Sourcing Globally in a Locked World -: A qualitative study of the Covid-19 Pandemic Effects on Swedish LSEs Global Sourcing Operations

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Sourcing Globally in a Locked World

- A qualitative study of the Covid-19 Pandemic Effects on Swedish LSEs Global Sourcing Operations

Bachelor Thesis

Authors: Johan Frykman Järlefelt & Emil Svensk

Supervisor: Selcen Öztürkcan Examiner: Per Servais Term: Spring 21

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Abstract

Global sourcing has made it possible for companies to purchase components from suppliers all over the world. The intention nowadays is to find the best quality at the most competitive price, distance is not as important in today’s society. Sourcing globally is natural to many companies today and has increased in recent years. This global and open-world changed when Covid- 19 erupted and the world declared a pandemic situation. Cities in China decided to implement a lockdown to reduce the infection. Covid-19 has affected global sourcing operations and made it hard to receive deliveries in time.

The thesis highlights different theories within global sourcing, how to ensure approved quality, and theories about digitalization/globalization. Other theories that are included in the thesis are theories about relationship

management and international purchasing offices. The purpose of the thesis is to analyze what effects Covid-19 has had on these theories. Further, the thesis is a qualitative research conducted through interviews.

The empirical findings discuss similarities and differences from the analysis chapter. This chapter is crucial to answering our research questions. Further, the conclusion chapter demonstrates the findings of the thesis. A conclusion is that traditional quality assurance theories are applicable also when

visitations at suppliers are not possible. Lastly, global sourcing departments have had to adapt to the new situation with the pandemic.

Key words

Global Sourcing, Large Scale Enterprises (LSE), Globalization, International Trade, Covid-19, Pandemic, International Purchasing Offices, Relationships Management, Quality Assurance

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Acknowledgments

Johan and Emil want to express our greatest gratitude to every individual that has contributed to our bachelor thesis. Firstly, we would like to emphasize the importance to our respondents from Swedish LSEs involved in the thesis and therefore express the deepest appreciativeness to Håkan Lindvall at Ericsson, Sten C. Nilsson at Husqvarna Group, Urban Sörqvist at Saab, Elaine Leong at Volvo Penta & Magnus Karlsson at a large international active company. The meaningful information provided, and the time you set aside for your participation are what made the whole thesis possible and enabled to finish this study. We wish all the involved participants and their companies all the best in the future.

Secondly, we would like to direct a special thank you to our supervisor Selcen Öztürkcan, who has supported and guided us during the conducting of this thesis. We appreciate the valuable insights and feedback. You have guided us in a good direction and encouraged the quality of work that helped us achieve a thesis we are proud of, and for that, we are incredibly grateful.

Finally, we would like to show our gratitude to our examiner Per Servais and our opponents for the constructive and relevant feedback during the several seminars before finishing the thesis, this has been valuable for the study.

Kalmar 26, May 2020

Johan Frykman Järlefelt Emil Svensk

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Figures and Tables Index

Figure 1 - Outline ... 7

Figure 2 - Product development process (Herman & Liu, 2013, p.39) ... 15

Figure 3 - Conceptual Framework ... 16

Table 1 - Operationalization ... 24

Table 2 - Authors Contribution ... 27

Table 3 - Cases ... 28

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1 Introduction

The introduction chapter will begin with a background of the studied area followed by a problem discussion where the research gap is identified. The chapter will also contain the research questions for the thesis followed by the purpose and a delimitation to the study.

Lastly, there will be an outline of the thesis.

1.1 Background

The world economy has developed throughout history where globalization has been a major decisive factor of economic evolution. Globalization has changed the supply strategy for several major international companies in the opportunistic process of targeting low cost suppliers and their products and services across geographical borders (Monczka, Handfield, Giunipero & Pattersson, 2015). Along with the assistance of globalization, the practice of global sourcing mentioned above with exploiting the efficiencies of the global market has occurred. This international phenomenon has similar to the world economy developed into a significant part of successfully globally active companies due to involved benefits, for instance; reduction in labor rates, increased perceived value, quality products for a lower price, different skills and resources compared to domestic manufactures and access the newest technology (Monczka et al. 2015).

