Supplier Integration at Holtab

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Supplier Integration at Holtab

A Case Study on the dyadic relation of an

Electrical Substation Producer and its supplier in Sweden

Jean Denis Galibert (870611) Md. Maruf Hossan Chowdhury(780621)

Florian Singer (830330) Fawad Rehan (810206)

Tutors: Petra Andersson Åsa Gustafsson Examiner: Helena Forslund

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Summary

Master Thesis – Advanced Level, Business Process and Supply Chain Management,

School of Management and Economics at Växjö University, 15 ECTS Credits, FE 3054, VT 2009

Authors: Jean-Denis Galibert, Md. Maruf Hossan Chowdhury, Florian Singer and Fawad Rehan.

Tutor: Petra Andersson & Åsa Gustafsson

Examiner: Helena Forslund

Title

“Supplier integration at Holtab: A Case Study on the dyadic relation of an Electrical substation producer and its supplier in Sweden”

Background

In order to create value and to reduce cost companies have outsourced activities and therefore extended their supply chain. However, a wrong management can leads to major drawbacks such as delay on delivery. Ensuring the on time delivery is one of the serious concerns to meet the customer demand and it shall not be neglected. Supply chain integration facilitates members in the supply chain to be

competitive by meeting the customer demands on time and in full.

Purpose

The aim of this study is to propose supplier integration in order to solve the problem of on time delivery in the dyadic relation between the case company Holtab and its supplier MPM. Therefore, the study focuses on identifying the root causes of the problem and proposing some feasible solutions to the problem that lead both companies toward integration. Furthermore, out of these solutions this thesis discusses relevant degrees of collaboration for the companies.

Method

This thesis is a theoretical and empirical study based on a qualitative research method. A case study method is followed in this regard as it deals with the specific problem of a company. Scientific articles,

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literatures and books are used for the theoretical framework in line with the research objective. Data is mostly qualitative and collected mainly, by depth interviews. Data is analyzed comparing the inputs of interview with the literature. This is carried out through a deductive approach. Finally, it can be told that a positivistic approach is followed for the study.

Findings and conclusion

The findings of study transpire some wastes and non value added activities in the value stream of substation. From these wastes two main root causes have been identified: lack of information sharing and wrong inventory information. In order to address the problems of Holtab in an appropriate way, a number of solutions seem feasible based on different time frame.

At first, as a minimum requirement, communication development is needed to be improved to share information regarding ordered substations and the related material requirements, in a time frame of less than twelve months. A collaborative planning, forecasting and replenishment are suggested in a time frame of 12-24 months. In line with this, transfer of decision rights regarding replenishment to MPM for implementing VMI are focused and real- time ERP-to-ERP information sharing for collaborative

forecasting is also suggested. Further, as a proactive step collaborative resource sharing, risk sharing, and joint performance measurement are suggested for a longer time frame in future.

Further research

For further research it could be interesting to apply the steps followed to solve the problem in this thesis in different cases. First it would be worthwhile to know if these steps could be used to analyze the relationship between Holtab and other suppliers for some other components. Then it could also be interesting to know if the application of similar ways in other companies would help them to solve their problems.

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Acknowledgements

Writing a master thesis is a long process that requires time, energy and deep understanding of the research questions to solve. To be able to conduct this thesis several persons brought their help and we would like to thank them.

First, we would like to thank our case company, Holtab, which has supported us at every step of our work. Inside this company, we would like to address a special gratitude toward Patrik Persson, Holtab managing director, who took the time to answer to our questions and was always available. We would also like to thank Roger Kidell, Holtab Supply Chain Manager and Roger Möller, MPM Manager. Both of them share with us valuable information through their interviews.

Then, we would like to thank our tutors, Åsa Gustafsson and Petra Andersson. They gave us recommendations and guidance when we needed it the most. Their supports help us to define our subject and make ourselves clear for the reader.

Finally, we would like to thank Helena Forslund, our examiner. She gave us extensive feedback and advices during the seminar enabling us to improve our work constantly. We would also like to thank our opposition group who gave us useful comment and helped us to improve the thesis week after weeks.

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Definitions of Terms

CPFR: Collaborative Planning, Forecasting and Replenishment CRM: Customer Relationship Management

EDI: Electronic Data Interchange ERP: Enterprise Resource Planning MRP: Materials Requirements Planning POS: Point Of Sales

RQ: Research Questions SCI: Supply Chain Integration SCM: Supply Chain Management SCP: Supply Chain Planning VMI: Vendor Managed Inventory VSM: Value Stream Mapping XML: Extensible Markup Language

