The role of context, activities, and organization, in Value-Based Procurement

Abstract: This thesis explores the adoption of a Value-Based Procurement Strategy. A procurement strategy is value-based when it facilitates procurement to develop attractive value propositions for both suppliers and internal stakeholders. The procurement function, including its activities and organization, and the collaboration with suppliers, are shaped to achieve this goal. SAAB, a Swedish military fighter airplane manufacturer, has been driven to adopt such a strategy by its surrounding context and market position, which demand that SAAB find new ways to attract key suppliers. SAAB responded to this demand by offering suppliers alternative benefits in terms of, for example, knowledge, intelligence, standardization, co-marketing, and prioritization. SAAB offers the empirical opportunity taken by this thesis to explore Value-Based Procurement.A theoretical framework built on literature on procurement in terms of procurement context, procurement activities, and procurement organization informs this study. The framework also encompasses literature on value and value propositions. A value perspective describes well both how SAAB’s procurement function has been shaped, and the work that the procurement department does. Nearly thirty hours of interviews with people of different roles within the procurement organization of SAAB and a workshop involving multiple key informants form the empirical base for this explorative, qualitative, single-case study. A thick empirical description of SAAB’s Strategic Sourcing department and its work allows the reader to assess generalizability. The analysis building thereon results in nineteen propositions for how the adoption of a Value- Based Procurement Strategy has implications for procurement activities and organization.This study contributes in several ways to research. It recounts an in-depth revelatory case of the adoption of a Value-Based Procurement Strategy and a customer taking a leading role in developing value propositions for suppliers and itself, thus providing insight into an unexplored area. The procurement context encourages the adoption of a Value-Based Procurement Strategy and plays a role in determining what is valuable to suppliers. The procurement activities and procurement organization play enabling roles in successfully implementing Value-Based Procurement, and act as drivers of value proposed to suppliers. Value propositions are tools for developing procurement strategy and for execution thereof through procurement. This thesis also deepens the understanding of value by promoting a parallel view of co-developed customer and supplier value. Finally, it contributes to procurement literature by showing that the buying side has value propositions to make. This thesis contributes to managers by illustrating how a Value- Based Procurement Strategy can be adopted, and possible reasons why it should. It also proposes “value actions” as possible Value-Based Procurement Strategy improvement efforts.