Purchasing and digitalization in an era of turbulence

Abstract: Abstract Title: Purchasing and digitalization in an era of turbulence Authors: Emil Sarajlic & Vishal Natesan Supervisor: Wilbert Baerwaldt, Director Sourcing and Value Chain at Duni AB Louise Bildsten, Department of Industrial Management & Logistics, Faculty of Engineering, Lund University Examiner: Jan Olhager, Department of Industrial Management & Logistics, Faculty of Engineering, Lund University Background: This research delves into the uncertainties and challenges encountered in global supply chain operations, exacerbated by unpredictable events such as the COVID-19 pandemic and the 2021 Suez Canal obstruction. These disruptions can lead to stock-outs, poor capacity utilization, and the need for expensive buffers. The study centers on Duni, an international company present in over 20 countries. The thesis evaluates Duni's purchasing practices through the lens of digitalization, examining operational processes, digital tools used, turbulence impact, and potential AI automation opportunities. It employs a qualitative approach, building on prior research, but uniquely scrutinizes the impact of turbulence on digitalization of operational activities. Problem formulation: The thesis underscores the critical role of digitalization in managing these disruptions and discusses its impact on diverse stakeholders - suppliers, governments, retailers, financial institutions, and customers. Effective digitalization can create sustainable competitive advantage, reinvent procurement processes, and enhance transparency, contributing to profitability. However, if poorly implemented, it could sub-optimize the ordering process, damaging trust relationships. Purpose: The purpose of this Master Thesis is to explore and map the purchasing practices of Duni through the following four lenses of; the operational process, the role of the digitalization tools used, the impact of turbulence, and lastly, possibilities of AI automation. Methodology: The approach to this research paper is done through the usage of a multiple-case study framework. A data collection protocol is developed using an semi-structured interview guide that covers the different areas of this research paper. Lastly, Data analysis and discussions about limitations is done to touch on the subject of quality of research. This research paper is mainly of a qualitative nature. Conclusion: The research centered on three main questions regarding Duni's supply chain. Firstly, it investigated the operational procurement process, discovering that while Duni uses two Enterprise Resource Planning systems, human intervention remains necessary to accommodate unpredictable factors in the supply chain. Secondly, the research focused on how Duni evaluates delivery performance. It found that while traditional metrics such as delivery date compliance and order quantity compliance are used, there is a lack of a formal, quantitative supplier delivery performance rating system. Lastly, the research sought to understand the role of digitalization and automation in ensuring adequate delivery performance and mitigating risk. It found that balancing automated systems with human intuition is crucial, particularly in managing unpredictable events that impact the supply chain. There's an opportunity for automation in supplier delivery performance measurement, and handling endogenous turbulence, while exogenous turbulence requires more manual adjustment due to its complexity.