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Ensuring global visibility in an outsourced purchasing organization

Bitzekis, Jörgen and Resell, Christian (2010) MIO920
Production Management
Abstract
In February 2009, ST‐Ericsson was formed as a joint venture bringing Ericsson Mobile Platforms and ST‐NXP Wireless together, creating an industry leader in development and design of wireless semiconductor components and platforms. The new company became one of the top players in wireless semiconductors.
During the integration, purchasing of indirect material at ST‐Ericsson was outsourced to an outsourcing partner, to capture benefits and synergies. During Q1 and Q2 2009, focus was on integrating the two organizations, introducing a common ERP system on July 1st 2009. During Q3 and Q4 2009 focus shifted to capture short term cost down opportunities while improving long time cost efficiency.
The initial effort by the authors was the... (More)
In February 2009, ST‐Ericsson was formed as a joint venture bringing Ericsson Mobile Platforms and ST‐NXP Wireless together, creating an industry leader in development and design of wireless semiconductor components and platforms. The new company became one of the top players in wireless semiconductors.
During the integration, purchasing of indirect material at ST‐Ericsson was outsourced to an outsourcing partner, to capture benefits and synergies. During Q1 and Q2 2009, focus was on integrating the two organizations, introducing a common ERP system on July 1st 2009. During Q3 and Q4 2009 focus shifted to capture short term cost down opportunities while improving long time cost efficiency.
The initial effort by the authors was the consolidation and analysis of proforma1 purchasing data to identify and capitalize on short term cost down opportunities by creating so called spend analysis reports using the general business intelligence tool QlikView. As more data could be extracted from the new ERP system, spend analysis reports were developed for this data as well, supporting purchasing and to some extent business control from the beginning of Q4.
Throughout the gathering of data and development of spend analysis reports, issues and improvement possibilities were identified in three different areas: organization, outsourcing relationship and spend visibility. To ensure spend analysis could be used to its full potential, focus was shifted to these three areas, conclusions were drawn and recommendations were formulated.
Concerning the organization it is recommended that ST‐Ericsson in corporation with its outsourcing partner clarify its organizational structure giving transparency in roles, responsibilities and communication paths. The outsourcing relationship should also be clarified, creating a less ambiguous interface between customer and supplier, which will improve measurement and follow up on fulfillment of service level requirements. Regarding spend visibility, ST‐Ericsson and its outsourcing partner should together globally implement a spend analysis solution such as the QlikView reports developed by the authors. To enhance the possibilities with spend analysis, the material grouping of purchased material should be reviewed and revised and all personnel should be aligned to ensure uniform use of the material groups.
1 Pro forma (Latin) is used to describe what the result of a company created by a merger would have been by summarizing the formerly independent parts. iii (Less)
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author
Bitzekis, Jörgen and Resell, Christian
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
other publication id
10/5346
language
English
id
1976029
date added to LUP
2011-06-16 16:18:49
date last changed
2011-06-20 12:31:26
@misc{1976029,
  abstract     = {In February 2009, ST‐Ericsson was formed as a joint venture bringing Ericsson Mobile Platforms and ST‐NXP Wireless together, creating an industry leader in development and design of wireless semiconductor components and platforms. The new company became one of the top players in wireless semiconductors.
During the integration, purchasing of indirect material at ST‐Ericsson was outsourced to an outsourcing partner, to capture benefits and synergies. During Q1 and Q2 2009, focus was on integrating the two organizations, introducing a common ERP system on July 1st 2009. During Q3 and Q4 2009 focus shifted to capture short term cost down opportunities while improving long time cost efficiency.
The initial effort by the authors was the consolidation and analysis of proforma1 purchasing data to identify and capitalize on short term cost down opportunities by creating so called spend analysis reports using the general business intelligence tool QlikView. As more data could be extracted from the new ERP system, spend analysis reports were developed for this data as well, supporting purchasing and to some extent business control from the beginning of Q4.
Throughout the gathering of data and development of spend analysis reports, issues and improvement possibilities were identified in three different areas: organization, outsourcing relationship and spend visibility. To ensure spend analysis could be used to its full potential, focus was shifted to these three areas, conclusions were drawn and recommendations were formulated.
Concerning the organization it is recommended that ST‐Ericsson in corporation with its outsourcing partner clarify its organizational structure giving transparency in roles, responsibilities and communication paths. The outsourcing relationship should also be clarified, creating a less ambiguous interface between customer and supplier, which will improve measurement and follow up on fulfillment of service level requirements. Regarding spend visibility, ST‐Ericsson and its outsourcing partner should together globally implement a spend analysis solution such as the QlikView reports developed by the authors. To enhance the possibilities with spend analysis, the material grouping of purchased material should be reviewed and revised and all personnel should be aligned to ensure uniform use of the material groups.
1 Pro forma (Latin) is used to describe what the result of a company created by a merger would have been by summarizing the formerly independent parts. iii},
  author       = {Bitzekis, Jörgen and Resell, Christian},
  language     = {eng},
  note         = {Student Paper},
  title        = {Ensuring global visibility in an outsourced purchasing organization},
  year         = {2010},
}