Senft (2014) develops the reasoning of how globalization has affected the entire global economy in the sense that there is no return for internationally successful companies to solely domestic trades, how global sourcing is the new normality in the economy. In addition, the author explicates how powerful global sourcing is, that the consequences for companies who refuse or haven't the intention to pursue this type of international trade, will not survive due to the fierce competition and the advantages global sourcing provides (Senft, 2014).

Do what you do best, and outsource the rest, is according to Drucker (2020), an advice he has suggested to international companies throughout his career. This advice is based on how, according to Drucker (2020) the trade over international borders is decisive for developing a successful outcome over several years. Additionally, the author states how various large scale enterprises (LSE) for instance; Mercedes, Ericsson and BMW, throughout the years has with the intention to exploit the opportunities with the world economy and the benefits, been able

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importance for the major companies (Drucker, 2020). Furthermore, Drucker explicates a reasoning regarding if a business, and especially a large business is aiming for a great economically outcome, the organizations must accept that international trade is conductive and the superior operation for the companies and how the domestic economic operations are supposed to strengthen, hopefully financially and with knowledge, the company’s

international competitive position among competitors (Drucker, 2020).

In addition to how globalization has affected the world economy throughout history and developed major companies to internationalize their business where the global sourcing operations has been a crucial part for internationally successful companies, the Covid-19 pandemic has complicated this global process for companies. The usual operation with the possibility and requirement of traveling to countries and markets where the involved sourcing process is present, has not been allowed/small access for travel due to the various strict restrictions. Moreover, the pandemic has obviously affected the global economy negatively, when the outbreak of covid-19 began during the beginning of 2020, the forecast impact on the global economy was historically negative and was expected to become the deepest recession globally in decades. A forecast of an envision around a 5,2 percent decrease in the global Gross Domestic Product (GDP) was presented. The long-term effects of the recession would potentially leave negative consequences through lower investments, decreased employment rate and complicate global trade and supply connections (The World Bank, 2020a).

The world and definitely the economy did and is presently going through challenging times with the ongoing pandemic, due to how the subject is present, research and up-to-date information of the challenging year is not published. However, newly studied expected prospects of the damaged economy explicate more positive material than the deepest

recession in decades. According to the International Monetary Fund (IMF) and their published

‘’World Economic Outlook 2021’’, states how the consequences and scars from the Covid-19 pandemic are expected to be less compared to the financial crisis that affected globally during 2008. Moreover, the pandemic is expected to have a deeper impact on emerging and

developing countries compared to advanced/more developed ones on average due to policy support and access to vaccines (International Monetary Fund, 2021). Additionally, a positive forecast over 2021 regarding an increased GDP was stated in January. It is expected that the global economy will expand by around 4 percent after the challenging 2020 where decisive

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factors such as vaccine deployment, China’s recovery and advanced economies shallow contractions have been of importance (The World Bank, 2021b).

Furthermore, the negative effects on foreign direct investment and international trade due to the Covid-19 pandemic are crucial. Khan, Khan & Shafiq (2021) describes the different forecast impacts with source assistance from the World Trade Organization, where they present how the global trade volumes are estimated to decrease between 13 percent to 32 percent. Additionally, the authors explicate how foreign direct investment will globally be negatively affected. The consequences of the pandemic will decrease across the world, where the estimated numbers during 2020 and 2021 will cut around 30 to 40 percent of the total global foreign investment. Moreover, the top 500 multinational enterprises in the world that are dominating the foreign direct investment market globally, have experienced a decline in the earnings estimated to around 30 to 40 percent, similar to the total number (Khan et al.

2021).

1.2 Problem Discussion

Global sourcing is a well-known concept and is nowadays used by both small and large global companies (Lin, 2020). Cost savings and innovation are according to Lin (2020) propulsive factors to outsource manufacturing of a specific component to a foreign supplier. Lin (2020) describes that a successful global sourcing strategy is when the value chain activities could be divided and distributed to regions where they are best sourced. Hence, the company has to find locations with access to knowledge, skill, and talent in the outsourced area (Lin, 2020).