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Table of Figures

FIGURE 1: PROBLEMSAND RESEARCH AREAS...3

FIGURE 2: TIMEPLANFORPRESENTMASTERTHESIS...5

FIGURE 3: DISPOSITIONOFTHEWORK...6

FIGURE 4: COMPARISON POSITIVISTICAND HERMENEUTIC PARADGMS (GUMMESSON, 2000, PP.178)...9

FIGURE 5: QUALITATIVEAND QUANTITATIVE RESEARCH (NEUMANN, 2003)...11

FIGURE 6: TYPEOF ANALYSIS (YIN, 2003, PP.5)...13

FIGURE 7: BASIC TYPESOF DESIGNFOR CASE STUDIES (YIN 2003, PP. 40)...14

FIGURE 8: INFORMATIONABOUTDATACOLLECTION...17

FIGURE 9: SUMMARYOF METHODOLOGY...19

FIGURE 10: EXAMPLEOFACURRENTSTATEMAP (LOVELLE, J. 2001, PP.3)...22

FIGURE 11: EXAMPLEOFAFUTURESTATEMAP (LOVELLE, J. 2001, PP. 5)...23

FIGURE 12: EXAMPLEOFAN ISHIKAWA DIAGRAM...24

FIGURE 13: DIMENSIONSOF SUPPLY CHAIN INTEGRATION, LEE, 2000...27

FIGURE 14: INFORMATION INTEGRATION (BAGCHIAND LARSEN, 2002)...29

FIGURE 15: ORGANIZATIONAL INTEGRATION (BAGCHIAND LARSEN, 2002)...32

FIGURE 16: ADAPTEDFROM FLIEDNER (2003, PP.17)...33

FIGURE 17: ACTIVITIESINTHE CPFR PROCESSES (DANESE, 2007, PP. 182)...34

FIGURE 18: A COMMONINTER-ORGANIZATIONPROCESSFORCROSS-COMPANYMATERIALFLOWS (JONSSON, 2008 PP. 373)...36

FIGURE 19: ILLUSTRATIONOFTHEPRINCIPLEOF VMI (JONSSON, 2008, PP. 376)...37

FIGURE 20: PUSH-PULLSUPPLYCHAINS (SIMCHI-LEVIET. AL, 2003, PP. 123)...39

FIGURE 21: CONFIGURATIONFOR COLLABORATION (HOLWEGET. AL 2005, PP. 172)...40

FIGURE 22: CURRENT STATE MAP...44

FIGURE 23:TABLEFOR ASSEMBLYSTEPS (SOURCE, HOLTAB)...47

FIGURE 24: LOGISTICS DEPARTMENT INFORMATION FLOW...49

FIGURE 25: COMPARATIVEORDERSTOCKOF HOLTAB: SOURCE, HOLTAB...50

FIGURE 26: CAPACITY PLANNING TABLE, SOURCE: HOLTAB...53

FIGURE 27: PROGRESSPLANNINGBASEDONCAPACITY: SOURCE, HOLTAB...54

FIGURE 28: ARRANGEMENTOF STOCKOFSTANDARDIZED PEX CABLES...56

FIGURE 29: STOCK-FILLINGPROCESSFORSTANDARDIZED PEX CABLES...57

FIGURE 30: ORDERPROCESSING...58

FIGURE 31: ISHIKAWADIAGRAMFORCUSTOMIZED PEX LEADTIME...62

FIGURE 32: WASTE SUMMARY...63

FIGURE 33: RELATIONOFROOTCAUSES...64

FIGURE 34: FRAMEWORKFORANALYSIS...66

FIGURE 35: TIME HORIZONWITHSPECIFICSOLUTIONS...69

FIGURE 36: MINIMUM REQUIREMENTS...72

FIGURE 37: VMI RELATIONBETWEEN HOLTABAND MPM...77

FIGURE 38: LONG-TERMPLAN...78

FIGURE 39: PRO-ACTIVE PLAN...80

FIGURE 40: SUMMARYOFSOLUTIONS...81

Figure 41: Basic Supply Chain Configurations for Collaborations (Holweg et. al , 2005, pp. 172)...83

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Master Thesis: Holtab AB Introduction

Chapter One: Introduction 1.1 Background

“A truly integrated supply chain does more than reducing costs. It also creates value…“ (Lee, 2000, pp.

30). Increasing the level of integration among the members of a supply chain has become a necessity for improving the effectiveness. Such cooperative behavior of firms provide rapid access to the required information, more sensitivity towards the needs of the customers, reduce order cycle time, accelerate response times and reduce cost (Sezen, 2008, Lin et. al, 2002).

Due to aspects of efficiency and cost reduction firms have rethought their own borders and have now to consider how to manage and coordinate the accruing networks (Tompkins et. al, 2005, pp. 13). This can be seen as task of supply chain management, which handles the variety of emerging relations, but does also more. “…there is little doubt that the success of the Japanese manufacturing model is largely attributed to their collaborative supply chain approach”. (Holweg et. al, 2005, pp. 171)

On the other hand the proceeding of processes in a wrong management of the chains can lead to drawbacks as for example loss of control of activity, reporting and accounting problems as mentioned by Schniederjans et. al (2005). Due to these drawbacks a high integration is seen critical, wherefore some authors speak of tendencies to disintegration. For example Bagchi et. al (2006) discuss the different results of studies regarding the appropriate degree of integration. It depends on the area of application and the specific firm or industry if a more or less integrated solution is the appropriate answer. It also depends on the considered factors of the studies and applied concepts, wherefore Holweg et. al (2005) criticize that concepts in the area of supply chain management are not well defined, which leads to problems in suggesting solutions on a more general level, because different persons have different perspectives regarding the tools.

While managing the supply chain on time delivery of a product is one crucial point. To ensure the on- time delivery it is important to control and monitor that one's processes do not include any non value added activities. An efficient way to monitor these activities at different stages is by using tools such as Value Stream Mapping. As Womack and Jones (2000) explain Value Stream Mapping is a tool that enables to visualize and summarize flows of information and materials in the value stream. It therefore

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enables to remove the non value added activities that are considered as waste and then visualize a better way to manage these flows.

New technologies, especially the use of web-technologies enable companies to collaborate closer, thus helping in a higher degree of integration. Using the actual technological possibilities displays a chance, but can also result in costly mistakes. (Tompkins et. al, 2005, pp. 17) Approaches like vendor managed inventories or collaborative production planning are now possible not only for big companies but also for small firms due to the technological development in recent years. These approaches depict a high integration of initial external processes, which can lead to close cross-linked and efficient processes with the ability to constrain on core competencies in one’s own four walls. By not (re-) considering their processes in that way, companies can be “… beaten by their broken supply chains” (Tompkins, et. al, 2005).

