Supplier Base Reduction Process

Industries have been undergoing several trend changes in the past decades, two of which are relevant for this study: outsourcing and mergers and acquisitions. Outsourcing allows companies to focus on doing what they are best at; and mergers and acquisitions are a way of increasing presence in the market and achieving fast growth. Several companies in the world followed both of these trends, including Sandvik Mining and Construction (SMC), and one of the common consequences seen is the increase of the supplier base. The objectives of this thesis are to develop a framework for targeting suppliers to be eliminated and a process for eliminating such suppliers. It discusses supplier management in general, including selection and elimination of suppliers, as well as supplier base expansion. Several employees in SMC were interviewed, from sourcing to production and from operation level do middle management. A theoretical framework was developed and tested. In addition, a process for eliminating suppliers was created in the form of a flowchart. A sample of 200 suppliers was given and a test period of six months stipulated. Of those, 37% were targeted to be eliminated from the supplier base. However, this process has a high stakeholder involvement required, which impacted severely on the success of the project. Some cases seen are of suppliers labeled as “special”, resistance against the project by some employees or low priority of the project. Hence, it was determined that either the company is not ready to undertake such process, or that a stronger management involvement is necessary. By the time the thesis was published a rate of elimination of 3% was verified. /Kir1