ASSESSMENT OF PURCHASES IN A CASE COMPANY
Nurminen, Ville (2012)
Nurminen, Ville
Satakunnan ammattikorkeakoulu
2012
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201303042876
https://urn.fi/URN:NBN:fi:amk-201303042876
Tiivistelmä
The purpose of this thesis was to indicate the total cost difference between case company’s purchases of products that are sourced from European manufacturers, products purchased from Chinese manufacturers and products that are manufactured by case company’s own factory in Poland.
The study was focused on the total cost of the purchases. The purchasing processes had to be reviewed in order to identify all the various cost drivers involved in the sourcing of the products. After the cost drivers were identified they were analysed by using a Total Cost of Ownership analysis. Since the purchasing processes are different between Asian purchases and European purchases there were distinguishable differences in costs.
Research was mainly implemented by using sample cases. An item which was produced by two suppliers, European and Chinese, was selected as a first case sample. Main cost elements of the purchasing processes were identified and compared between suppliers. It was discovered in this thesis that the total costs of purchases were completely different between Chinese supplier and European supplier. The results were undisputable as the Chinese supplier was over three times cheaper than European supplier, and in addition had a better overall quality.
Subject of lead-time is a crucial factor when purchases are evaluated. Long lead-times and the unsteady customer demand have caused problems for the case company. The purchasing lead time is typically significantly longer when purchasing from Asian countries.
As the case company has a factory in Poland, there was a desire to compare purchases from Asia with in-house production, or in other words, insourcing. According to the research, manufacturing costs of the selected sample item was lower when compared to the purchase price from Asia, therefore insourcing is a valuable part of the case company’s sourcing strategy.
The study was focused on the total cost of the purchases. The purchasing processes had to be reviewed in order to identify all the various cost drivers involved in the sourcing of the products. After the cost drivers were identified they were analysed by using a Total Cost of Ownership analysis. Since the purchasing processes are different between Asian purchases and European purchases there were distinguishable differences in costs.
Research was mainly implemented by using sample cases. An item which was produced by two suppliers, European and Chinese, was selected as a first case sample. Main cost elements of the purchasing processes were identified and compared between suppliers. It was discovered in this thesis that the total costs of purchases were completely different between Chinese supplier and European supplier. The results were undisputable as the Chinese supplier was over three times cheaper than European supplier, and in addition had a better overall quality.
Subject of lead-time is a crucial factor when purchases are evaluated. Long lead-times and the unsteady customer demand have caused problems for the case company. The purchasing lead time is typically significantly longer when purchasing from Asian countries.
As the case company has a factory in Poland, there was a desire to compare purchases from Asia with in-house production, or in other words, insourcing. According to the research, manufacturing costs of the selected sample item was lower when compared to the purchase price from Asia, therefore insourcing is a valuable part of the case company’s sourcing strategy.