A higher degree of integration may help to avoid drawbacks and problems, especially after once decided for an external partner. Building highly integrated solutions is not simple and also contains danger. But companies “… who ignore the forces of supply chain integration will only see the gap between them and the leaders widen” (Lee, 2000).

1.2 Problem discussion

One characteristic of Holtab’s self-conception is the awareness and importance of relations with their suppliers in order to meet their customer’s requirements. That is why it tries to create, maintain and develop long term value laden relationship with both suppliers and customers. In other words Holtab has in general a good understanding of its processes out of the view of supply chain management.

Currently Holtab is facing a problem with one of its suppliers, MPM. One component delivered by MPM is the PEX cables which connect transformers inside of a substation in order to supply the electricity between high voltage and medium voltage. These cables have to be adjusted depending on the type of substation; therefore the cables which Holtab face problems are considered as customized components.

The PEX cable is not a very expensive component, but the assembling of the correct cable is important for maintaining a high quality. With the wrong length or wrong bending, the life expectancy of a substation may decrease about 10 – 15 years or in the worst case it can even destroy the substation.

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Furthermore, the assembling of a customized PEX cable constitute one of the final work steps, because to determine the suitable length and bending of the cable main parts of the substation must be finished.

As Holtab must wait till the last moments to know the length of the customized cable, which they request from MPM. In the opposite to the make to order approach regarding customized cable, standardized ones are made to stock. Nonetheless this late knowledge of the specificity of the cable also means that MPM has a shortage of time to produce the cables because they have short time for delivering the orders to customer.

Figure 1: Problems and Research Areas

The on-time availability of customized PEX cables can therefore be seen as main problem in the relation of Holtab to its supplier MPM. Indeed the current lead time is longer than the forecasted one. In the order to delivery process of PEX cable some activities seem to be time consuming and redundant therefore increase the lead time and thus prevent from ensuring the on time delivery of PEX cables.

One of the problems behind the on time unavailability of cable lies in the order process of PEX cables.

While the data at Holtab regarding quantity demand by customers, purchase of material, requested time of delivery and confirmation of the supplier regarding this time and quantity is recorded in their ERP system, the order process itself is still taken out via fax or email. Regarding customized cables the time frame is short and in this short time frame any delay in the order to delivery process is really critical. To regard this problem in a more appropriate way the background shall be broaden to the consideration of reducing of the lead time, wherefore the order process depicts one part.

The fulfillment of orders regarding standardized cables can be seen as less critical due to the longer order cycle time. Problems emerge if the production of standardized cables narrows the capacity of

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MPM’s production. At present there is an information gap between the two regarding demand and inventory at Holtab. So, information about estimated demand, production planning and inventory of standard cable is helpful to MPM to set its plan for customized cable and make the production capacity free for it. This sort of advance information can reduce uncertainty of requirement. Otherwise a last- minute order of a customized cable can maybe not be fulfilled because of a fully stretched capacity of MPM. This means, that the problem Holtab is facing regarding customized PEX cables, has to be considered related to the treatment of standardized cables.

Problems are also created due to the existing inventory management system. Inventory is calculated weekly by a person manually. Then he informs logistics department about the inventory status and recorded in the ERP. After the calculation of inventory logistics department can place order to supplier about material requirement. So, the waiting time for inventory status information also consumes time in the order process. They need to wait for manual counting each week because real inventory in warehouse differ from ERP record. It happens when the cables are used in production; the information about withdrawal of cables is not recorded in ERP in time.

1.3 Research questions

How can Holtab ensure the on-time availability of customized PEX cables and which degree of integration seems to be appropriate in this context?

To be able to answer to this question, a number of issues have to be considered due to the complexity and several cross-linked problems. Therefore the following sub-questions shall help to give proposals in a structured and appropriate way:

1. What wastes and root causes can be identified for the problems with PEX cable?

2. In front of these problems which solution can be suggested for the relation between Holtab and MPM?

3. Which statements regarding the degrees of supplier integration can be deduced out of these solutions?

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1.4 Purpose

The main purpose of this study is to support Holtab in solving their problems of ensuring on time availability of PEX cables during assembly of substation. Therefore, one of the aims of present thesis is to analyze and illustrate the root causes and problems and to focus on the aspects regarding the relation between Holtab and MPM. Consequently a comprehensive analysis of collected data in relation to theory shall help to illuminate the problems. The final objective of this paper is to be able to propose solutions for the specific questions and to connect them to an overall proposal for Holtab regarding their relation with MPM.

1.5 Time-Table

The following time-table shall help to give an understanding, which time has been planned in proceeding single activities. This plan has been used not for exact deadlines, but as guidance which activities are planned for the, for example, next week. Mentionable is the pervading work on theory, empirical data, analysis and report writing, wherefore the study of theory has been used as starting point, which tools shall be included, as well as basis for the suggestion of solutions.

Figure 2: Time plan for present master thesis.

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Task W 14 W 15 W 16 W 17 W 18 W 19 W 20 W 21 W 22 W 23

General planning Problem

formulation Introduction &

Methodology Collection of empirical data

Study of theory

Analyzing and Report Writing Proofreading

Opposition &

seminars

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1.6 Disposition

Figure 3: Disposition of the work

The work is distinguished in the parts of Introduction, Methodology, Theory, Analysis and Conclusion which is usual in writing a master thesis. Main parts of this work are the value stream mapping (VSM), SC integration and collaboration configuration. In the above figure, different steps which are followed for solving Holtab problem are highlighted. These steps are done in the different chapters of the work.

