ABB is a global company with a leading position in power and automation technologies. Being active on a global market creates a high pressure to always develop the business and reduce costs in order to stay competitive. The purchasing function at ABB ́s unit Control Products is divided into a strategic- and an operative purchase department. The negotiated setups the strategic purchasers establish with the suppliers have been shown to affect the transport- and inventory costs that are charged to the operative purchase department. In order to determine whether more beneficial setups could be negotiated by including transport- and inventory costs when they are evaluated, this case study has been requested. Two master students from Linköping University have conducted the study and by investigating different setups, conclusions to answer the study ́s purpose could be drawn. The purpose is presented below. The study’s purpose is to recommend future guidelines for the strategic purchasers at ABB’s unit Control Products that can be applied when negotiating with suppliers, by evaluating purchase-, transport- and inventory costs. In order to investigate how the purchase-, transport- and inventory costs were affected by different setups, four different cases were defined. Each case included a specific article, which was chosen based on its properties and its current and alternative setups. The conducted literature reviews and interviews with employees at Control Products resulted in the two sub- criteria lead time and net price were defined as the most important ones when negotiating and evaluating suppliers. A combination of these sub-criteria was therefore used to choose suitable articles. Once the cases had been defined, the purchase-, transport- and inventory costs could be calculated for both their current situation and alternative setup scenarios. Theories from relevant researches were used to strengthen and criticised the cases’ results. Each case's result provided information regarding how the purchase-, transport- and inventory costs were affected by specific setups. By comparing the alternative scenarios with the setup currently used, the alternatives ́ profitability could be determined. The cases showed that by only studying one of the three cost posts, only a limited insight was gained. Even if the purchase cost was to increase for an alternative setup, it could still be profitable to implement due to decreased transport- and inventory costs. Furthermore, an alternative setup that showed significant potential to reduce inventory costs was proven to not be profitable because of its effect on the net price. Neglecting to take transport- and inventory costs into account when a potential supplier is evaluated can make a deal look more profitable than it is. The final recommendation is that purchase-, transport- and inventory costs all have to be taken into consideration in order to determine which setups that are economically preferable. If the strategic purchasers at Control Products includes these when they negotiate with suppliers, more profitable deals can be obtained. / <p>Examensarbetet är en förvrängd version då känslig information om ABB inte ska läcka ut.</p>

This master thesis entitled “The study of Logistics procurement with a view to Purchase” is aimed at reducing costs in relation to obtaining, storing and maintaining material resources. The first part of this thesis introduces the company's production program and material standards. After which the relating processes are analyzed and by using theoretical approaches, measures to ensure savings are then proposed. The final part offers a summary of the benefits of the proposed solutions.

Syfte – Syftet med studien är att utforma en arbetsprocess för att öka lagerservicenivå genom reducering av effekterna från betydande och osäkra anskaffningsledtider i kombination med begränsad efterfrågehistorik med beaktning på lagerkostnader. För att uppnå syftet och skapa en arbetsprocess har syftet brutits ned i tre frågeställningar: [1] Hur kan betydande och osäkra anskaffningsledtider beaktas för att uppnå en ökad lagerservicenivå? [2] Hur kan begränsad efterfrågehistorik beaktas för att uppnå en ökad lagerservicenivå? [3] Hur kan en artikelklassificering med beaktning på lagerkostnader, efterfrågehistorik och efterfrågevariation möjliggöra dimensionering av buffertar för att uppnå en ökad lagerservicenivå? Metod – Studien utfördes som en fallstudie på ett företag verksamt inom elfordons industrin. Både kvalitativa och kvantitativa datainsamlingstekniker användes. Datainsamlingstekniker som ansågs vara relevanta för studien var dokumentstudier, intervjuer och observationer. Resultat – Arbetsprocessen fås fram utifrån de tre frågeställningarna. Betydande