Internal benchmark of IKEA's Sourcing Assignment processes and documents across business areas and categories - A multiple case study

Abstract: Background: The IKEA Range & Supply organisation consists of business areas (BAs) and categories. BAs work with product development toward end-customers while the material-based categories work toward suppliers with purchasing and sourcing related tasks. There exists an internal cross-organisational interface between these units and IKEA recently created Sourcing Assignment as a tool to encourage BAs and categories to formally meet, discuss and document agreements. Previously these interactions occurred informally. A Sourcing Assignment starter package (status quo), containing general guidelines on way of working, a checklist and proposed document template, was shared with the involved employees in early 2016. Supply Chain Managers (SCMs), representing BAs, and Category Managers (CMs), representing categories, were suggested as the key internal stakeholders to create documented handshakes in the form of Sourcing Assignments. SCMs and CMs were given the freedom to set up Sourcing Assignment as preferred, with status quo as a reference. Sourcing Assignment implementation took place during spring 2016 and an internal evaluation was planned in autumn 2016. However, it was never conducted. The master’s thesis study was carried out around a year after Sourcing Assignment was launched companywide. Problem formulation: Complexity exists in the cross-organisational interface between 10 BAs, divided into 20 home furnishing businesses (HFBs), and 7 category areas, divided into 34 categories. BAs work with several different categories while the opposite also applies, i.e. categories work with multiple BAs as well. This means that SCMs and CMs must handle many different Sourcing Assignment relations in IKEA. It was specified in status quo that BAs were expected to take the lead for Sourcing Assignment and approach the categories. BAs started developing their own ways of working (processes) and document templates meaning that a category working with multiple BAs could expect different approaches. Sourcing Assignment was portrayed as a documented handshake which primarily categories, but also BAs, should consider further in their business plan (BPL) and action plan (APL) processes. These BPL and APL processes are sub-processes in an IKEA core process with the purpose to “optimise the value chain and define a world class supplier base satisfying short- and long-term capacity and quality demands based on Sourcing Assignments from HFBs” (IKEA, 2017A). Consequently, CMs responsible for widespread categories working with many BAs could in a worst-case scenario have 10 different ways of working and document templates at hand. This can cause confusion once all individual Sourcing Assignments are compiled. The IKEA supervisors raised concerns regarding diverging ways of working with Sourcing Assignment, and want to map the as-is situation in dialogue with categories to identify an internal best practice, i.e. one way of working, applicable to the entire IKEA Range & Supply organisation. Purpose: The purpose with this master’s thesis is to develop and recommend an improved way of working with Sourcing Assignment, i.e. the process and document template, so that IKEA can work more structured and aligned with Sourcing Assignment in the future. Methodology and method: The master’s thesis followed a constructive research approach (CRA) and mostly an inductive research process within the CRA. The chosen CRA highlights the importance of testing a developed construct, i.e. the solution to the problem, under authentic circumstances. Two qualitative tests were conducted in IKEA leading to minor modifications of the developed construct. The inductive research process meant that an extensive theoretical frame of reference was not developed for empirical testing prior to data collection. The main motivator was scarcity of academic literature treating equivalents to Sourcing Assignment and the highly practical and internal nature. Therefore, data collection, via interviews and documents, began at an early stage for the two units of analysis, namely the Sourcing Assignment process and document. Then, internal best practice was built from empirics, in line with the qualitative grounded theory philosophy, while theoretical elements were integrated deductively along the way leading to a more balanced research process. A multiple-case study was followed as research method which resulted in empirical data being collected from IKEA employees in 6 BAs and 9 categories. Interview material was condensed into 6 case descriptions pinpointing e.g. potential problems and desired way of working. Data analysis consisted of cross-case analysis to point out elements to include or exclude in an internal best practice. Conclusions: Several different individual process approaches were identified as result of the cross-case analysis, namely clustering, top priority, all-inclusive, short-term focus and information sharing approaches. None of the cases were considered as standalone internal best practice, but several individual best practice elements were identified within the separate cases. Collectively these elements could be combined into a best practice for IKEA’s Sourcing Assignment. The developed construct, i.e. the recommended improved way of working with the Sourcing Assignment process and document template, consists of a new Sourcing Assignment: • Framework • Process map • Year cycle • Handbook The proposed framework outlines a best practice way of working with Sourcing Assignment. Two priority levels are distinguished with different process and document scope depending on the internal power-dependency between BAs and categories. The Sourcing Assignment handbook is the new document template accompanied with the new framework, process map and year cycle as complementary appendix. Keywords: • Sourcing Assignment • Internal benchmark • Multiple-case study • Cross-case analysis • Internal best practice • Category management in purchasing • Category source/sourcing plan • IKEA way of working