In the introduction part, first the surroundings of the work and the specific problems are determined, which includes background and problem discussion, which then leads to the research questions and the objective or purpose of the current paper. In the methodology part the scientific perspectives of this paper shall be discussed and illustrated.

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In the first theoretical chapter the tools of VSM and the Ishikawa diagram are presented to give an understanding about how to use, read and implement them. Then in another theoretical chapter the supply chain integration is discussed. First with the presentation of three dimensions introduced by Lee (2000) and then the more specific areas of inventory management, forecasting, replenishment and production planning, shall be discussed, mainly through the concepts of VMI and CPFR.

The empirical part starts with the evaluation of relevant flows and processes of the observed company Holtab by the use of VSM. In the area of SC integration the main aspects of the relation between Holtab and its supplier MPM shall be presented. Finally the process to forecast, plan the production and also the replenishment of stocks are discussed in the empirical part.

The analysis combines the illustrated aspects of theory and empirics, wherefore the same structure is kept. Consequently it enables first to identify the waste and its root causes thanks to VSM while proposing a classification. Then it highlights the degree of integration that Holtab has with its supplier.

After taking into consideration the wastes analysis proposes solutions using CPFR concept for different degrees of integration with different time frames. Finally it links these solutions with the research questions discussing which degree of collaboration is the more appropriates for the companies.

Final thoughts, recommendations and a summary of the main results build up the conclusion of this work, which will mainly answer to the formulated research questions and try to give clues for further researches.

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This chapter constitutes an overview of the methodology which is used for the present thesis. It is segregated to some phases.

First, a

discussion of the scientific perspective, approach and strategies are presented. Then the chosen data sources are stated and explained.

Afterwards, the scientific credibility is described.

This chapter constitutes an overview of the methodology which is used for the present thesis. It is segregated to some phases.

First, a

discussion of the scientific perspective, approach and strategies are presented. Then the chosen data sources are stated and explained.

Afterwards, the scientific credibility is described.

Master Thesis: Holtab AB Research Methodology

Chapter Two: Research Methodology

2.1 Scientific Perspective

In the literature of research methodology two different scientific perspectives and paradigms for research papers are discussed: the positivism and the hermeneutics (Prasad, 2005, pp. 30). Different orientations towards research have been identified with the help of the term paradigm. Paradigm is a shared sense of ideologies, guidelines, ontological and epistemological assumptions for a group of scholars for conducting research under different paradigms (Prasad, 2005, pp.8).

Positivism is used by scientists who study a research question from an external point of view to solve specific problem areas. In positivistic perspective knowledge is accepted if it is achieved by means of measurement and objective identification. Here researchers apply statistical and mathematical tools, and the research approach is deductive in nature.

Whereas Hermeneutics is the opposite of the positivism, hermeneutic paradigm explains relationships through a more personal interpretative process and this interpretation is based on subjectivity.

Researchers concentrate on understanding and interpretation, data collection and analysis is qualitative rather than quantitative (Gummesson, 2000, pp. 177-178). The paper is basically following a positivistic paradigm although it is not following each and every trait of this paradigm.

This paper is based on clear objectivity with specific problem and research questions. Crucial for the methodology is the perspective we want to consider the problem. The task is not to implement or evaluate a specific tool or concept to a company, because of the nature of the illustrated problem.

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Holtab wants to get a solution for a specific problem, wherefore a comprehensive analysis around the problem is focused.

The logic behind scientific perspective for this thesis is shown by the following table:

Dimensions Positivistic Paradigm Hermeuntic Paradigm Context of our paper Purpose Research concentrates on description

and explanation.

Research concentrates on understanding and interpretation.

Research focuses on description, understanding and interpretation.

Area of study Well-defined, narrow studies. Narrow as well as total

studies (holistic view). Narrow and well defined Vantage point The vantage point is primarily

deductive; thought is governed by explicitly stated theories and hypotheses.

The vantage point is primarily inductive;

researcher's attention is less focused and is allowed to

"float" more widely.

Primarily deductive research.

Objectivity or subjectivity Researchers seek to maintain a clear distinction between facts and value judgments; search for objectivity.

Distinction between facts and value judgments is less clear, recognition of subjectivity.

We tried to maintain a clear distinction between facts and value judgment.

Use of approaches and pre- understanding

Researchers strive to use a consistently rational, verbal, and logical approach to their object of research.

Pre-understanding that often cannot be articulated in words or is not entirely conscious-tacit knowledge- takes on an important role.

We strived to use a consistently rational, verbal, and logical approach to our research object.

Data Statistical and mathematical

techniques for quantitative processing of data are central.

Data are primarily non- quantitative.

We mainly used non- quantitative data.

Researchers' position Researchers are detached – i.e. they maintain a distance between themselves and the object of research; take on the role of external observer.

Both distance and

involvement; researchers are actors who also want to experience what they are studying from the inside.

Non involvement and external role of observers.

Science or experience Distinction between science and personal experience.

Researchers accept influence from both science and personal experience; they use their personality as an instrument.

Its’ a scientific thesis; as personal experience and influence are avoided in study.

Personal influence and Emotionality

Researchers try to be emotionally neutral and make a clear distinction between reason and feeling.

Researchers allow both feelings and reason to govern their action.

The thesis was written emotionally neutral.

