Purchasing and supply management capabilities in Finnish medium-sized enterprises

Purchasing and supply management (PSM) has become increasingly important for companies to survive in current highly competitive market. Increased outsourcing has extended the role of PSM, making external resource management and supplier relationships critical success factors in business. However, the recent research has mainly concentrated on large enterprises. Therefore the PSM issues related to medium-sized enterprises represent a significant research area. The thesis aims to explore the status and role of PSM in Finnish medium-sized firms, understand how strategic companies consider PSM to be, clarify what are the competence requirements for PSM professionals, and increase the understanding of PSM capabilities needed from the points view of individual competence and organisational capabilities. The study uses data that was collected in 2007 from purchasing executives at the director/CEO level representing a sample of 94 Finnish firms. 54 % of the respondent enterprises had a supply strategy. The total supply cost was on average 60 % of firms' turnover. Centralisation of PSM and outsourcing of logistics will increase in Finnish medium-sized enterprises. The findings point out that Finnish medium-sized enterprises had strategical features of PSM. However, Finnish firms have not concentrated on making strategies that relate to PSM. The elements that explain the existence of a supply strategy could be found in this study. It can be concluded from this study that there is an advantageous base for the development of strategic PSM, because nearly all the enterprises were of the opinion that PSM capabilities have an effect on business success. When reviewing the organisational capabilities, the five most important development elements were supplier relationships, both operational and strategic processes, time management, and personnel's competence. Training in internationalisation, strategic management, and communication could help to improve competences of PSM personnel.

The role of power relations in strategic supply management – A value net approach

Supplier relationships are key elements of supply management and thus have attracted substantial research interest among academics and practitioners. The collaborative nature of relationships has been the focus of the mainstream research, and limited interest has been channelled towards power in buyer–supplier relationships. However, power is one of the key factors determining the outcomes in many business relations. Hence, one of the main objectives of this dissertation is to clarify how power may influence the nature of buyer–supplier relationships and, moreover, the depth of collaboration. Another main objective is to clarify the role of power relations in strategic supply management. Given the different nature of relationships, the firm needs divergent strategies in its supply management in order to handle them efficiently. Power has been identified as one of the factors that affect the nature of buyer–supplier relationships, and firms should thus develop strategies for handling power relations. Three research questions are addressed in pursuit of these objectives, the aim being to clarify the sources of power, the influence of power on collaboration, and the role of buyer–supplier relationships in the firm’s supply strategy. This dissertation has two parts. The first part provides a synthesis of the overall dissertation, and the second part comprises five complementary research papers. The qualitative research method is applied in an empirical case study from the Finnish food industry. The main contribution of this dissertation is that it clarifies the role of power relations in strategic supply management in value nets, and discloses the nature of power as an influencing factor in supplier relationships. It extends the discussion on power in buyer– supplier relationships in highlighting the context of networks and raising the question of network effects on power relations. It also illustrates how power positions and power relations in value nets can be determined based on the sources of power of the network actors, and shows their influence on collaboration.

Julkisten hyvinvointi- ja tukipalvelujen hankintastrategia - kunta tuottajasta palvelujen järjestäjäksi ja kehittäjäksi

Tutkielman tavoitteena on selvittää, millaisia tekijöitä kuntien on huomioitava hyvinvointi- ja tukipalvelujen hankinnassa. Tutkielmassa tarkastellaan julkisten palveluhankintojen taustalla vaikuttavia tekijöitä ja vertaillaan näitä tekijöitä hankintastrategian liiketaloudelliseen viitekehykseen. Tulosten valossa pohditaan myös hankintastrategian luomisen ajankohtaisuutta julkisissa palveluhankinnoissa. Tutkielman teoreettinen viitekehys perustuu aikaisempiin hankintastrategiaa ja make or buy –päätöstä käsittelevään kirjallisuuteen ja tieteellisiin tutkimuksiin. Tutkimuksen empiirinen osio koostuu kahdesta case – tapauksesta. Tutkimusmenetelmänä käytettiin henkilökohtaisia haastatteluja. Tutkimuksen kohteina olivat Espoon hyvinvointipalvelujen sekä Kotkan tukipalvelujen hankinta ja kilpailuttaminen. Tutkimuksen lähtökohdista ja viitekehyksestä johtuen kohteeksi valittiin sekä hyvinvointi- että tukipalvelujen hankinta. Lisää näkökulmaa tutkimukseen saatiin valitsemalla kohteiksi kaksi eri kuntaa, mikä sopi myös tutkimuksen toimeksiantajan tavoitteisiin. Tulosten perusteella case – tutkimuksen kohteina olevilla kunnilla ei ole hankintastrategiaa ohjaamassa hyvinvointi- ja tukipalvelujen hankintaa. Liiketaloudellisten hankintastrategiaan vaikuttavien tekijöiden katsotaan soveltuvan myös julkisten palvelujen hankintaan. Tutkimuksen kohteiden välisessä vertailussa hankintojen suunnitelmallisuus painottui hankintaprosessin onnistumiseen vaikuttavana tekijänä. Kuntien oman roolin muuttuminen palvelujen tuottajasta niiden järjestäjäksi ja kehittäjäksi edellyttää tiiviimpää yhteistyötä yksityisen sektorin palveluntuottajan kanssa. Molempien palveluntuottajien osaamisen yhdistäminen antaa puitteet laadukkaiden hyvinvointi- ja tukipalvelujen kehittämiseen.

