Supplier Base Reduction

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Department of Industrial Management and Logistics Division of Engineering Logistics

Planning for Supplier Base Reduction
- understanding Supplier Base Reduction’s role in purchasing A case study at Alfa Laval AB

Authors

Fabian Karlsson Sebastian Eriksson-Ritzén

Supervisors

Ala Pazirandeh Markus Ekendahl

ii

Acknowledgements
This thesis completed our Master of Science in Mechanical Engineering with specialization in Logistics and Supply Chain Management at the Faculty of Engineering, Lund University. We initiated this study by expressing a wish to write our master thesis within purchasing at Alfa Laval. We would like to thank Alfa Laval for providing us with an office at their site in Lund and all the information needed to complete this study. We would also like to especially thank all the global purchasers and people at Operations Development who have been very supportive and a great company, both socially and professionally. Finally we would like to address the supervisors for the thesis; Ala Pazirandeh and Markus Ekendahl. Ala has continuously provided us with great feedback on our report writing and has really helped us to improve the report structure of this study. Markus has provided us with his personal network within Alfa Laval and has with his knowledge and experience within purchasing been a great inspiration for our future careers.

Lund, February 2011

Fabian Karlsson

Sebastian Eriksson-Ritzén

iii

Abstract
Title: Planning for Supplier Base Reduction - understanding Supplier Base Reduction’s role in purchasing. A case study at Alfa Laval AB Fabian Karlsson and Sebastian Eriksson-Ritzén Ala Pazirandeh, Department of Industrial Management and Logistics, Lund University Markus Ekendahl, Alfa Laval AB Background: Today individual businesses do not compete as isolated entities, but rather within supply chains. Lambert (2008) emphasizes the importance of relationship management in supply chain management which is also supported by Chen and Paulraj (2004) who argue that buyer-supplier relationships have a central part in supply chain management. Chen and Paulraj (2004) state that in the past companies commonly contracted with a large number of suppliers and that recently there has been a significant shift from the traditional adversarial buyer-seller relationships to the use of a limited number of qualified suppliers with deeper relationships. The shift when moving from a large number of suppliers to fewer is titled supplier base reduction. Supplier base reduction is one of five components in Chen and Paulraj‟s (2004) buyer-supplier concept. They conclude that supplier base reduction is a required element of contemporary supply chain management. This thesis concerns how supplier base reduction connects to other areas within the purchasing field and what issues companies needs to address when planning for a supplier base reduction initiative. The purpose of this thesis is to increase the understanding of a successful supplier base reduction initiative and the activities that should be conducted prior to such a supplier base reduction initiative. How to successfully plan a supplier base reduction initiative and what aspects to consider when planning such an initiative? In order to map the areas of purchasing that relate to supplier base reduction and understand how these areas affect and are affected by supplier base reduction a system approach has been used. This has been combined with an abductive approach where purchasing literature has been studied and a conceptual model has been developed. This conceptual model has been used to analyze the conditions for supplier base reduction at the case company, Alfa Laval. The conceptual model concludes that it is important to understand why a company should initiate supplier base reduction and that there are activities that should be carried out before reducing the supplier base. The degree of purchasing centralization affects how difficult...
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