Figure 4: Comparison Positivistic and Hermeneutic Paradgms (Gummesson, 2000, pp.178)

Finally it is important to see that we are using a deductive approach starting with theories to relate the problems and analyzing the problem to come across a conclusion. We tried to investigate the research question from an external point. From these perspectives this study can be regarded as positivistic. On the other hand it is not following all the traits of positivistic paradigm because data collection and analysis are qualitative; interpretation is also based on theories.

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2.2 Scientific approach

For acquisition of new knowledge and to find solutions to the formulated problem there are generally two approaches used namely inductive reasoning and deductive reasoning. Inductive reasoning is a theory building process, starting with observations of specific instances, and seeking to establish generalizations about the phenomenon under investigation. Whereas deductive reasoning is a process to test theory which starts with an established theory or generalization before collecting empirical data and analyzing how the used theory applies to specific instances (Hyde, 2000).

Gummesson (2000, pp.63) illustrated two approaches of research namely the deductive and the inductive approach. The deductive approach starts with existing theories and tries to find a model relating to hypothesis and research question enabling the researcher to collect empirical data. Finally, the empirical data will be compared with the theoretical one for analysis to get a conclusion. As opposed the inductive approach starts with empirical data i.e. real world data and the researcher derives categories, concepts, patterns, models, and finally try to develop theories from the analysis of the real world data.

The deductive approach is chosen for this thesis as the relevant theories corresponding to the problem of the case company Holtab, are described. Afterwards, data is collected in line with the problem areas and the theoretical boundaries. Then the analysis shall provide approaches and solutions for the illustrated fields of problem after discussing relevant factors. Through the use of the theoretical frame the solutions to the problem consider different perspectives and therefore applicable to the company as well as give a general approach for others in the same situation.

To summarize, this paper is not developing a model or theory based on empirics, which would be related to the inductive approach, rather theories are used in a deductive manner to narrow down to an appropriate solution.

2.3 Scientific methodology

Researchers generally adopt two methods to collect and analyze data, namely qualitative and quantitative method (Malhotra and Birks, 2003, pp. 132).

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Qualitative research puts focus on understanding social and human problems. This is more subjective and narrative rather than object oriented and quantitative. It doesn’t focus on numbers and statistics.

This narrative-orientated approach is based on a complex and holistic picture which mainly gains information, feelings, thoughts and experiences through verbal communication (Gummesson, 2000, pp.2-4). To Malhotra and Birks (2003, pp.132) qualitative research refers an unstructured, primarily exploratory design based on small samples, intended to provide insight and understanding. Whereas Quantitative research seek to quantify data and typically apply some form of statistical analysis.

Quantitative approach is also an investigation of social or human problems. But this research is mostly based on testing theories and hypothesis with the help of numbers and statistical methods. This mathematical procedure assesses whether the general hypotheses and theories are true or not.

(Gummesson, 2000, pp.35)

A comprehensive difference between qualitative and quantitative research is shown below

Qualitative Research Quantitative Research

Identifies and explores meaning once the

researcher becomes immersed in the data.

Test hypothesis that the researcher begins with.

Concepts are in the form of themes, motives, generalizations, and taxonomies.

Concepts are in the form of distinct variables.

Measures are created in ad hoc manner and are often specific to the individual setting or researcher.

Measures are systematically created before data collection and are standardized.

Data are in the form of words and images from documents, observations, and transcripts.

Data are in the form of numbers from precise measurement.

Theory can be causal or non-causal and is often inductive.

Theory is largely causal and is deductive.

Research procedures are particular, and replication is very rare.

Procedures are standard, and replication is assumed.

Analysis proceeds by extracting themes or generalizations from evidence and organizing data to present a coherent, consistent picture.

Analysis proceeds by using statistics, tables, or charts and discussing how what they show relates to hypotheses.

Figure 5: Qualitative and Quantitative Research (Neumann, 2003)

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This thesis mainly uses qualitative research methodology since it is investigating the problem of one company, not using statistical data analysis tools and not based on larger sample size to test hypothesis rather it's using a qualitative approach for data collection which is mentioned in data collection part in detail. Through discussion with decision makers of the company and responsible persons at the stages of the observed problems the problem is visualized and deepened through subsequent depth interview.

This method is used to gain appropriate in-depth information regarding the occurring problems. This shall help to investigate instead of just giving predetermined options to choose between. It also enables to explore and identify factors affecting the critical processes, to identify the root causes of problems and to create an understanding of how the company operates and how to solve those as stated by Neumann (2003), an important trait of qualitative research. The data in this thesis is not quantitative rather mostly descriptive i.e. in the form of words and images and diagrams. Though in line with the occurring problem of the company, some numerical data have been collected but they are not analyzed by using statistical tools to test specific hypothesis. As for example some numeric data regarding inventory, production planning, and time at different stages of value streams is collected and it is used only to identify the problems. From these arguments it can be told that qualitative approach is used in this thesis.

2.4 Scientific research strategy

To write a master thesis on a topic the author needs

to have a close track to scientific strategy to be used in the study. The researcher needs to consider whether he/she is doing an experiment, a survey, a history, a case study or an analysis of archival records by a careful attention and investigation to three conditions namely: form of research question, extent of control of behavioral events, and the degree of focus on contemporary events researchers can assign the appropriate scientific research strategy to their study (Yin, 2003, pp. 5). The relation between five research strategies and the three conditions as mentioned above can be shown by the figure

Strategy Form of research Requires Control of

Behavioral Events?

Focuses on Contemporary Events?

Experiment how, why? Yes Yes

Survey who, what, where, how many, how much?

No Yes

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Archival analysis who, what, where, how many, how much?

