Assessing the supplier selection problem for raw materials of different strategic importance. : Case study of a lithium-ion battery manufacturer in Sweden

Abstract: Many sectors and industries are being pushed by policymakers and consumers towards an industrial transformation to become more sustainable. This in order to reduce the negative impact on the environment caused by the emissions of toxic substances and greenhouse gases, as well to promote more efficient use of resources. The transport sector and specifically the automotive industry is seen as one of the main actors within the climate debate due to their high environmental impact in terms of emissions. Therefore, authorities and customers are pushing automotive manufacturers to shift towards electric mobility. However, a rapid shift is not simple. The supply of raw materials needed to sustain the production of batteries does not meet the demand. In turn, causing shortages of some materials and heavily increasing their prices. This thesis addresses the supplier selection problem within a Swedish lithium-ion battery manufacturer with clients mainly in the automotive industry. The study has analyzed a set of relevant criteria to evaluate a supplier within the high-tech industry within a specific context. Furthermore, the study has determined whether differences exist between the importance of the criteria depending on the strategic profile of the material. The strategic profile depends on the profit impact and the supply risk of the material. In order to assess the importance weights of the criteria, the analytical hierarchy process (AHP) was used and interviews were conducted with purchasing experts in the industry. This study provides a new approach to the existing literature of supplier selection, by studying this process in an industry in which it has never been done and also by assessing the supplier selection by categorizing the materials by their strategic profile, an approach that has not been studied in literature until the moment. Results show that the importance of some of the supplier selection criteria vary widely between the strategic profile of the materials, while the importance of other criteria remain the same. In addition, the study has also determined that the importance of the criteria vary also within the supplier selection process, having different importance levels at different steps. Finally, the results show that some criteria of a certain criticality represent a go-no go gate in the selection process. The conclusions are that the supplier selection process within the battery industry cannot be regarded as a homogenous process and that supplier selection criteria vary with the strategic importance of the material. Thus, suppliers must be assessed with different criteria importance weights when using a tool such as the AHP to perform supplier selection. Additionally, the critical criteria for each material must be determined prior to use the tool.