ProcuValue Value Creating Procurement: Project Report
Jääskeläinen, Aki; Heikkilä, Jussi; Thitz, Otto (2017)
Tampere University of Technology. Industrial and Information Management
2017
Tieto- ja sähkötekniikan tiedekunta - Faculty of Computing and Electrical Engineering
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Julkaisun pysyvä osoite on
https://urn.fi/URN:ISBN:978-952-15-3994-7
https://urn.fi/URN:ISBN:978-952-15-3994-7
Tiivistelmä
This project addressed the shift in purchasing from a “classical purchasing philosophy” reflecting a transaction-oriented approach to a “modern purchasing philosophy” highlighting longer supplier relationships and a strategic approach in managing supplies and the purchasing function. The current understanding of modern purchasing is limited and it is notably difficult to put the new ideas highlighting long-term value creation into practice.
The aim of the project was to create new and widely applicable knowledge for managing strategic purchasing and supply management. It examined the viewpoints of both buyer and supplier. More specifically, this project investigated 1) the benefits of long-term purchasing, 2) the strategic capabilities of the purchasing function, 3) models, practices, and performance measures for modern PSM, and 4) supplier capabilities and the supplier-buyer relationship characteristics.
This project had four case companies: Metsä Group, Posti Group Corporation, Tieto Oyj, and Valmet Corporation. All these companies are large multi-national companies operating in the business-to-business markets. The case companies represent the viewpoint of a buyer. The project started with a purchasing maturity analysis, which was carried out by a survey addressed to the case companies. It continued with an interview study, which paid more attention to specific aspects in purchasing: value creation, long-term orientation, and performance management. A supplier survey was conducted in the latter part of the study and addressed to more than 600 suppliers of the case companies. In addition, each of the cases had their own development projects with their respective objectives, schedules and methods.
Different characteristics of long-term purchasing were identified, such as purchasing strategies highlighting close supplier partnerships, strategic technology choices, and purchasing related to long-term investments. A long-term approach to purchasing was found to offer benefits such as the utilization of supplier expertise and increased attractiveness among suppliers. The identified strengths of the purchasing functions studied were the skills of purchasing professionals to ensure the availability of purchased goods and services, the existence of a long-term purchasing strategy, documentation of a purchasing process, a link between purchasing and company strategy, and an awareness of the importance of purchasing in contributing to cost competitiveness. The most common development areas of purchasing included cross-functional integration between purchasing function and other functions such as product development, involvement of suppliers in product development, bundling of the supplies, and using and communicating of supplier evaluations.
New models, practices and performance measures for contemporary purchasing and supply management were developed in the course of this study. In the case company Valmet, a new design-to-cost framework was developed in order to improve cross-functional and inter-organizational collaboration in product development. At Posti, an approach for measuring supplier partnerships was designed. In the case of Metsä Group, a framework for measuring supplier quality was developed. At Tieto, the idea of combining data from different functions was successfully presented and tested. The analysis of supplier capabilities and supplier-buyer relationship characteristics revealed that a foundation for a good buyer-supplier relationship does indeed exist. Suppliers appear to be capable when offering and implementing their solutions. However, integration between supplier and buyer frequently remains rather superficial. For example, true collaboration in product development is rare.
Several avenues for future research in the field of PSM can be identified. There remains a need to better understand the benefits of long-term purchasing in terms of financial numbers as well as the mechanisms for creating the benefits. Further, there is a need to better understand when to search for long and close supplier relationships. Supplier satisfaction is a rising topic requiring more attention since buyer companies are increasingly competing for the most capable suppliers. Digitalization in purchasing and supply management is a topic gaining increasing attention and requiring more research in the future. There has already been lot of work in automating and digitalizing purchases. This project revealed a topical need for digital supplier portals, which centralize all the supplier information (e.g. costs, contracts, supplier offerings and their use in different business).
The aim of the project was to create new and widely applicable knowledge for managing strategic purchasing and supply management. It examined the viewpoints of both buyer and supplier. More specifically, this project investigated 1) the benefits of long-term purchasing, 2) the strategic capabilities of the purchasing function, 3) models, practices, and performance measures for modern PSM, and 4) supplier capabilities and the supplier-buyer relationship characteristics.
This project had four case companies: Metsä Group, Posti Group Corporation, Tieto Oyj, and Valmet Corporation. All these companies are large multi-national companies operating in the business-to-business markets. The case companies represent the viewpoint of a buyer. The project started with a purchasing maturity analysis, which was carried out by a survey addressed to the case companies. It continued with an interview study, which paid more attention to specific aspects in purchasing: value creation, long-term orientation, and performance management. A supplier survey was conducted in the latter part of the study and addressed to more than 600 suppliers of the case companies. In addition, each of the cases had their own development projects with their respective objectives, schedules and methods.
Different characteristics of long-term purchasing were identified, such as purchasing strategies highlighting close supplier partnerships, strategic technology choices, and purchasing related to long-term investments. A long-term approach to purchasing was found to offer benefits such as the utilization of supplier expertise and increased attractiveness among suppliers. The identified strengths of the purchasing functions studied were the skills of purchasing professionals to ensure the availability of purchased goods and services, the existence of a long-term purchasing strategy, documentation of a purchasing process, a link between purchasing and company strategy, and an awareness of the importance of purchasing in contributing to cost competitiveness. The most common development areas of purchasing included cross-functional integration between purchasing function and other functions such as product development, involvement of suppliers in product development, bundling of the supplies, and using and communicating of supplier evaluations.
New models, practices and performance measures for contemporary purchasing and supply management were developed in the course of this study. In the case company Valmet, a new design-to-cost framework was developed in order to improve cross-functional and inter-organizational collaboration in product development. At Posti, an approach for measuring supplier partnerships was designed. In the case of Metsä Group, a framework for measuring supplier quality was developed. At Tieto, the idea of combining data from different functions was successfully presented and tested. The analysis of supplier capabilities and supplier-buyer relationship characteristics revealed that a foundation for a good buyer-supplier relationship does indeed exist. Suppliers appear to be capable when offering and implementing their solutions. However, integration between supplier and buyer frequently remains rather superficial. For example, true collaboration in product development is rare.
Several avenues for future research in the field of PSM can be identified. There remains a need to better understand the benefits of long-term purchasing in terms of financial numbers as well as the mechanisms for creating the benefits. Further, there is a need to better understand when to search for long and close supplier relationships. Supplier satisfaction is a rising topic requiring more attention since buyer companies are increasingly competing for the most capable suppliers. Digitalization in purchasing and supply management is a topic gaining increasing attention and requiring more research in the future. There has already been lot of work in automating and digitalizing purchases. This project revealed a topical need for digital supplier portals, which centralize all the supplier information (e.g. costs, contracts, supplier offerings and their use in different business).