Potential cost improvements and workable form of collaboration in Alvesta steel collaborative procurement project

Abstract: Master thesis in Business Administration, 30ECTS, School of Management and Economics at Linnaeus University, Business Process & Supply Chain Management, 5FE00E, Spring 2010 Author: Omid Sherkat Tutor: Åsa Gustafsson Title: Potential cost improvements and workable form of collaboration in Alvesta steel collaborative procurement project Background: There is an idea about starting collaborative procurement for steel-based products manufacturers in Alvesta region, Sweden. Collaborative procurement of purchasing group is an organization in which cooperative purchasing processes take place. A purchasing group consists of dependent or independent organisations that share and/or bundle together in order to achieve mutually compatible goals that they could not achieve alone. However, collaborative procurement has its own advantages and disadvantages. Objective: This study describes the procurement and purchasing function, as well as identifies and explains the total cost of ownership in studied cases in order to find the potentials for collaborative purchasing which is aimed at reducing the total cost of ownership. Moreover, this investigation is looking for the workable form or even forms of purchasing group in this case. Method: This is a multiple-case study with systematic combining approach as the orientation. Interview and documents are the instruments of data collection. Empirical data from each case has been analysed both within-case and cross-case. Construct validity, external validity, and reliability are scientific criteria for trustworthiness of this thesis. Results, conclusions: All studied companies in this case are going through the complete process of procurement and purchasing. Amongst the studied sites, Finnveden Powertrain AB is an exceptional case by centralised purchasing. The total cost of ownership in studied cases contains the activities related to management, delivery, communication, price, and quality but not service. Ultimately, this investigation showed that the required elements and basements to establish a regional purchasing office in form of a third party formal separate organisation, at least as a feasible project based on analogous purchasing in different companies and other influential factors, are ready there. Suggestions on further research: This study can be continued by choosing a larger sample to have a better view about procurement and purchasing process of manufacturers in this region. In addition, through more interviews the motives or even hinders of join a group purchasing among the increasing number of companies can be identified.