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Supply Chain Development within Volvo Penta ChainDevelopment through Supplier Relationship Improvement供应链的发展:通过改进供应商关系的发展AcknowledgementThis report is the Masters Thesis of Industrial Engineering-Logistics studies at University of Bors.It gave us the opportunity to use what we have learnt during the programme. Due to the vast area ofinvestigation the research presented, writing and working on this report has meant a lot of work.However, at the same time this was the challenge we were looking for and a really interestingjourney where we got the opportunity to learn a lot. Hereby, we would like to express our deepestgratitude to the following people for their help in enriching the quality of this report and guiding usalong the way.First of all we would like to thank Bodil Hgg for giving us the opportunity and helping us find thisinteresting subject to work on. We also thank her for getting us in touch with other Volvo companiespersonnel during this research. We would also like to thank our supervisor at Volvo Penta, Vara,Tonny Tuvheim for his support, kindness and patience; the same gratitude to all the other personnelat Vara that we have interviewed.Furthermore, we would also like to thank Mr. Stefan Karlsson at Volvo Trucks for his time and kindassistance in benchmarking parts of the study.Last but not least we would like to express our highest gratitude to Prof. Dag Ericsson that has beenour tutor and examiner during this report. Dag has guided us along the way, advised us and madesuggestions to improve this work. His time has meant a lot and his feedback has helped us create anup to date and interesting thesis.Finally, we would like to thank our parents for their endless support throughout this report andthroughout our lives. Thank you for standing behind us and helping us move forward, for yourunconditioned love and support.IIAbstractIn today global business market, concepts are moving towards inter-national and inter-firm incontrary to older days. This has made companies explore ways to leverage their supply chains, and toevaluate the role of suppliers in their activities. One result has been the increased outsourcing ofactivities and performance. This has heightened the role of suppliers ever more.Consequently, in order to maintain competitive in the market and to be able to satisfy theknowledgeable end customer, suppliers must be completely aligned with the core company and itsobjectives and performances. This goal is only gained through strategic benchmarking towardsSupplier Development.With a large number of suppliers to deal with, it wont be feasible to have partnership relationshipwith each. The strategic approach is to classify them in a manner suitable for the company and onlythen start from top of the list setting goals for the most prioritized.Before making any attempt in Supplier Relationship Development, the company must start fromwithin setting the right mindset from top down, inside its own ground. Only then Supplierdevelopment will be aligned with the objectives of the company and the program will be integratedand successful.This research sought after ways to develop a strategic and systematic method of dealing withsuppliers. This guideline was classified as a step by step map of a Supplier Development program.The study was conducted for Volvo Penta Vara Company, and as part of its Supply ChainDevelopment Program. The findings from the company and literature were compared and analyzedand finally guidelines were developed.This report is the last part of the masters studies in Industrial Engineering-Logistics at University ofBors. It gave us the opportunity to use what we had learnt during the programme. Considering thebroadness of the subject we were after, this report meant a lot of work. However, this was thechallenge we wanted and an intriguing journey where we learned a lot along the way.IIIContentsAcknowledgement .I Abstract .III Introduction.1 Background.1 