superior Supplier Evaluation – a Benchmark Study at Sony Ericsson and Tetra Pak},
  year         = {2007},
}