Optimizing the supply chain strategy of a multi-unit Finnish nursery company

Abstract

Value added logistics in supply and demand chains. Smile. Part 1. eBusiness between global company and itslocal sme supplier network

VALOSADE (Value Added Logistics in Supply and Demand Chains) is the research project of Anita Lukka's VALORE (Value Added Logistics Research) research team inLappeenranta University of Technology. VALOSADE is included in ELO (Ebusiness logistics) technology program of Tekes (Finnish Technology Agency). SMILE (SME-sector, Internet applications and Logistical Efficiency) is one of four subprojects of VALOSADE. SMILE research focuses on case network that is composed of small and medium sized mechanical maintenance service providers and global wood processing customers. Basic principle of SMILE study is communication and ebusiness insupply and demand network. This first phase of research concentrates on creating backgrounds for SMILE study and for ebusiness solutions of maintenance case network. The focus is on general trends of ebusiness in supply chains and networksof different industries; total ebusiness system architecture of company networks; ebusiness strategy of company network; information value chain; different factors, which influence on ebusiness solution of company network; and the correlation between ebusiness and competitive advantage. Literature, interviews and benchmarking were used as research methods in this qualitative case study. Networks and end-to-end supply chains are the organizational structures, which can add value for end customer. Information is one of the key factors in these decentralized structures. Because of decentralization of business, information is produced and used in different companies and in different information systems. Information refinement services are needed to manage information flows in company networksbetween different systems. Furthermore, some new solutions like network information systems are utilised in optimising network performance and in standardizingnetwork common processes. Some cases have however indicated, that utilization of ebusiness in decentralized business model is not always a necessity, but value-add of ICT must be defined case-specifically. In the theory part of report, different ebusiness and architecture models are introduced. These models are compared to empirical case data in research results. The biggest difference between theory and empirical data is that models are mainly developed for large-scale companies - not for SMEs. This is due to that implemented network ebusiness solutions are mainly large company centered. Genuine SME network centred ebusiness models are quite rare, and the study in that area has been few in number. Business relationships between customer and their SME suppliers are nowadays concentrated more on collaborative tactical and strategic initiatives besides transaction based operational initiatives. However, ebusiness systems are further mainly based on exchange of operational transactional data. Collaborative ebusiness solutions are in planning or pilot phase in most case companies. Furthermore, many ebusiness solutions are nowadays between two participants, but network and end-to-end supply chain transparency and information systems are quite rare. Transaction volumes, data formats, the types of exchanged information, information criticality,type and duration of business relationship, internal information systems of partners, processes and operation models (e.g. different ordering models) differ among network companies, and furthermore companies are at different stages on networking and ebusiness readiness. Because of former factors, different customer-supplier combinations in network must utilise totally different ebusiness architectures, technologies, systems and standards.

Value added logistics in supply and demand chain. Smile. Part 2. eBusiness in a service business. Case: A maintenance and operations network in forest industry

