CONCLUSIONS

6.1.1 RQ1: What is the current sourcing plan in SMEs purchasing department? Strategic purchasing

First conclusion about the current sourcing plan of SMEs is that the investigated SMEs lacked an implemented, documented or developed strategic purchasing strategy. It is also the main issue of the sourcing plan since it is an integrated part of the overall purchasing strategy. Because of limited resources SMEs goals are fairly short-term and profit-oriented.

Strategic Sourcing

Hybrid sourcing was the most common approach use to manage the supply base. Hybrid strategy provide both advantages of single and multi sourcing such as less dependency on suppliers but at the same time developed partnership with strategic suppliers (Faes and Matthyssens, 2009). However the hybrid strategy could be developed and focused at strategically selecting suppliers and components that require multi and single sourcing. One of the main functions of strategic sourcing is rebuilding and evaluating the supply base. The supply base is especially vital for SMEs since they have much to gain from external expertise and knowledge, that they don´t have the capacity, resources and knowledge to focus on themselves.

All investigated SMEs use both local and global sourcing. The most common reason for global sourcing is not cost cutting but gaining deeper insight to new markets and access to new and developed technology. Local sourcing was most preferred because of the flexibility and where strategic suppliers are preferably located.

The conclusion of the analysis is that none of the SMEs use a clear partnership or competitive bidding sourcing approach. They do value relationships and use competitive bidding to certain

101 extent when searching for new suppliers. Further it could be concluded that purchasing is seen only from an operational perspective in the SMEs and not a central part of the organizational structure. Evaluation of suppliers could be a strategic activity, depending on the purpose. During evaluation focus was on what suppliers did wrong and the reason for changing supplier was due to failure to live up to buyers demands. The determining of the strategic level of partnership can be viewed from purchasing managers perspective; their goals, strategy's and objectives will also determine what competitive advantages that possibly can be gained. Supplier attributes valued by SMEs are; delivery performance, cost reduction, feedback, impact on manufacturing, quality, reclamation, price, and technological service. Most of these actives are seen on an operational or tactical purchasing level.

Information technology

There is no developed IT strategy, which is in line with an undeveloped purchasing strategy. All investigated SMEs used ERP system, even if it is considered resource demanding. The ERP systems are integrated in the organizations and are seen as a central part in the purchasing departments. Internet is the most electronic tool in interaction with suppliers. The SMEs limited resources make it impossible to invest in extensive technical IT solutions in corporation with suppliers. E-commerce is used mainly through e- mail and is not used to its full potential that it can with today´s technology. If implemented correct it could mean less resources needed for the order and communication with suppliers, by streamlining much of the manual work currently used.

6.1.2 RQ2: What are SMEs possible solutions for strategic sourcing? Strategic purchasing

First step of implementing strategic sourcing is to develop a structured purchasing strategy on a management level based on their operational and tactical strategies. Incorporate it in the overall corporate strategy and implement the strategy within those departments and employees working on operational level with purchasing. IT is proven by theory to be a source of competitive advantage if implemented correctly. Incorporate IT in the purchasing strategy, both on the operational level of orders and inventory and on a strategic level such as communication, information sharing, management and collaboration purposes. By developing a purchasing strategy the company can integrate the strategic purchasing approach in all

102 departments and human resources allowing the organization to work towards the same goals, both long- and short-term

Strategic sourcing

A possible solution to ensure a competitive strong supply base is making the evaluation an ongoing project instead of a time to time event, as it currently was for most of the SMEs. The criteria for evaluation should also be based on strategic activities , just as much as it is for operational activities to ensure competitive advantage. Strategic activities are such as; quality management, capability evaluation, supplier development, relationship management and technology evaluation. The supply base is a function in strategic sourcing which should incorporate other department’s needs as well.

The negative aspects of global sourcing was more pushing than local sourcing and lead time was the main aspect all SMEs discussed. Single sourcing in combination with global sourcing might allow them to order higher volume from global suppliers. The effort will involve management since reducing the supply base affect many in the organization and could mean a long process. From a perspective of strategic sourcing it could be said that their local sourcing plan is strategic since is allows communication, easy management and most of the strategic suppliers are local. However the close distance, long-term relationship and flexibility could be used for more purpose than cost cutting, shorter lead time and easy access to be strategic in the objectives. It is with these suppliers where critical components and strategic suppliers can become a part of a stronger partnership.

In considering what approach to develop in the purchasing and sourcing strategy one could be development of partnership since the focus is already on long-term relationships. Partnership can make suppliers become a part of the internal processes. To compete with Larger Enterpirces, SMEs have to develop cooperative partnership with their suppliers, especially strategic suppliers. Adopting sourcing strategies in a more cooperative manner is a necessity. It is not only suppliers that can be integrated. Even if purchasing department in all SMEs have collaboration with other departments, a stronger integration can be made with production, R&D, marketing and incorporating suppliers in the organization on a strategic management level. A possible solution for the supplier errors is to work towards supplier development efforts to enhance competitiveness. Higher focus should be on enhancing supplies capabilities

103 and long-term quality output. This is accomplished by thinking and applying strategic focus in the decision making and evaluation. It cannot be denied that the operational values generated by purchasing are vital for a company. The use of strategic sourcing and supplier development can enhance the operational aspects with strategic objectives of partnership.

Information technology

First of all IT has to be implemented in the sourcing strategy and clear objectives need to be stated. The objectives should describe the demanded functions and long-term goals of a technology implementation in purchasing. Technology is an important part of strategic sourcing plan and needs to be incorporated in the decision making of sourcing. Resources are limited when it comes to information technology and SMEs and strategic used e-commerce could provide features an ERP is too expensive to provide.

