Developing a Methodology for Supplier Base Reduction : A Case Study at Dynapac GmbH
Dynapac GmbH is a manufacturer of road construction equipment and has historically been acquired and merged with several companies, resulting in an expansion of their supplier base. Currently, they are experiencing a large supplier base within direct material causing a decrease in the effectiveness and efficiency in the management of the suppliers. Dynapac GmbH therefore wishes to lower the number of suppliers in order to obtain desired effects, such as cost savings, reduction of administrative workload, higher control, higher quality and improved communication with suppliers. The purpose of the study is therefore to develop a methodology that describes all the activities needed to successfully reduce the number of suppliers.
At the moment, approximately 80 percent of the total purchasing budget is allocated to only 14 percent of the supplier base. The supplier base can therefore be assumed to consist of a high number of suppliers supplying only a few products with a low turnover. Based on this, it can be concluded that the supplier base includes several opportunities for supplier base reduction. The action of reducing the supplier base is perceived as being in line with the sourcing strategy as well as the business strategy and the needed support is therefore believed to be present in order to succeed with performing supplier base reduction.
Based on existing research, a conceptual model for supplier base reduction was created. The current situation at Dynapac GmbH was thereafter analysed in order to enable a customization of the model. Interviews were held to obtain input regarding the model and the activities. The overall view on the model was positive and all activities were considered to be relevant to include. Possible customizations of the activities were discussed during the interviews, which resulted in a customized model consisting of activities with either two types of customizations: (1) defined variables or (2) developed processes. Lastly, the model was validated in a pilot test before it was reconfigured and handed over as a methodology.
The finalized methodology included a thorough description on how to conduct supplier base reduction from beginning to end, consisting of 14 activities corresponding to five different phases. The first two phases intend to lay the basis for enabling a reduction of the supplier base and the third phase aims at implementing it in practice. The fourth phase consists of analysing the result of the implementation followed by the last phase with focus on continuous improvement of the supplier base.
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