A Method for Customer-driven Purchasing : Aligning Supplier interaction and Customer-driven manufacturing

Abstract: The role of a purchaser has traditionally focused on acquiring standard items at the lowest possible cost. The ability to reduce unit cost has been the key performance indicator for purchasers. Most traditional purchasing strategies thus focus on optimizing this situation, focusing on the supplier interface only and not on customer value. However, for many manufacturing companies, the demand from their customers has changed lately. Not only low‐cost standard products but also customized products and short delivery lead times is increasingly required. In order to contribute to the focal actor’s competitiveness, purchasers need a purchasing strategy that supports customer value creation and thus differentiates between acquiring standard items and acquiring customized items. Accordingly, not only the focal actor’s interaction with the supplier needs to be regarded in the purchasing situation, but also the interaction with the focal actor’s customer. This is defined as customer‐driven purchasing in this research.The purpose of this research is to develop knowledge that contributes to increased competitiveness of manufacturing companies. The manufacturer can increase competitiveness by further utilizing knowledge available in manufacturing strategy in the purchasing situation. The main objective of this dissertation is to analyze the competitiveness in customer‐driven purchasing and to develop a method for customerdriven purchasing by aligning supplier interaction with customer‐driven manufacturing. The method for customer‐driven purchasing (the CDP method) was developed in collaboration with Combitech AB, Ericsson AB, Fagerhult AB, Husqvarna AB, Parker Hannifin AB, and Siemens Turbomachinery AB. The CDP method consists of three phases, divided into twelve steps. The first phase focuses on identifying strategic lead times and differentiating between varying circumstances for the purchased items. The second phase focuses on analyzing customer‐driven manufacturing while the third phase focuses on analyzing supplier interaction. The method is concluded with the implementation of customer‐driven purchasing.When applying the three phases of the CDP method, the case companies have experienced a better alignment between customer expectations and supplier performance since the competitive priorities to pursue in a supplier interaction are identified and taken action upon. Direct visible results of implementing the model are, for example, shortened supply lead time for customized items, and reduced inventory levels for standard items. The CDP method has also helped the companies to identify critical suppliers and how the supplier interaction should be affected by the customer demand for the purchased item. Several indirect results have also been reported, such as, improved internal communication, and a better balance between short supply lead time and low cost. Thus the need to differentiate and balance the goals and key performance indicators for purchasers has become evident. Applying the CDP method has been seen as an important learning process in which the objectives of purchasing and manufacturing are aligned for improved competitiveness. This contributes to establishing purchasing as a strategically important competitive function and to support a holistic view of the focal actor’s competitiveness.