Supplier Selection

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The Process of
Supplier Selection

1 Introduction
In today’s competitive society more and more businesses are realizing the impact purchasing has on their profit (van Weele, 2005:XV). According to van Weele (2005:4) “most companies today spend more than half of their sales turnover on purchased parts and services”. As this is a shocking amount, it is not surprising companies have special purchasing departments to handle this crucial and often complicated process. One of the most important and challenging steps of the purchasing process is the selection of suppliers. Therefore there are lots of studies and literature dealing with finding the right supplier for your distinctive products/services and needs. 1.1 The problem field

The biggest problem is finding the right supplier for your need. If you don’t find the optimal solution it can cost the company competitive advantages and money. There are many problems in the process and questions like how many suppliers the company should use, where they should be located and what quantities should be ordered are some of the most relevant ones. The problem affects every company in the entire world as there isn’t a company who does everything themselves. Some products or services are outsourced and to be effective and competitive you need to find the most optimal solution. 1.2 Purpose

The purpose of this paper is to learn how companies choose their suppliers. Which are the criteria? What determines if they choose an old or a new one? We decided to examine this through an interview with Toni Collin, CEO of the Finnish department at the clothing company Carlings, to find out how their suppliers are chosen. He has almost a decade of experience in the company and was also present at the establishment of the company in Finland. We have also done some research in this area to be able to compare if the process at Carling is consistent with theory. The interview with Toni Collin was done on September 25th 2009 by phone at 12:00 to about 12:35. One of us has also met Toni Collin several times in person. To get further dept on the subject we also chose to do an interview with one of Carlings’ suppliers; the Swedish fashion brand Acne. This interview was done with Edin Wertz on the phone the on September x 2009 to provide a suppliers perspective. In the next chapter we will present the theoretical framework for supplier selection that we have found in books and journals. It deals with problems like make or buy, to use single or multiple sourcing and what criteria a supplier should meet. The third chapter discusses our findings with the help of the interviews and compares to the theoretical framework while chapter four is a conclusion of our findings and some suggestions for further research. At the end of the paper there are two sets of interview questions of which the first was used on Carling and the second on Acne. 2 The selection of a supplier from a theoretical point of view More and more companies are concentrating on their core competence while outsourcing non-strategic productions (Kannan and Tan, 2002:11). This means choosing a supplier is an important job as it can affect the companies’ performance (Kannan and Tan, 2003:473). By choosing the right one, you can gain competitive advantages while choosing the wrong one can be a costly process. While the key aspect might have been price before, quality and timely delivery are equally important in today’s complex companies (Cho and Ting, 2008:116). For example a strategic part being late in delivery for a company that uses the JIT-system, can be a financially devastating setback. The criteria for a supplier are different for every company, but there are still some theories you can apply, regardless of the industry. 2.1 Make or buy

The first step might be to analyze the need of the product, both the future and present (Lupu, 2008:40). Especially future demands can be hard to estimate and to get an idea you might need to collaborate...
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