No Yes/No

History how, why? No No

Case Study how, why? No Yes

Figure 6: Type of Analysis (Yin, 2003, pp.5)

Regarding study, in general there are different kinds of questions such as “who”, “what”, “where”, “how”,

“why” and “when”. In this thesis we tried to answer the questions “what”, “how”, “why” and “where” in order to identify the root causes and factors influencing the problem of PEX cable in time supply, how this problem can be solved and why these methods are suggested for the problem. Thus we can tell that surveys and archival analysis strategy are not used. The next step is to check if the authors are able to manipulate directly or indirectly the relevant behaviors and practices within the researched companies.

In this case the authors acted as external observers and not as the subject nor as an integral part of the system. The authors just collected data rather than playing any role, which did not influence the companies’ existing practices, behavioral patterns and performances in any way. Thus, the experiment strategy can be eliminated. Finally, it is to corroborate whether the thesis deals with contemporary events, as opposed to historical ones. The answer is contemporary events because this study deals with a company problem in contemporary years. Eisenhardt (1989) stated that the case study method is a research of a specific object or phenomenon. We are seeking to answer to questions like what, how and why to solve the problem a specific company in contemporary years with the growth of demand and sales. From these considerations it can be affirmed that it’s a case study.

As it is identified that this research is a type of case study, further question arises is what type of case study we are going to conduct.

2.5 Case study approach

According to Yin (2003, pp. 39), following are the four types of case study designs as shown in the table below. According to Yin (2003, pp. 40), a single case study represents an extreme case or a unique case whereas a multiple case study requires extensive resources and time beyond the means of students. An embedded case study is one in which there are more than one unit of analysis, i-e subunits.

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Figure 7: Basic Types of Design for Case Studies (Yin 2003, pp. 40)

This occurs when, within a single case, attention is also given to a subunit or subunits. The subunits can add opportunities for extensive analysis, enhancing the insights into the single case. On the other hand, a holistic design is advantageous when no logical subunits can be identified or when the relevant theory underlying the case study is itself of a holistic nature. This global approach can allow an investigator to avoid examining any specific phenomenon in operational detail. Thus, the entire case study may be conducted at an abstract level, lacking any clear measures or data.

Further, a problem with the holistic design is that the entire nature of the case study may shift, unbeknownst to the researcher, during the course of the study. The initial study questions may have reflected one orientation, but as the case proceeds, a different orientation may emerge, and the evidence begins to address different research questions. Exact situation was faced by researchers during this research.

This thesis revolves around solving Holtab's late delivery problem of PEX cables. The study required analysis from different angles, from supplier relations to internal processes. Therefore, a holistic

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approach was taken by the researchers. And because the study is not targeting any specific solution, it was difficult to go in operational detail of the different solutions. Therefore, practical application of the solutions would require further in-depth operational-level study of each solution. Therefore, according to the researchers, the present case falls in the single study holistic dimension. As the study involves two firms, Holtab and its supplier MPM, the focus is on both thus making it a dyadic study in nature also.

2.6 Data collection

Data collection is a salient part to conduct a scientific research. Careful attention needs to be paid to collect data. Researchers need to consider the reliability of the sources of data to ensure quality of data.

It also needs skill to collect data so that the purpose of research can be served by the data collected. It is also important that all data are not needed and collected data shall be in line with the research objective and the research questions (Aaker and Day,1990, pp.97; Yin, 2003, pp. 57). There are different sources of data. Most of the authors discuss two sources in general namely: primary sources or empirical data and secondary sources which include theoretical data as well. Primary data is collected specifically for the research needs at hand. Secondary data is already published data collected for purposes other than the specific research needs at hand. Secondary data can be classified as collection from internal sources or external sources. Internal source data is available with in the organization which includes departmental records, production and sales data and other internal organizational data. External source data are originated outside of organization that is from different publications such as government publications, trade association data, books, reports, journals. Data from these sources are available at minimal cost and effort often available at library resources (Malhotra, 2004, pp. 102-104). To collect primary data two techniques or tools are used. One is quantitative and the other is qualitative. Qualitative tools for data collection are focus group, depth interview and projective techniques. Whereas, quantitative tools include survey through interviews, questionnaires and observation (Malhotra, 2004).

2.6.1 Secondary and Theoretical data

While conducting a research work like a master thesis, secondary data and theoretical perspective are important. Therefore, theoretical data play an important role in this regard. Some of the important secondary sources of data were obtained from the ERP database, departmental records and company web site. Theoretical data were collected in line with the problems to solve the research questions. This

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means that the theoretical frame is designed in line with the problem and the research questions corresponding to different aspects of ensuring material supply on time such as supplier relation, integration, inventory management theories. Corresponding to the theories, relevant empirics were collected. Then an analysis has been done to draw a conclusion to the problem. To compile theories library resources at Växjö University was a good source to find relevant books on methodology, previous master thesis papers as well as general information on logistics and the supply chain. To collect specific theories corresponding to the problem areas the internet databases such as Google scholar, Emerald, and Elin made the effort easier to have current scientific articles from scientific journals. Further useful topic-related information could be gathered by the use of the internet which made available some additional data to the authors through search engines and websites

2.6.2 Empirical data

In order to conduct a research in a deductive approach relevant empirical data need to be collected in line with the theories. Because it is the basis for analysisis of theories, or testing of theories to draw a conclusion or to come up with a solution of problem (Gummesson, 2000, pp. 15). Empirical data for this thesis have been collected both from Holtab and its supplier for PEX cable (MPM). Because the mentioned problem can not be solved by analyzing Holtab only. Indeed the problems come from both sides and it needs to have in-depth discussion with both parties in the supply chain of PEX cable to know how it can be mitigated. In-depth interview in a semi structured manner were conducted with decision makers of Holtab and MPM such as the managing director, the logistics manager, IT personnel, engineers in production plant of Holtab and supply linkage of MPM. Data regarding time at different stages of value stream, production planning and quantity, inventory, order processing and information exchange were collected. So that it can identify waste and the scope of integration to reduce the wastes, reduce lead time and to ensure on time delivery of material. In some cases to cover the gap of knowledge about arising problems instantly information were also collected by email from Managing director Patrik.

