Supplier portfolio management of the MNCs and its implications to the Finnish SMEs in the machinery industry

Abstract

The objective of the study was to understand the dynamics of MNCs' supplier portfolio management in the Finnish machinery industry. In addition, and accordance to the title, the second objective was to draw the implications of the supply management to the Finnish SME suppliers. The study was conducted as a qualitative research in the context of machinery industry in Finland. The data was collected through interviews from three different sources: The first group of Finpro consultants provided background to the research, the second group of four MNCs provided information on the supplier management aspect, and the third group of six SME suppliers provided the information on how the management affected them.

The results of the study indicate that MNCs' supplier portfolio management is not only a result of strategic planning, but a combination of three factors: 1. Historical reasons, 2. Strategic decisions and 3. Convenience reasons. Thus the actual management of the portfolio only takes place in the last two sections. These results were presented in a pyramid model. The study notes, how the supplier's position in the pyramid model is the most critical factor in determining the implications of supplier management to the SMEs. In addition, the overall international strategy of the MNCs affects greatly the management of the SMEs, and position of local suppliers.

Lastly, the study suggests a model on how the SMEs should create an own strategic response to the supplier management. The response starts from understanding the environment and positioning oneself, and ends with a creation of own customer portfolio, to hedge against the risks of changing business environment.