Developing a supplier segmentation and management system for an SME company in the metal industry

Abstract

The competitive market has pushed organizations to be more selective towards their suppliers. Therefore having a supplier management system in order is increasingly viewed as a source of competitive advantage. However, most of the SMEs have not yet utilized a fully structured supplier selection and evaluation system in their purchasing process. The case company for which the research was conducted is one of these SMEs which require developing a more systematic assessment process to improve their current situation and identify possible improvement areas.

The study presented in this thesis proposes a solution for supplier selection and evaluation in a small and medium size enterprise (SME). The thesis comprises of two main parts (a) literature review (b) empirical study part. The literature introduces supplier selection and evaluation frameworks and models used in the industry. The literature review has focused on the following evaluation frameworks: categorical method cost based method and weighted point evaluation method (WPEM) as well as understanding the entire purchasing process. The empirical part identifies the most relevant elements that should be taken into consideration when designing/creating a Purchasing and Supply Management system in an SME setting. A solution comprising of five steps has been proposed: First step starts with implementing the appropriate model for supplier segmentation. The second step deals with determining the relevant supplier KPIs for the organization. Third step is to select the right evaluation framework which is followed by developing an information collection system as part of the fourth step. Finally, as the last step a feedback and follow up with the supplier must be completed.

A supplier segmentation tool and a supplier selection and evaluation model was also developed for the case company which proved to be highly beneficial and helped the company focus their resources on building long term relationships with strategic suppliers.