VVALOSADE is a research project of professor Anita Lukka's VALORE research team in the Lappeenranta University of Technology. The VALOSADE includes the ELO technology program of Tekes. SMILE is one of four subprojects of the VALOSADE. The SMILE study focuses on the case of the company network that is composed of small and micro-sized mechanical maintenance service providers and forest industry as large-scale customers. The basic principle of the SMILE study is the communication and ebusiness in supply and demand networks. The aim of the study is to develop ebusiness strategy, ebusiness model and e-processes among the SME local service providers, and onthe other hand, between the local service provider network and the forest industry customers in a maintenance and operations service business. A literature review, interviews and benchmarking are used as research methods in this qualitative case study. The first SMILE report, 'Ebusiness between Global Company and Its Local SME Supplier Network', concentrated on creating background for the SMILE study by studying general trends of ebusiness in supply chains and networks of different industries. This second phase of the study concentrates on case network background, such as business relationships, information systems and business objectives; core processes in maintenance and operations service network; development needs in communication among the network participants; and ICT solutions to respond needs in changing environment. In the theory part of the report, different ebusiness models and frameworks are introduced. Those models and frameworks are compared to empirical case data. From that analysis of the empirical data, therecommendations for the development of the network information system are derived. In process industry such as the forest industry, it is crucial to achieve a high level of operational efficiency and reliability, which sets up great requirements for maintenance and operations. Therefore, partnerships or strategic alliances are needed between the network participants. In partnerships and alliances, deep communication is important, and therefore the information systems in the network also are critical. Communication, coordination and collaboration will increase in the case network in the future, because network resources must be optimised to improve competitive capability of the forest industry customers and theefficiency of their service providers. At present, ebusiness systems are not usual in this maintenance network. A network information system among the forest industry customers and their local service providers actually is the only genuinenetwork information system in this total network. However, the utilisation of that system has been quite insignificant. The current system does not add value enough either to the customers or to the local service providers. At present, thenetwork information system is the infomediary that share static information forthe network partners. The network information system should be the transaction intermediary, which integrates internal processes of the network companies; the network information system, which provides common standardised processes for thelocal service providers; and the infomediary, which share static and dynamic information on right time, on right partner, on right costs, on right format and on right quality. This study provides recommendations how to develop this system in the future to add value to the network companies. Ebusiness scenarios, vision, objectives, strategies, application architecture, ebusiness model, core processes and development strategy must be considered when the network information system will be developed in the next development step. The core processes in the case network are demand/capacity management, customer/supplier relationship management, service delivery management, knowledge management and cash flow management. Most benefits from ebusiness solutions come from the electrifying of operational level processes, such as service delivery management and cash flow management.

Capability matrix – Identifying and evaluating the key capabilities of purchasing and supply management

Organizations gain resources, skills and technologies to find out the ultimate mix of capabilities to be a winner in the competitive market. These are all important factors that need to be taken into account in organizations operating in today's business environment. So far, there are no significant studies on the organizational capabilities in the field of PSM. The literature review shows that the PSM capabilities need to be studied more comprehensively. This study attempts to reveal and fill this gap by providing the PSM capability matrix that identifies the key PSM capabilities approached from two angles: there are three primary PSM capabilities and nine subcapabilities and, moreover, the individual and organizational PSM capabilities are identified and evaluated. The former refers to the PSM capability matrix of this study which is based on the strategic and operative PSM capabilities that complement the economic ones, while the latter relates to the evaluation of the PSM capabilities, such as the buyer profiles of individual PSM capabilities and the PSMcapability map of the organizational ones. This is a constructive case study. The aim is to define what the purchasing and supply management capabilities are and how they can be evaluated. This study presents a PSM capability matrix to identify and evaluate the capabilities to define capability gaps by comparing the ideal level of PSM capabilities to the realized ones. The research questions are investigated with two case organizations. This study argues that PSM capabilities can be classified into three primary categories with nine sub-categories and, thus, a PSM capability matrix with four evaluation categories can be formed. The buyer profiles are moreover identified to reveal the PSM capability gap. The resource-based view (RBV) and dynamic capabilities view (DCV) are used to define the individual and organizational capabilities. The PSM literature is also used to define the capabilities. The key findings of this study are i) the PSM capability matrix to identify the PSM capabilities, ii) the evaluation of the capabilities to define PSM capability gaps and iii) the presentation of the buyer profiles to identify the individual PSM capabilities and to define the organizational PSM capabilities. Dynamic capabilities are also related to the PSM capability gap. If a gap is identified, the organization can renew their PSM capabilities and, thus, create mutual learning and increase their organizational capabilities. And only then, there is potential for dynamic capabilities. Based on this, the purchasing strategy, purchasing policy and procedures should be identified and implemented dynamically.

