Improving the supply base

Abstract

Traditionally, research in supply management has focused on the linear relationship between buyer and supplier (e.g. Chan & Chan, 2004; Hokey, 1994; Rezaei & Ortt, 2012; Sheth & Sharma, 1997) and on the technical issues faced in Supply Chain Management (SCM) (Fisher, 1997). However, as (Kim et al., 2011) and (Bellamy & Basole, 2013) recognized, both perspectives fail to capture the complex and dynamic nature of supply networks. Therefore, it provides managers tools that are based on nonrealistic assumptions.
Despite the attention given in the literature to the activity to optimize the supply base the acknowledgement of its strategic importance in the supply management practices, frameworks for carrying out the process to optimize the supply base are rare (Talluri & Narasimhan, 2005). Moreover, the existing frameworks fail to illustrate the complex and dynamic nature of the Supply Networks that encloses the process of supply base optimization (e.g Kraljic, 1983; Luo, Wu, Rosenberg, & Barnes, 2009; Ogden & Carter, 2008; Sarkar & Mohapatra, 2006). Therefore, the academia has not provided managers a representative mental model of the complexities implicated in the process to optimize the supply base nor how to manage them. For this reason, this thesis attempts to fill this gap by exploring what the system level perspective offers to the literature in the field of supply base optimization.
In order to fill this gap, three case studies were conducted with three initiatives to optimize the supply base in Royal Philips. This thesis proposes a theoretical framework to visualize and evaluate the landscape of the supply base optimization. This framework characterizes three different networks involved in the optimization of the supply base and proposed to evaluate the landscape based the three fundamental themes: Network structure, dynamics and strategy. The outcome of the research is the creation of propositions to clarify the process that a firm undergoes when optimizing the supply base.
The first contribution of this research is to provide a new definition of supply base opti-mization from a network perspective. Based on the input from the experts and the analysis of documentation of the conventions, the definition of supply base optimization is as follows:
“Supply base optimization is an ongoing process that aims to have the right number of suppliers with the right capabilities and right performance in order to meet current and future business needs”
The second contribution of this thesis is a theoretical framework that serves one main purpose: To provide guidance to analyze the process to optimize the supply base from a network-level perspective, providing researchers a more realistic mental map of the supply network to analyze its processes.
On the other hand, the analysis of the data collected in the firm, namely the interviews and the documentation of each convention, lead us to the third contribution of this research, which is the creation of a process to optimize the supply base. This process takes a network level perspective and acknowledges the interactions of the different actors at each network.