Steven, Dong & Corsi (2014) reasoning similar to Lin (2020) about how the manufacturing of specific components has been relocated as a result of global sourcing strategies. Global sourcing has according to Steven et al. (2014) contributed to cost savings but there are also consequences with it. Reduced control combined with lack of visibility in the production line contributes according to Steven et al. (2014) to an increased quality risk for the outsourced components. Hence, insufficient quality is a contributing factor to product recalls, product recalls are according to Steven et al. (2014) quality failures of a serious level that is connected with the globalization of the supply chain. Muralidharan, Wei, Zhang & Bapuji (2016)

support Stevens et al. (2014) argument that insufficient quality is a factor for product recalls, product recalls could according to Muralidharan et al. (2016) damage a firm’s reputation and should always be avoided.

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Kong & Goh (2015) discuss similar theories as Steven et al. (2014), they confirm that a motive for global sourcing is the reduction of unit production cost. Global sourcing has according to Kong & Goh (2015) several advantages but the geographical distance between the buyer and the supplier could cause complications. Additionally, the authors resonate that geographical distance increases the quality risks of the sourced components, the quality risk increases due to limited possibilities for visitation at the suppliers factory. Lin (2020) argues that geographical dispersion is necessary, companies have to find locations where a skilled workforce exists for the specific activity at a competitive cost. Accordingly, due to these criteria’s geographical dispersion is common for globalized companies and is according to Lin (2020) something global sourcing departments have to accept and deal with.

In December 2019 China reported about the coronavirus which was a newly identified virus.

One month afterward the first case of Covid-19 outside China was confirmed. On 11 March 2020 WHO declared Covid-19 as a pandemic (WHO, 2020). Moreover, the Covid-19

pandemic has induced travel restrictions worldwide with the ambition to curb down the spread of the virus (EU, 2021). Furthermore, the newspaper Business Travel News (2020) discussed the future for business travel and the effects of business travel due to Covid-19. Travels to visit customers or suppliers have been canceled due to the pandemic. Sales meetings and visitations at suppliers factories have been replaced by digital meetings. According to Business Travel News (2020), business travels will not be the same after Covid-19, some physical meetings will be replaced by meetings over a computer or a phone (Business Travel News, 2020). Söderlund (2020) argues that there is empirical evidence that in-person

meetings have an important feature to facilitate trade. It is according to Söderlund (2020) important with personal meetings to maintain existing relationships and agreements between them.

Large scaled companies around the world have been forced to close down their factories in an attempt to reduce the spread of the virus (Pwc, 2021). In general, companies and suppliers of these scales regularly have well-developed management plans for critical situations. However, since the Covid-19 outbreak is an extraordinary situation it has not been calculated into the crisis preparations. The preparations for crises do not involve situations where travel

restrictions and quarantines are introduced (Pwc, 2021). Bimpizas & Genovese (2020) affirm this with a real case scenario from Apple's supply chain. The Chinese company Foxconn is a

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manufacturer to the production of iPhone. The covid-19 has influenced Foxconn badly and has caused delays for Apple, an extraordinary situation which Apples was not prepared for.

Hence, the Covid-19 pandemic is affecting large scaled enterprises supply chains, their abilities to assure deliveries in time, and secure accepted quality on outsourced components (Bimpizas & Genovese, 2020).

This study is processed to fulfill an observed research gap. There is information about how Covid-19 has affected large scaled enterprises and their business process. However, there are limited studied materials about how companies and their global sourcing departments work to secure the required quality on outsourced components. Bimipizas & Genovese (2020) have analyzed that the pandemic has effects on delivery time and quality assurance, but there are limited data about how global sourcing departments operate to deal with this. The ambition of this study is to fulfill the identified research gap and obtain relevant information.

1.3 Research Questions Research Question 1

• How has the Covid-19 pandemic affected Swedish LSE in their global sourcing operations and business relationship management?

Research Question 2

• How has Swedish LSEs ensured the required advanced quality on internationally sourced components due to the changes connected with the Covid-19 pandemic?