och osäkra anskaffningsledtider kunde beaktas genom att granska en verksamhets försörjningskedja genom en värdeflödesanalys. Kunde anskaffningsledtiden kortas ner så skulle ett framtida önskat tillstånd bearbetas fram. Kunde anskaffningsledtiderna ej kortas ner föreslogs det att implementera säkerhetstid. För att beakta en verksamhets begränsade efterfrågehistorik identifierades det olika tillvägagångssätt genom att granska efterfrågetypen. Vid betingad efterfrågan föreslogs det att använda sig av prognoser. Vid icke-betingad efterfrågan vid små volymer eller vid nya artiklar föreslogs det att mänsklig bedömning används. För övrig icke-betingad efterfrågan rekommenderas en kombination av mänskligt omdöme och prognoser. Vidare för all efterfrågan rekommenderades införandet av säkerhetslager. Dessa buffertars dimensionering baseras på artikelklasskombinationen från ABC-, XYZ- och kostnadsklassificeringen utifrån en MUSIC 3D analys. Utifrån detta presenterar även en rekommenderad handlingsplan för de samtliga klasserna. Implikationer – Studien resulterar i en arbetsprocess som kan användas för andra verksamheter med betydande och osäkra anskaffningsledtider i kombination med begränsad efterfrågehistorik för att öka lagerservicenivån med beaktning till lagerkostnader. Arbetsprocessen ger en vägledning om vilka faktorer som bör beaktas för att möjliggöra en ökad lagerservicenivå. Begränsningar och fortsatt forskning – Studien är begränsad till att arbetsprocessen som tagits fram teoretiskt kan påvisa ökad lagerservicenivå för företag med betydande och osäkra anskaffningsledtider samt begränsad efterfrågehistorik. Studien berör heller inte uträkningar för att bestämma exakta nivåer av säkerhetslager. Den lagerkostnad som beaktas hos fallföretaget är inköpspris. Studien är avgränsad till att implementeras på företag med lagerhållande verksamhet. För fortsatt forskning skulle arbetsprocessen kunna testas på flera företag. / Purpose – The purpose of the study is to design a work process to increase inventory service levels by reducing the effects of significant and uncertain procurement lead times in combination with limited demand history and at the same time regarding inventory costs. To achieve the purpose and create a work process, the purpose is divided into three research questions: [1] How can significant and uncertain procurement lead times be considered to achieve an increased service level? [2] How can limited demand history be considered to achieve an increased service level? [3] How can an item classification considering inventory costs, demand history and demand variation enable dimensioning of buffers to achieve an increased service level? Method – The study was conducted as a case study of a company active in the electric vehicle industry. Both qualitative and quantitative data collection techniques were used. Data collection methods that were considered relevant for studies were document studies, interviews, and observations. Findings – The work process is developed from the three research questions. Significant and uncertain procurement lead times could be considered by examining a business supply chain through a value flow analysis. If the procurement lead time could be shortened, a future state proposition is recommended. If it could not be shortened, it was proposed to implement safety time. To consider a business limited demand history, different approaches were identified by examining the type of demand. In the event of derived demand, it was suggested to use forecasts. In the case of non-derived demand for small volumes or for new items, human judgment is recommended. For other non-derived demand, a combination of human judgment and forecasts is recommended. Safety stocks are recommended for all types of demand. The dimensioning of buffers depends on the class combination from the MUSIC 3D in the ABC-, XYZ- and cost-classification which provides a suggested action plan. Implications – The study results in a work process that can be used for other businesses with significant and uncertain procurement lead times in combination with a limited demand history to increase the service level considering inventory costs. The work process provides guidance on which factors that should be considered to enable an increased service level. Limitations – The study is limited to demonstrate that the work process can theoretically increase the service level. The study also does not make calculations for setting exact levels of safety stocks. The warehousing cost is in the case company considered as the purchase price of goods. The study is limited to being implemented in companies with warehousing operations. For further research, the work process could be tested at several companies.