Supply Risk Management as a means of achieving World Class Commodity Management

Abstract: Background Axis Communications AB is a network surveillance company based in Lund, Sweden, that has experienced steady growth for several years. Axis has no own manufacturing and instead utilize contracted manufacturers around the world. It is the sourcing department at Axis that are responsible for establishing contracts with these manufacturers as well as suppliers. The responsibility of handling contracts and the long-term relationship with the suppliers and contracted manufacturers are divided into different commodities. In order to improve this working method Axis’ sourcing department has launched a goal to reach world class commodity management. To be noted is that this thesis has been a complete elaboration between the two authors. Each author has been involved in every part of the process and contributed equally. Problem Formulation The sourcing department’s goal of reaching world class commodity management includes several aspect were one were one was risk management. Axis have realized that there is a lack of structure in their current proactive risk management and is not satisfied with it. Therefore, external guidance, in form of this master thesis, was brought in. Axis’ desire was to identify which commodity management. Purpose The purpose of this research and master thesis can be seen from two perspectives; (i) as an effort to develop the research area within SCRM in connection to sourcing with a live-case; and (ii) to assist Axis in their journey towards World Class Commodity Management through proactive SRM. Methodology and Method A constructive research approach was chosen for this master thesis with the use of both qualitative and quantitative data. The constructive research approach highlights the importance of testing the developed construct. Testing of the construct was done together with employees at Axis that would directly work with it and based on their feedback the construct was modified to a minor degree. A single case study combined with survey was used as a research methods which resulted in empirical data from 15 interviews and survey data from 12 respondents. This data was then summarized into the empirical data chapter highlighting several aspects of Axis, e.g. organizational, governance, and the informal risk management process. The data was analyzed through explanation building and descriptive statistics to identify which aspects needed to be included in the construct. Conclusion The conclusion of the master thesis was that Axis should include more alignment, compliance, and a structured approach in their proactive supply risk management in order to reach world class commodity management. However, since Axis is a decentralized company with high level of individual freedom the introduction of more compliance based, structured SRM with a systematic approach could be challenging. Therefore, collaboration with employees, cross-functionality between departments, and adherence with the suggested process are key in order to achieve a higher level of proactive SRM. The proactive supply risk strategies, processes, tools and governance should be developed in order to reach world class suggested proactive SRM process follows four steps: (i) risk identification; (ii) risk assessment; (iii) risk treatment; and (iv) risk monitoring. Moreover, a facilitating initial process step, mapping, is also suggested to provide a more thorough understanding of the supply chain and its components. Currently Axis were using some tool in their risk management work and they should keep using these. However, since they were used in an unstandardized way predetermined parameters and guidance for their usage should be developed. Further, additional tool that Axis can use is presented in this master thesis which aims could lead to more informed decisions at the sourcing department in connection to proactive supply risk management. The strategies that should be used for proactive supply risk management depends heavily on the situation. Therefore, more structure through a process is suggested so that they are selected in a data driven way. This aims to bring more alignment to the sourcing department so that knowledge based decisions can be made.