Sub-question

• What are the future expectations of global sourcing operations after Covid-19 according to Swedish LSEs?

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1.4 Purpose

The purpose of the thesis is to provide an analysis how the ongoing Covid-19 pandemic has affected Swedish LSE global sourcing operations in an uncertain international environment.

By examining several globally active Swedish companies operating their businesses in various fields, through qualitative interviews, the aim of the report is to analyze and provide an understanding on how the organizations can ensure different product and service quality, how customer relationship has been affected, if the home-based operation in the organization can change the occupation and if the involved companies believe the future will be different regarding the global sourcing for LSE.

1.5 Delimitations

The thesis will exclusively focus on various effects of the Covid-19 pandemic for several Swedish LSEs global sourcing operations. Due to the limited amount of time, resources and lack of contacts, the research will not involve major international companies that operate globally with the similar type of businesses as the Swedish ones.

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1.6 Outline

Figure 1 - Outline

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2 Theory

This chapter will present different theories connected to the studied area. The chapter will begin with information about global sourcing and how it has developed through the years.

This will be followed by theories regarding international purchasing offices and relationship management. Theories about quality assurance will be followed by digitalization and

globalization. Lastly, there will be a conceptual framework that will connect the different theories.

2.1 Global Sourcing

The world has throughout the economy history rapidly developed into one single marketplace with various countries operating with international competitors. Global sourcing is an

organization’s process of locating suppliers, services and products over the national/domestic borders that are more beneficial for the company in different ways. Regardless of how the lower cost is the frequently mentioned reason for the global sourcing operations, the benefits are several, for instance; to source a more technological advanced supplier than an existing domestic one, can provide the buying company with a more developed quality product/service that possible could increase the company’s position towards competitions on the market (Sollish & Semanik, 2011).

Additionally, an Integrated Procurement Strategy study was performed in the 90’s that focused on global sourcing and how this overseas strategy could and has developed into a successful operation and how the international trade possibly would evolve and increase into the new normal for multinational companies. Furthermore, the research stated four different areas a company’s sourcing strategy will be depending on if they could achieve immediate improvement in these sections.

- Cost reduction

- Improvement in quality

- More exposure to global technology - Improvement in delivery and reliability (Monczka & Trent, 1991).

Furthermore, Gronwald (2017) illustrates how the global sourcing for companies operating internationally are depended greatly on teamwork between involved parties. For a successful

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collaboration in the global economic environment, the importance of understanding cultural differences between the companies in question is crucial and a key aspect that will have an effect on the future outcome of the partnership. The knowledge of each other's culture, international management and the companies involved internationalization objectives could support the development of cross-cultural competencies (Gronwald, 2017).

2.1.1 Outsourcing

International trade is as mentioned several times an important factor for a multi-international organization’s operations, the global sourcing way of working can be divided into different types of sourcing where outsourcing is a usual strategy. Hollensen (2020) explains how outsourcing is an international strategy when an organization moves various functions from the internal domestic operations out of the company to locate more beneficial options

internationally. Cook (2007) expands the reasoning and states how outsourcing is transferring a part of the organization operations to foreign locations and thereby the control of the

process, for instance in the manufacturing of a specific product.

Additionally, Hollensen (2020) agrees upon how a reason for global sourcing is the lower financial cost and how this definitely motivates organizations to perform sourcing

internationally instead of home-based operations that could be uneconomic beneficial. In addition, it is stated how this strategy contributes to the competitiveness of the company due to the efficiency when purchasing from global suppliers (Hollensen, 2020).

Moreover, the global environment in business has put the globally active companies under pressure to possess a competitive advantage over the competitors on the market. An

advantage over competitors could be a unique product, reduced costs or exceptional quality, however, one significant advantage is achieving operational knowledge. This could be described as doing more work with fewer resources, and when this is crucial the companies have to secure their internal resources (capital for instance), beneficial options and suppliers internationally can be outsourced to be financially more suitable (Gupta, 2008).