IEA Bioenergy Task 40 “Sustainable International Bioenergy Trade: Securing supply and demand” Country report of Finland 2008

This study considered the current situation of biofuels markets in Finland. The fact that industry consumes more than half of the total primary energy, widely applied combined heat and power production and a high share of solid biomass fuels in the total energy consumption are specific to the Finnish energy system. Wood is the most important source of bioenergy in Finland, representing 21% of the total energy consumption in 2006. Almost 80% of the wood-based energy is recovered from industrial by-products and residues. Finland has commitment itself to maintaining its greenhouse gas emissions at the 1990 level, at the highest, during the period 2008–2012. The energy and climate policy carried out in recent years has been based on the National Energy and Climate introduced in 2005. The Finnish energy policy aims to achieve the target, and a variety of measures are taken to promote the use of renewable energy sources and especially wood fuels. In 2007, the government started to prepare a new long-term (up to the year 2050) climate and energy strategy that will meet EU’s new targets for the reduction of green house gas emissions and the promotion of renewable energy sources. The new strategy will be introduced during 2008. The international biofuels trade has a substantial importance for the utilisation of bioenergy in Finland. In 2006, the total international trading of solid and liquid biofuels was approximately 64 PJ of which import was 61 PJ. Most of the import is indirect and takes place within the forest industry’s raw wood imports. In 2006, as much as 24% of wood energy was based on foreignorigin wood. Wood pellets and tall oil form the majority of export streams of biofuels. The indirect import of wood fuels increased almost 10% in 2004–2006, while the direct trade of solid and liquid biofuels has been almost constant.

Improving the effectiveness of supply chain development work – an expert role perspective

This study focuses to the intersection of three sets of activities in a company: expert work, development work and supply chain management, SCM. Experts and expert work represent a set of individuals whose efficiency and impact this study is intended to improve, while development work defines the set of organizational activities to focus on. SCM as an expertise area acts as the platform on which this study is built. The study has two aims. Firstly, it aims to derive a model helping an SCM expert to increase the effectiveness of expert work in development tasks by understanding the encountered organizational situations and processes better, reflecting his/her past and future actions to organizational processes and selecting and adjusting the processes and contents of his/her work accordingly. Secondly, it aims to develop applicable approaches and methods to understand, evaluate and manage the organizational processes and situations in development work. The integrative model on approaches and methods to improve the effectiveness of development processes is split to two aggregate dimensions: technical performance of the developed solution and consumption of resources of the development process. Six potential approaches and methods aiming at helping in the management of organizational dimensions are presented in enclosed publications. The approaches focus on three subtasks of development work: decision making, implementation and change, and knowledge accumulation. The approaches and methods have been tested in case studies representing typical development processes in the area of supply chain management. As a result, four suggestions are presented. Firstly, SCM experts are advised to consider the SCM development work to be consisting of development processes. Secondly, inside these processes they should identify and evaluate the risk of difficult decision-making related to organizational factors. Thirdly, they are prompted for an active role in implementation and change, supporting the implementation through whole process. Finally, the development should be seen in a holistic view, taking into account the stage of knowledge and organizational issues related to it, and adopt a knowledge development strategy.

Supply Risk Management in Pharmaceutical

Fast development in the operating environment and fierce competition have driven companies to pursue efficiency and success through lean and global supply chains. At the same time overall uncertainty has increased in the business environment and supply chains have become a priority in risk management since their vulnerability may endanger business continuity. Although risk management should start at procurement strategy development phase, proactive contingency planning is also essential because it enables correct reaction and fast changes in process execution in the case of risk realization. This thesis is a case study conducted in the pharmaceutical industry where purchasing and materials management organizations face a number of challenges and limitations that have to be considered in supply risk management. The goal of the study was to discuss the operating environment, and identify and analyze supply risks and potential risk management practices. The study was concluded with suggestions for purchasing strategy development that take risk management considerations into account. This copy is the public version of the thesis.

Strategic supply chain alignment to customer buying behavior

In search for competitive advantage, designing and managing supply chain networks have become a necessary competence for organizations. The target of this thesis is to answer a question, how to design a multiple supply chain network. The purpose is to study, what kind of different supply chain designs exist and, how to choose appropriate supply chain designs for a company. In the thesis, the focus is on the supply chain alignment to customers, more specifically to customer buying behavior. The research method was a case study. A framework for measuring customer buying behavior was developed based on the literature and it was used in the study of customer buying behavior in the case environment. In the case company structured interviews and data records were used as sources of evidence. Persons working in the customer-interface were interviewed face-to-face and through an e-mail questionnaire. When analyzing the data, a Quality function deployment matrix was used as one analysis method. As a result of the thesis, supply chain network of the case company is proposed to be divided into three separate supply chains, which focus on different areas and they could be called lean, agile and continuous replenishment supply chains. In conclusion, in the supply chain alignment to customer buying behavior several aspects have to be studied from different perspectives. According to the results, a multiple supply chain strategy is recommended to be implemented in the case company, since the diversity of the customer needs cannot be managed efficiently through a single supply chain.