Supplier Relationships and Strategies.1 Supplier Relationship Management (SRM) in literature .1 Company profile .2 Purpose and Objectives.2 Problem Definition .3 Delimitations .4 Outline .4 Methodology .6 Research Approach.6 Data collection method .7 Sampling Methods .7 Analysis method .8 Theoretical Foundation .10 Trends in Supplier arena.10 Outsourcing activities to suppliers .10 Reducing the number of suppliers .10 Developing partnerships with Suppliers .10 What is a Supplier Relationship?.11 Supplier Relationship costs and benefits .11 Manage and Strategy .12 Benchmarking Supplier Relationships .13 Supplier relationship management .15 Areas of presence of SRM .15 Areas of benefit from SRM.17 Social factors in SRM.18 IV1 1.1 1.1.1 1.1.2 1.1.3 1.2 1.3 1.4 1.5 2 2.1 2.1.1 2.1.2 2.2 3 3.1 3.1.1 3.1.2 3.1.3 3.2 3.2.1 3.3 3.4 3.5 3.5.1 3.5.2 3.6 Supplier Selection.19 Role of procurement in SRM .19 Supplier Classification.22 The Japanese paradigm .22 A Strategic Supplier Segmentation .23 Supplier Classification at SAAB.25 Supplier Development .26 Why develop suppliers? .26 Which Suppliers to Develop .28 Supplier Development Programs .28 Mapping the Supplier Development .29 Problems in implementation of Supplier Development .31 Supplier Development Program at Scania .33 3.10 Information Technology and SRM.35 Empirical Foundation.37 Volvo Penta Supplier Relationship Management.37 History.37 Penta within AB Volvo .38 Production .39 Volvo Penta Supplier Market.39 The Supply Chain Development Program .41 SRM within SCD program.41 Communication.42 Connections with Suppliers .44 Supplier Segmentation within Penta Vara .45 Sources of problem .46 SRM within Volvo Trucks.48 Supplier Market.48 Procurement within Trucks.48 Communication.48 The Supplier Internet Portal .49 The Supplier Relationship Development Program .50 V3.7 3.7.1 3.8 3.8.1 3.8.2 3.8.3 3.9 3.9.1 3.9.2 3.9.3 3.9.4 3.9.5 3.9.6 4 4.1 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.1.6 4.1.7 4.1.8 4.1.9 4.1.10 4.2 4.2.1 4.2.2 4.2.3 4.2.4 4.2.5 SRM Logistics group program.51 Sharing Responsibilities (Risk).52 The escalate strategy for Critical Suppliers .52 Penta vs. Trucks.54 Points from Trucks SRM .54 Comparing the communication strategies.54 Main SRM differences .55 Discussion: Problem Analysis .57 SRM trends in literature suitable within Volvo Penta .57 Social Factors.57 Making procurement more effective.57 Mapping Supplier Development Step by Step .58 In case of problems .59 Utilizing IT in Communications .60 SRM approaches that work in Volvo Penta.62 Vara Supplier Market issues .62 Vara Supplier Segmentation .62 Source of problems in buyer-supplier connections.63 SRM approaches in Trucks suitable for Volvo Penta.65 Volvo Trucks Key Points.65 Utilizing a SRM Logistics group in Communications.65 Key Comparison Points .66 Suggestions for SRM improvement.67 Illustrating Improvement.67 Improvement Suggestions.68 Conclusions and Recommendations .69 Conclusion .69 Recommendation for future work.70 Bibliography .71 VI4.2.6 4.2.7 4.2.8 4.3 4.3.1 4.3.2 4.3.3 5 5.1 5.1.1 5.1.2 5.1.3 5.1.4 5.1.5 5.2 5.2.1 5.2.2 5.2.3 5.3 5.3.1 5.3.2 5.3.3 5.4 5.4.1 5.4.2 6 6.1 6.2 7 Table of Figures and TablesFigure 1 research approach .1 Figure 2 result from sampling method.8 Figure 3 bow tie and diamond relationship models .1 Figure 4 different modes of relationships .1 Figure 5 supplier relationship lifecycle.1 Figure 6 different stages of SRM.17 Figure 7 the Japanese Supplier Segmentation.23 Figure 8 different strategies toward supplier shortcoming .1 Figure 9 steps in mapping Supplier Development .29 Figure 10 different levels of Logistics Information in SRM .1 Figure 11 inter-firm connections.1 Figure 12 Distribution of Volvo Penta worldwide.1 Figure 13 AB Volvo companies and business units, where Penta stands in the AB group .38 Figure 14 the communication outline between Vara, its customers, and its suppliers .1 Figure 15 Mapping
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