Incorporating a total cost perspective intothe purchasing strategy : A case study of amedium sized retail compan

Sammanfattning: The retail industry is today characterized by downward price pressure, and the increasedcompetition in the industry has led to pressure on profit margins. Purchasing and supply chainmanagement have become areas of increased strategic importance and play a crucial role inthe business performance. This study aims to extend previous literature in these fields byproviding the existing research with an empirical study on how the purchasing strategy canincorporate a total cost perspective of the supply chain.The purpose of this study was to suggest aspects to incorporate in the purchasing strategywith the objective to consider a total cost perspective of the supply chain. This was donethrough conducting an empirical case study at a Swedish middle sized retail company, bycollecting and analyzing both qualitative and quantitative data through interviews, meetingsand internal databases. Challenges that prohibit the case company to apply a total costperspective were identified in the purchasing process and a total cost model was built tovisualize how these affect total costs. Our findings show that there are six challenges thatprohibit the case company to include the total cost perspective in the purchasing process; theinability to reach minimum order quantities (MOQ), production specific requirements, thedifficulty to combine order suggestions on related stock keeping units (SKU), an uneven flowof orders to suppliers, inefficient time supply period and an inability to coordinate transports.Three aspects were identified as root causes for these challenges and suggested to the casecompany to incorporate in their purchasing strategy to enable the management of total costs inthe supply chain. The aspects are flexible time supply periods, internal and externalinformation sharing and coordination of transport. Furthermore, this research also gives anunderstanding of how the formation of the private label assortment fuels the challenges thatprohibit the company to take a total cost perspective.