Service Procurement in System Drives Production Development

The motivation for this thesis was to investigate procurement as a phenomenon in ABB’s System Drives Continuous Improvement (SD CI) team. Initially, there were not any tools, practices or rules that guided decision making. Developing procurement in SD CI is a necessity to induce cost savings, better the quality of purchases and save working time. The trend can be seen in the field of purchasing and supply management (PSM), which studies best practices in purchasing, for example. This study aims to combine the best practices from literature with the specific needs of SD CI to form a framework to guide procurement activities. This study was carried out as a case study to investigate the relationships between SD CI and other parties to find the key improvement points. The research comprised of interviews, a survey and workshops, alongside a literature review. Based on the study, it was found that the difficulty in procurement by SD CI is partly caused by the lack of sourcing knowledge and lack of systematical sourcing activities. In addition, the contact between SD CI and the Procurement and Logistics (P&L) department at ABB was minimal. Based on literature, it was suggested that sourcing strategy based on the Kraljic matrix, the systematic sourcing process comprising of requests for information, proposal and quotation (RFI, RFP, RFQ respectively) and the total cost of ownership (TCO) should form the basis of the framework. The framework was then further developed to include for example supplier selection criteria. The outcome of this thesis is a framework based on the previously mentioned tools to aid SD CI in procurement activities. The prototypes of the individual constituents of the framework give reason to believe that implementing the framework in full will benefit SD CI by allowing them to transfer knowledge systematically between clients, suppliers and P&L. This in turn will help save time as well as ensure better quality solutions and purchases