A more comprehensive idea about primary sources of data collection is illustrated by following table.

Company Source Date Contact approach

Holtab Patrik Persson (Managing Director)

09/03/19 09/04/06

Depth interview Depth interview

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09/04/23 Depth interview

Plus Email Roger Kidell

(S. C Manager)

Plus Email

Plant visit 09/03/19

MPM Roger Möller

(Manager)

Figure 8: Information about data collection

2.7 Scientific credibility

Justification of reliability and validity of data is important in any research. Construct validity, internal and external validity and reliability need to be tested for scientific credibility of a research (Yin,2003, pp.33- 34).

According to him, the term reliability means that operations and procedures used in the research can be repeated by other researchers, in order to achieve similar findings.

Validity defines a theory, model, concept or category in describing reality properly, just as a good map properly describes Earth on an architect's blue print is useful for erecting a functioning building (Gummesson 2000, pp. 93).

2.7.1 Construct Validity

Construct validity means to establish “correct operational measures for the concepts being studied”.(Yin, 2003, pp.34) . To ensure that, the theoretical data is provided by multiple sources of textbooks and articles. Empirical data were collected in line with the established theories published by the renowned international journals, thus it can be told that construct validity is maintained.

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2.7.2 Internal Validity

Internal validity deals with the inferences drawn from causal or explanatory case studies. Internal validity is a test for causal studies which try to determine whether event X led to event Y without interference of a third event (Z). If it is concluded that there is a casual relation between X and Y without knowing that some third factor Z may actually have caused Y, the internal validity is questioned (Yin, 2003, PP.36). In this thesis a careful attention has been given to identify the causal relation of the problems. Why and how the problems are occurring thoroughly analyzed and shown by the causal relation in the Ishikawa diagram to improve the internal validity properly

2.7.3 External Validity

The extent to which the outcome of this research may be generalized above its composition is called external validity. In this thesis that is to say to other processes, other supply chains, and on top of that different industry sectors (Yin, pp. 37). Generalization of the solution may not be possible to a full extent possible especially for other industry sectors, because the case study is only based on interviews of two companies and regarding a specific component of assembly line.

2.7.4 Reliability

Kirk and Miller (1986, pp.20) defined that reliability is concerned with the question of whether or not the researcher is obtaining data on which he can rely on and whether or not the data is independent of any accidental circumstances. According to Yin (2003, pp. 37) the objective of reliability test is to be sure that if a later investigator followed the same procedures as described by an earlier investigator and conducted the same case study all over again, the later investigator should arrive at the same findings and conclusions. One prerequisite for allowing this other investigator to repeat an earlier case study is to document the procedures followed in the earlier case. Without such documentation, one can not even repeat its own work (which is another way of dealing with reliability).

The reliability is maintained in this research through recording the interviews. A formal activity plan was also made to ensure which activities will be conducted and what procedures will be followed. It helped to make a guideline for the work from the beginning. The interviews were taken from concerned persons in different departments who can provide reliable and relevant data. The questions asked to the interviewees were chosen by searching the relevant theories published in scientific journals.

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Due to the aim of this work, the theoretical section shall provide the required information for this case study.

Following the objective a pre- selection of approaches had to be done that is why the concept of Value Stream Mapping (VSM) will be introduced.

It enables through the analysis of a product value stream to identify the wastes needed to be solved. A tool for waste

classification with the Ishikawa diagram is also presented.

2.8 Summary

Figure 9: Summary of Methodology

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Deductive Theory as starting point for finding

appropriate concepts and tools

Scientific approach

Positivistic ^Following the research questions , in

order to solve the problem .

Scientific paradigm

Case Study Studying and searching for answers for a

specific problem Research strategy

Single case holistic study

Proceeding of the case study leads to

new perspectives and ways to follow

Case Study design

Theoretical and empirical

Articels , Textbooks , Search engines ,

Interviews at Holtab as well as at MPM

Data collection

Qualitative In depth interviews for data collection ,

no statistical analysis Research approach

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Master Thesis: Holtab AB Tools of VSM and Ishikawa

Chapter Three: Tools of VSM and Ishikawa

3.1 Value Stream Mapping

3.1.1 Definition of value stream mapping

Value stream mapping (VSM) is a concept linked to lean production. It has been first promoted and implemented by Toyota to rapidly become a success in the manufacturing industry. It has been defined by Womack and Jones (2000) as ‘‘the simple process of directly observing the flows of information and materials as they now occur summarizing them visually and then envisioning a future state with much better performance’’. In simpler words, it is a process mapping that aims to improve the performance of the processes of the company such as the flow of material and information by giving a clearer understanding of them. Consequently it targets the actual lead time removing bottlenecks of the processes, thus, it achieves lead time reduction.

