Analysis of strategic suppliers for Volvo parts: through mapping of global activities

Abstract: This master thesis was conducted at Volvo Parts purchasing department in Gothenburg during the fall of 2006. Volvo Parts is the aftermarket solution provider for most of Volvo Groups business areas including Volvo Trucks, Mack Trucks, Renault Trucks, Volvo Buses, Volvo Construction equipment and Volvo Penta.
Volvo guarantees that they will provide spare parts to the aftermarket for 15 years after the model is phased out of production. This is not only something that Volvo Parts has to supply: it is also an opportunity to make greater revenue on this specific truck model for the Volvo Group since the aftermarket often is seen as very lucrative. However it is not certain that all customers will turn to a Volvo dealer when they are in need of an aftermarket part. There is strong competition on the aftermarket from different OES (original equipment supplier) manufacturers. The same manufacturer that supplies Volvo Trucks with a part for the production will now be a competitor to Volvo Parts on the aftermarket. Therefore it is of great importance to obtain a low purchasing price to be able to compete efficiently. Volvo Parts main influence on the purchasing price is through negotiations.
The purpose of this study was to: trough a thorough supplier mapping, provide Volvo Parts purchasing department with "in deep" information of seven of their major strategic suppliers that will aid them in negotiations
and evaluations of these suppliers. This will cover roduction facilities, customer structure, producing what/where, exchange/remanufacturing facilities and remanufacturing trends with competitors. The study will also supply Volvo Parts with recommendations to further research within supplier analysis.
The thesis method has contained a literature study together with supplier mapping through a general template, created based on the thesis background and purpose. The mapping has been conducted through a mix of face-to-face interviews, e-mail questionnaires, telephone interviews and internet research.
The authors have performed an empirical study for each of the seven suppliers: this empirical study has worked as the foundation for the analysis and recommendations that the authors provide for each of the seven suppliers.
Through this mapping and analysis the authors have found many possibilities for improvements concerning Volvo Parts suppliers. There are many situations where there are alternative production sites to the ones being used by Volvo today, where the suppliers produce the same aftermarket parts that Volvo Parts today purchases through different central warehouses, which results in
unwanted price mark ups. By skipping steps in the supply chain Volvo Parts can lower their prices towards their final customers and thereby improve their ability to compete with the suppliers as well as protect their own aftermarket. The authors have also found that there are many remanufacturing activities at these seven suppliers that Volvo Parts today is not aware of. By taking advantage of these possibilities Volvo Parts can become an even more environmentally friendly company. There are also savings that can be made through lower purchasing prices together with possibilities of reaching new market segments.