Additionally, due to the complexity of the world economy and how companies in some cases have operations in different types of fields, it is necessary for the organization to consider and identify what the firm's core competencies is, focus on these competencies and outsource other fields that are contributing to the company. This is another important factor due to how

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the firm’s focus could lack if everything is operated internally, which in turn could decrease performance and quality negatively (Chopra & Meindl, 2016).

In addition to the statement above regarding if an organization has the option to focus entirely on their core competencies and outsource remaining operations, Helmond & Terry (2017) develops this reasoning; how outsourcing and globalization have enabled LSE and globally active companies to operate collaborative supply networks with partners based in other countries. For instance, worldwide known companies as; Apple, HP, Samsung and IBM that in turn have been able to focus entirely on key activities internally (Helmond & Terry, 2017).

2.1.2 International Purchasing Offices

As mentioned, a various number of times, the international trade for LSEs and multinational corporations are of significant matter. One key strategy for the global sourcing activities in developing economies are the role of international purchasing offices (IPO). The definition of what IPO is, according to Tate, Ellram, Bals & Hartmann (2009) an approach for global organizations to develop their international trade and set up an offshore office to increase efficiency in manufacturing both strategically and financially, that satisfy the highly competitive requirements in low-cost locations around the world. Furthermore, the authors explicate how this strategy has been rapidly growing overall in the global economy for multinational companies and how IPO could be stated as the next new operations of globalization.

Additionally, Sartor, Orzes, Nassimbenu, Jia & Lamming (2014) describes how IPO has developed into a management role in international trade of significant matter. IPO has

evolved into a trend for organizations when the previous-based trade barriers that complicated trade over borders historically, has been removed. The increased interdependence and

competition around the economies in the world and the development of communication and information technologies have affected the process for companies to source different types of products and services internationally and affected the development of IPO in emerging and developing markets. Jia, Lamming, Sartor, Orzes & Nassimbeni (2014) states in a different article how the development of and establishment of IPO have been a critical and necessary factor and one of the most adapted strategies for sourcing globally active corporations.

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IPOs for LSEs and active companies on the international market have different type motives.

The world economy and their involved parties have seen an increasing number of offices in emerging markets, according to Rosplock (2017) the reasons for the increased IPOs could be growth, geographic diversification, access to expert knowledge and technologies and also in some cases escape risks and barriers in the domestic country, political or economic.

Moreover, the author elaborates a reasoning how IPOs should be considered as a long-term investment for the company in question, and definitely not viewed as a short-term trade activity.

2.2 Relationship Management

For globally active companies operating in the sourcing field, the relationship with suppliers worldwide is of significant matter. Ford, Gadde, Snehota & Håkansson (2011) states how the relationship with various suppliers is incredibly meaningful and dependent for the survival and development of the company. The interactions between an international company and supplier are vital due to how a business company that outsources is not independent and therefore all involved components purposes of the relationship need to be considered to develop each other’s companies. The effectiveness and efficiency for the larger company are often determined by the several relationships with suppliers, where different types of products are manufactured and additionally, the technological development and expert knowledge for a major international company are often depending on external suppliers.

Furthermore, the relationship management with suppliers and customers are, according to Zineldin (2012) seen as a type of profitability improvement approach for the whole company, if the relationship is of satisfaction for the parties involved. A satisfied supplier or customer is a key aspect to develop a loyal long-term relationship which in turn will hopefully develop a successful future outcome. Further, the author states the importance of continuous

communication and a desire for continually developing the relationship with suppliers for retention of the collaboration. Within successful relationship management, the partnership requires a mutually beneficial value agreement, otherwise, the cooperation could be jeopardized due to dissatisfaction in one of the involved companies. Additionally, Raab, Ajami, Gargeya & Goddard (2008) agree upon the reasoning of the importance of a solid relationship with suppliers and customers, they elaborate how the understanding of creating profitable relationships will establish an international competitive advantage.

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Consequently, the relationship management in business relations between components is necessary for a great outcome. Cheverton (2017) develops this statement by emphasizing the value and power of physical meetings. Management has, in some industries and businesses, evolved with digitalization into further technological management with, for instance, video conferences and meetings. However, an organization in their management operations should not underestimate the physical meetings that involve beneficial social aspects between a manager and supplier or customer. The possibility to put faces to voices and on a deeper level understand personalities, is according to Cheverton (2017) important for collaboration and relationship.