Therefore, one can say that value stream mapping is used to identify all type of wastes and enabling to measure and eliminate them (Rother and Shook, 1999). The term waste in this case stands for a part of a

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process that add no value to the process, in the contrary it uses resources and time that should be allocated to other processes of the company. Therefore, this tool enables to reduce cycle-time and thus lead time considering not only the product processes but also the management of information.

VSM is a redesign tool whose validity has been confirmed by studies such as Serrano et. al (2008). Other tools also propose to design process map but VSM has several advantages compared to other techniques (Mazur, 2007):

(1) VSM helps visualize the process using iconic representation;

(2) VSM helps identify the sources of waste in the process;

(3) VSM shows the linkage between information flow and material flow;

(4) VSM helps form the basis of an implementation plan

3.1.2 Implementation of Value stream mapping

To implement the VSM technique several stages are required. The first stage is to draw the current state map of the system, which again consists out of three steps. This will give a clear understanding of what the company is doing and enable to know where to operate. To draw this first map, Lovelle (2001) states that as first step it is needed to establish a framework, on which it is possible to work on an efficient way.

In starting with the current state map it is required to define the product one wants to analyze, to choose one or two suppliers to monitor and finally select a customer, therefore to define the box in which one shall work.

After completing this preliminary step, it is possible to draw the current state map. It is important to separate between internal and external mapping, which depicts the second and third step. (Mazur et al, 2007).

The methodology advises to start with the external mapping. Thus, starting point is the customer, wherefore the information (e.g. order, forecasts) exchange between the customer and the company has to be considered. The customer information has an impact on the processes of the company and especially the production processes to respond to this information (Lovelle, 2001). Finally, the external map has to highlight the information exchange between the supplier and the company, therefore how

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the supplier replies to the company order, which is originally driven by the customer demand. In figure 10 it corresponds to the higher part of the map.

Figure 10: Example of a current state map (Lovelle, J. 2001, pp.3)

The internal map also starts with the customer by considering the shipping of the finished good and the needed time. Then it is required to work backwards from this finish good to the first components of the product. For every steps in production, manufacturing and assembly information has to be included, as for example the number of employees needed, production lead time and process time. After completing these steps the current state map is drawn and represent a full circle starting from the customer and returning to him.

The second stage according to Lovelle (2001) is to identify waste in the current organization with the goal to reduce the lead time and to eliminate this waste. Therefore it is required to search in the process elements that do not bring value to the product. According to Lovelle(2001) seven elements exist:

(1) Overproduction: More product that are needed are produced and stay in stock

(2) Inventory : The company posses more inventory than needed

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(3) Transportation: Any activity that need to unnecessary move the product

(4) Waiting: The product is neither moving nor having activity that bring value

(5) Motion: Production layout design create unnecessary steps

(6) Over processing: The unnecessary controls and bottlenecks

(7) Correction: The product must be discarded or reworked

With the current state map it is possible to directly see some of the wastes such as inventory or transportation as well as signs for the presence of other ones like waiting time. Nonetheless the full understanding and identification of these wastes can take time because it is needed to understand their root causes (Lovelle, 2001).

Figure 11: Example of a future state map (Lovelle, J. 2001, pp. 5)

The final stage according to Melvin (2008) is to draw the future state map. It gives a blueprint of what the company wants to do and what improvement will be achieved. This map is easy to draw, because it only add things that shall be changed (Lovelle, 2001). Even if the drawing of the future state map is

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comparatively easy, the application of improvements has to be considered by the management at the same time, which can be the difficult part of this method (Lovelle, 2001). An example of future state map is presented with figure 11.

3.2 Ishikawa Diagram

The Ishikawa diagram also known as the cause and effect diagram has been created by Kaoru Ishikawa in the 60’s. It is a tool that enables to sort out the cause of dispersion of a problem or a point one wants to analyze (Ishikawa, 1986). An example of it is represented in the following figure.

Figure 12: Example of an Ishikawa Diagram

According to Ishikawa (1986), a cause and effect diagrams can be made following three steps:

1. Determination of the characteristic that one would like to improve or control. It has to be written on the right side of the diagram

2. Determination and writing, with a branch arrow, of the main factors that could cause the characteristic

3. On each branch of the main factors, write all the factors that are seen as cause. They should like twigs. On each of this twigs write their cause like smaller twigs. In the end the source of the characteristic should be reached.

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It exists different type of cause and effect diagrams that can be used in function of the problem to face and the way one wants to arrange it. The dispersion analysis type is one of them and it is focusing on the repetition of “Why does this dispersion occurs?” This repetition allows to organize and to link the different factor of dispersion and also to have a broad picture of the factors to rectify. (Ishikawa, 1986)

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Master Thesis: Holtab AB Supply Chain Integration

Chapter Four: Supply Chain Integration

Considering SC relationships and integration different theoretical frameworks are used, which includes transaction cost theory, social exchange theory and resource dependence theory (Fynes et. al, 2005, pp.

7). Instead of discussing these abstract frameworks the focus shall be on some advanced concepts regarding different steps of integration.

4.1 Dimensions of Supply Chain Integration

In this chapter three main theories will be studied. First a presentation of the SC integration with its classification in three dimensions will be highlighted.

Then one concept linked to inventory management, collaborative planning and forecasting is presented, the CPFR.

Finally a

classification of four

types of

collaboration models between companies

depending on inventory

management and information sharing is presented

In this chapter three main theories will be studied. First a presentation of the SC integration with its classification in three dimensions will be highlighted.

Then one concept linked to inventory management, collaborative planning and forecasting is presented, the CPFR.

Finally a

classification of four

types of

collaboration models between companies

depending on inventory

management and information sharing is presented

Supplier Integration at Holtab