Improving supplier selection process in indirect purchases – Case Study

Abstract

Due to various sectors experiencing growth in outsourcing, firms, to achieve business success, need to recognise how increasingly critical it is to select the right suppliers and how important collaboration with them has become over the years. The question “How to improve the supplier selection process in indirect purchases of a company?” is answered in this paper. A global automotive company’s regional business unit, headquartered in the Finnish Capital Region, and comprising Nordic countries and the Baltic States, is used as the case study. Its supplier selection process was compared to several supplier selection processes elaborated on in the literature on the subject. To collect and synthesise various perspective on the supplier selection topic, an exploratory research method was used, where purchasing- and supplier selection concepts were explained. Supplier selection criteria and methods were also examined. Empirical and problem-solving method was employed to address the inefficient/time consuming supplier selection process in the case company. Utilising these approaches not only allows conclusions and recommendations to be based on evidence, but also to contextualise them with reference to relevant literature. This study suggests that the case company’s supplier selection process can be optimised by implementing a universal SOW (scope of work) document format for internal customers to fill in and deliver to the buyer when a purchasing decision is made. This would allow for clearance and transparency regarding what exactly is required by the buyer to proceed with the supplier selection process, and in turn, with the entire purchasing process. An improved supplier selection model is proposed to address the shortcomings of the one the case company is currently utilising. Approval stages during the supplier selection process are to be either limited or eliminated, which allows for significant saving of time.