6.1.3 RQ3: How can strategic sourcing help to increase competitive advantages for SMEs?

Strategic purchasing

Competitive advantage is strengthen by development of strategy that shift SMEs from an operational and tactical level to a strategic level of purchasing management. Development of a purchasing strategy incorporates sourcing planning. If the sourcing plan is made with objectives, goals and values it will give a clearer view of suppliers that fit the company and their market demands making the supply base competitive stronger. Implementing IT in the purchasing strategy provides a tool for the purchasing function to reach the strategies, objectives and improve performance. It can both utilize and enhance the operational level of the strategy and the inter-organizational communications and processes leading to enhanced operational performance. The strategic focus should lie in value analyses, foster closer relationships with strategic suppliers and constant work with supply base.

Strategic sourcing

Competitive advantages that might be gained from evaluation and reduction of supply base is adoption to market and internal organizational changes to keep or gain competitiveness through development and growth. By using single sourcing for global suppliers and focus more orders on one supplier, SMEs can still get the wanted expertise from other markets but also gain cost cutting. Another advantage is closer relationship with suppliers located

104 globally, enabling easier communication and relationship management. Negotiating contracts with the local suppliers can lead to benefits for SMEs. Contract manufacturing can be an area for manufacturing SMEs to consider for improving business performance, business operations and to help build partnerships with suppliers.

Main competitive advantages generated for SMEs by a partnership approach is joint resources and network sourcing, sharing of problems and faster technological development. Strategic partnership influence the operational performance in a positive way; valuables such as cost, delivery performance, transaction and quality. Suppliers should be regarded as a competitive advantage from an inter-organizational perspective and a part of the SMEs network to gain access to new markets, resources and strengthen the overall competitive position of the company. Working with supplier development for SMEs means advantages through capability development. Collaborative relationships with external parties are a source of innovation and differentiation on markets. Supplier development and strategic sourcing plan can enhance operational performance and management control is achieved.

Information technology

Use of Internet in strategic sourcing may generate advantages by joint resources, insight in supplier’s organization and make the implementation of network sourcing effective, saving resources. Using a common database or communication channel allow the buyer and supplier to have a more streamlined collaboration, where less human resources is needed for both operational and strategic interaction. The process is long and implementation in the organization can cost more than the use of the technology, that is why long-term goal has to be defined, to make sure that the wanted advantages is fulfilled.

6.1.4 Summary of conclusions

The conclusions are based on theoretical assumptions where SMEs can gain competitive advantages by implementing a strategic thinking in the organization. The applied theory is not as simple and uncomplicated in reality. The process of implementing strategic purchasing is long and a constant project that preferably has to penetrate the whole organization, especially management level. The process of implementing a strategic plan for SMEs can be seen as relatively difficult, due to the limiting factors mentioned before. The theories are more appropriate for larger enterprises but there are some aspects of the strategic sourcing which

105 SMEs can apply to enhance their competitiveness. Information technology is one of these aspects. It has long been considered an area where SMEs can’t develop since they lack the resources but technology is constantly under development, because of it there are more realistic options for SMEs to adopt to their sourcing plan and an area where managers should follow the market changes. To keep in mind is that supplier’s performance matter, but it is the resources of suppliers that are the main competitive advantage and it is in this area where supplier development and sourcing strategies should focus.

6.2 Managerial Implications

Based on the analysis, conclusions and current status of the SMEs, the following steps are the realistic recommendations for the SMEs to begin pursuing strategic sourcing:

 Develop a purchasing strategy, with manager’s involvement, and that all employees have access and knowledge of. It should contain of both long- and short-term goals for purchasing. Connect the IT strategy to both purchasing strategy and competitive strategy.

 Develop the hybrid strategy in the overall purchasing strategy to utilize the common advantages of both multi and single sourcing.

 Conduct a deep evaluation of the supply base, based on suppliers strategic activities and how these can improve the operational performance.

 Develop a closer partnership with strategic suppliers and evolve and integrate suppliers in the internal network organization. Technology that can be used is video enabling technologies to increase partnership between buyer and suppliers.

 Investigate the possibilities of how E-commerce can help in information sharing and easier communication with global suppliers, especially the global suppliers SMEs are dependent on.

 IT should support the operational everyday work to fulfill the goal-setting of the strategic sourcing plans and partnership management.

 Investigate new technologies, such as e-commerce, that might fit your organizations purchasing needs.

106 6.3 Academic Implications

Most theory about strategic sourcing is adapted to large enterprises point of view, leading to a more critical analysis in this thesis of the claimed advantages. All theory's demand resources and are long-term processes if implemented. This means that not all the steps and possible advantages with strategic approach are realistic for SMEs to achieve. The research confirmed that changes in the purchasing strategy takes place irregularly and in different directions and managers can developed better means to plan the moves.

The study has a deductive approach, meaning that the purpose is to test the current theory to reject or confirm it. The gathered empirical and theory was connected and discussed in an analysis where a suitable method was chosen to find errors in sourcing of SMEs. The analysis resulted in a strengthen of the gathered theory by the study. Thus, theoretical contributions were to demonstrate the use of strategic approach for SMEs when striving for stronger competitiveness.

6.4 Limitations

The main constraint was time limitation and resource limitations for the research, only SMEs in Kronobergslän was used in the investigation. Another limitation in the research was the qualitative approach. Multiple case studies were performed meaning data was only conducted from five case companies within the area. SMEs in Ljungby tended to show similar approaches and use suppliers in the local area, perhaps in a higher distinct than SMEs in the rest of Sweden who don’t have the same industrial market close located. Suppliers and product categorys are indivuduall in their performance and needs. Making it a obstacle when generalizing theories to the entire supply base. There were common features detected but by going deeper into each product category might revil other aspects.