Interfirm Information System for Supply Chain Management from the Cloud: An Exploratory Case Study from the Telecom Industry

This study examines the practice of supply chain management problems and the perceived demand information distortion’s (the bullwhip effect) reduction with the interfirm information system, which is delivered as a cloud service to a company operating in the telecommunications industry. The purpose is to shed light in practice that do the interfirm information system have impact on the performance of the supply chain and in particularly the reduction of bullwhip effect. In addition, a holistic case study of the global telecommunications company's supply chain is presented and also the challenges it’s facing, and this study also proposes some measures to improve the situation. The theoretical part consists of the supply chain and its management, as well as increasing the efficiency and introducing the theories and related previous research. In addition, study presents performance metrics for the bullwhip effect detection and tracking. The theoretical part ends in presenting cloud -based business intelligence theoretical framework used in the background of this study. The research strategy is a qualitative case study, supported by quantitative data, which is collected from a telecommunication sector company's databases. Qualitative data were gathered mainly with two open interviews and the e-mail exchange during the development project. In addition, other materials from the company were collected during the project and the company's web site information was also used as the source. The data was collected to a specific case study database in order to increase reliability. The results show that the bullwhip effect can be reduced with the interfirm information system and with the use of CPFR and S&OP models and in particularly combining them to an integrated business planning. According to this study the interfirm information system does not, however, solve all of the supply chain and their effectiveness -related problems, because also the company’s processes and human activities have a major impact.

Green supply chain management practices and firm performance: evidence from Finland

In order to address the increasing stakeholder requirements for environmentally sustainable products and processes, firms often need the participation of their supply chain partners. Green supply chain management has emerged as a set of managerial practices that integrate environmental issues into supply chain management. If implemented successfully, green supply chain management can be a way to achieve competitive advantage while enhancing the environmental sustainability of the firm. The overall purpose of this dissertation is to contribute to the discussion on green supply chain management practices from the perspective of their drivers and performance implications. The theoretical background arises from the literature on competitive strategy, firm performance and green supply chain management. The research questions are addressed by analysing firm-level data from manufacturing, trading and logistics firms operating in Finland. The empirical data comes from two consecutive Finland State of Logistics surveys in 2012 and 2014, combined with financial reporting data from external databases. The data is analysed with multiple statistical methods. First, the thesis contributes to the discussion of the drivers of GSCM practices. To enhance the understanding of the relationship between competitive strategy and GSCM practices, a conceptual tool to describe generic competitive strategy approaches was developed. The findings suggest that firms pursuing marketing differentiation are more likely to be able to compete by having only small environmental effects and by adopting a more advanced form of external green supply chain management, such as a combination of strong environmental collaboration and the increased environmental monitoring of suppliers. Furthermore, customer requirements for environmental sustainability are found to be an important driver in the implementation of internal GSCM practices. Firms can respond to this customer pressure by passing environmental requirements on to their suppliers, either through environmental collaboration or environmental monitoring. Second, this thesis adds value to the existing literature on the effects of green supply chain management practices on firm performance. The thesis provides support for the idea that there is a positive relationship between GSCM practices and firm performance and enhances the understanding of how different types of GSCM practices are related to 1) financial, 2) operational and 3) environmental performance in manufacturing and logistics. The empirical results suggest that while internal GSCM practices have the strongest effect on environmentalperformance, environmental collaboration with customers seems to be the most effective way to improve financial performance. In terms of operational performance, the findings were more mixed, suggesting that the operational performance of firms is more likely to be affected by firm characteristics than by the choices they make regarding their environmental collaboration. This thesis is also one of the first attempts to empirically analyse the relationship between GSCM practices and performance among logistics service providers. The findings also have managerial relevance. Management, especially in manufacturing and logistics industries, may benefit by gaining knowledge about which types of GSCM practice could provide the largest benefits in terms of different performance dimensions. This thesis also has implications for policy-makers and regulators regarding how to promote environmentally friendly activities among 1) manufacturing; 2) trading; and 3) logistics firms.

A game theoretic simulation model for quality oriented timber supply to sawmills

Summary