2.3 Globalization

One may say that the most important international process for global sourcing throughout history, is globalization. The interconnection between countries and economies has provided the world economy with a various number of effects and impacts. Hamilton & Webster (2018) clarify that a certain event in a country on the other side of the world, regardless if it concerns economy directly or something different, can have a major impact on the economy on the other side of the world. The authors state the importance globalization has had with how nations create connections and linkages to each other, where international trade through exchange of different products and services in import and export have been the most

important and significant components of the global economy. Steger (2017) agrees upon the reasoning of how globalization has affected the connections between nations and describes how this global process has developed interconnectivity worldwide.

In addition to the statements above, Dunning & Lundan (2008) develop how important globalization has been to the world economy in the sense of expanding and changing the environment of doing business. The number of new actors on the global economy stage increases on an everyday basis which is also developing the economy daily with new perspectives and values.

2.4 Digitalization

Globalization has contributed to a world with increased geographical distance within the business, this is according to Butollo (2021) one factor for the fast development of

digitalization. Butollo (2021) explicates that digital technologies have been developed due to

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global value chains, companies nowadays have suppliers located worldwide, therefore, the demand for digital technologies has increased. Björkdahl (2020) expresses that digitalization could be seen as the fourth industrial revolution. Digitalization is according to Björkdahl (2020) increased usage of digital technologies for a company. If the digital technologies are used effectively it could imply fundamental changes for a company.

Ribeiro-Navarrete, Botella-Carrubi, Palacios-Marqués & Orero-Blat (2021) describe that one of the most important effects of digitalization is the possibility of communication worldwide through digital platforms. These platforms have according to Ribeiro-Navarrete et al. (2021) contributed to simplified communication without physical meetings, many business-related meetings can nowadays be conducted without travels to customers or suppliers. Digitalization is not always connected with simplifications; it could also contribute to challenges according to Björkdahl (2020). In addition, the author expresses that a challenge with digitalization is to use resources efficiently. Leaders within the company many times find it hard to effectively use the digital resources and take advantage of the benefits of the technology (Björkdahl, 2020). Overall, Butollo (2021) states that digitalization has had a positive impact on the business relationship and easy access to contact.

2.5 Quality Assurance

2.5.1 Six Sigma

Six Sigma is according to Taghizadegan (2013) a theory with the intention to exclude defects for a company’s operations. The motive for introducing the Six Sigma model is to reach results close to perfection. Taghizadegan (2013) explains that if a company expands the Six Sigma level, the quality will increase, and costs will decrease. Hayes (2021) certifies that the Six Sigma method is a data-driven approach with the ambition to limit mistakes in the

business process. The theory is according to Hayes (2021) developed to decrease the working hours while fewer mistakes are made. Hayes (2021) explicates that the theory is structured by statistics and financial analysis.

Furthermore, according to Hayes (2021) five steps in Six Sigma, the five steps are defined as DMAIC (define, measure, analyze, improve, control). The five steps are presented below:

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2. The process has to be measured through statistical methods. These statistics should help the team to benchmark their performance and give indications about how to reach the goals.

3. Analyzing is an important part of the theory, operational errors could be identified through analysis. Failures could be avoided by analyzing potential reasons for them.

4. These steps are conducted to improve the operations.

5. The last step is to take control of the process and ensure that the same problems do not occur again, to avoid infectivity for future operations

(Hayes, 2021).

These five steps also known as the DMAIC-model are confirmed by Schroeder, Linderman, Liedtke & Choo (2008). Schroeder et al. (2008) develops the reasoning about the theory by introducing different educational levels of Six Sigma. The education is divided into three different levels: Green belt, Black belt, and Master black belt. Employees who have been educated in Six Sigma for two weeks receive a green belt, the requirement for the black belt is four weeks of education (Schroeder et al. 2008). Moreover, to receive the master black belt extensive training in Six Sigma is required according to Schroeder et al. (2008), employees who have received the master black belt usually act as a mentor in Six Sigma.

