From process selection to supplier selection : a case study about an accessory purchasing department exploring JIT and/or VMI process collaboration with their suppliers.

University essay from Högskolan i Jönköping/Internationella Handelshögskolan; Högskolan i Jönköping/Internationella Handelshögskolan

Abstract:

For many retailers, manufacturers, and wholesalers, inventory is their single largest investments of corporate assets. Problems such as stock-outs and bullwhip effect due to sales fluctuation and poor visibility are normal for manufactures. Unnecessary activities, in the purchasing process internally and externally, such as double order handling, cost both money and time.

It is widely known that firms no longer can compete effectively in isolation of their suppliers and other entities. The future success of many businesses depends on co-operation and the co-ordination of efforts; making Supply Chain Management important. JIT and VMI are two of the philosophies that have been used to update supply chain relationships and management. By recognising your own supply weaknesses, the need for a supply strategy and a purchasing portfolio which classify suppliers emerges.

There is an interest in examining what possible benefits and drawbacks, JIT and VMI collaboration can bring and how they differ from each other. In order to have a successful collaboration and implementation, it is important to know what basis to choose suppliers on and understand what needs to be in place, internally and externally, before starting either a JIT or VMI relationship with different suppliers.

An inductive method was used in order to transform the literature review into a case study research. Explanatory and exploratory strategy was combined as well as qualitative and quantitative data collection such as oral interviews and written questionnaires. The case study was carried out at an accessory purchasing department at a large production company referred to as the “Focal company” in this thesis. Also, participating in the study were selected suppliers of the Focal company.

The literature review and the case study data was analysed which led to the results that:

• JIT and VMI can shorten lead time, improve quality and relationships if used properly, otherwise it can lead to increased inventory levels.

• Key factors for enabeling JIT and VMI are common goals, management commitment, accurate information and suitable software systems.

• Suitable suppliers for JIT and VMI are companies that have equal dependency and/or have interdependency and are willing and able to contribute to the competitive advantage of the buying firm.

• Supplier selection criteria are price, quality, delivery, flexibility, reliability organizational culture, structure and strategy.

• Implementation of JIT is not an option today at the Focal company.

• With a few IT-system updates, a little bit of education and training the Focal company and most of the suppliers in this study are ready for VMI.

• Because of the good balance of power and dependence in the relationships between the Focal company and their suppliers there is a good chance of a successful outcome.

• The Focal company’s rating criteria are well correlating with the literatures findings, which further support that they are ready to select suppliers for integrated relationships.

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