Javier Lloréns-Montes & Molina (2006) support the statements about the theory, besides, they express that Six Sigma quality, limit defective performance to 3,4 million opportunities. This is confirmed by Hayes (2021) who affirms that achieving Six Sigma quality is connected with nearly a defect-free performance. Agarwal & Bajaj (2008) support the steps of the theory and discuss that Six Sigma is preferable for outsourcing operations. Hence, Six Sigma could be implemented in an organization to increase the quality of outsourced components and avoid defective products (Agrawal & Bajaj, 2008).

2.5.2 Production Part Approval Process (PPAP)

The Production Part Approval Process (PPAP) theory is explained by Hermans & Liu (2013) as a method to ensure approved quality on outsourced components. Hermans & Liu (2013) explicates that modern companies buy many components from suppliers worldwide and therefore they have to be sure that quality restrictions are followed through PPAP. Midea (2016) confirms this description of the PPAP theory and adds that the theory consists of

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different steps. Ford, General Motors, and Chrysler are some companies that according to Doshi & Desai (2016) use PPAP to secure required quality on outsourced components.

According to Midea (2016), the first step in a PPAP process is to introduce the desirable design. Suppliers should be provided with drawings of the components and information about the design criteria (Hermans & Liu, 2013). Moreover, Herman & Liu (2013) express that suppliers need a process flow diagram over the produced components, the process flow diagram should contain all the different steps in order. Further, Midea (2016) describes that this step also should consist of a description of the life expectancy of the component to achieve maximum work capacity. The process failure mode and effect analysis (PFMEA) is another important part of the PPAP theory according to Lixandru (2016). PFMEA gives indications about what in the fabrication process could go wrong (Lixandru, 2016). Herman &

Liu (2013) develops the reasoning about PFMEA with a description of the control plan. The control plan is according to Herman & Liu (2016) a tool to identify the achieved quality on incoming components before assembly. Lixandru (2016) explicates that the control plan is important to ensure that the supplier follows the quality restrictions referred to in the drawing of the component.

Furthermore, Lixandru (2016) explicates that there are different levels within PPAP. There is according to Lixandru (2016) five levels of PPAP, regularly, PPAP level three are required for newly designed components. A higher PPAP level contributes to a higher required level of the outsourced product. The required PPAP level is a decision made between the customer and the supplier (Lixandru, 2016). Figure 1 illustrates the PPAP process with the different steps. Planning is the first step where the product is planned together with the supplier.

Thereafter, the products should be designed and tested to achieve desired results (Herman &

Liu, 2013).

Figure 2 - Product development process (Herman & Liu, 2013, p.39)

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2.6 Conceptual Framework

The theory chapter refers to theories within global sourcing and quality assurance strategies.

Digitalization and globalization theories have affected sourcing operations with the opportunity to globalize sourcing operations. PPAP and Six Sigma are quality assurance strategies that are used by sourcing departments to control suppliers. Furthermore, our theories will be used to analyze how the Covid-19 pandemic has affected global sourcing operations. The relationship management theory will be used to investigate how the exclusion of physical meetings has affected the relationship between sourcing departments and

suppliers. The overarching theme is to investigate how Covid-19 has affected these theories, have the working methods changed due to the pandemic. Global sourcing is the main theory where PPAP and Six Sigma is a part to assure required quality on outsourced components.

Figure 3 - Conceptual Framework

Global Sourcing

During Covid-19

Business relationship

International Purchasing

Offices

Digitalization/

Globalization Quality

Assurance

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3 Methodology

The methodology chapter will present different methods that will be used in the thesis. There will be information about the different methods and arguments why one method has been used. The research method will be presented with discussion about how the thesis will be formed. Lastly, research ethics will give information about how the respondents are treated.

3.1 Research Approach

According to Morgan (2014) there are two different research approaches for science studies, the inductive and the deductive approach. Morgan (2014) explicates that the way to examine the theory is a difference between the two approaches. Fejes & Thornberg (2019) support Morgan´s (2014) exposition about the two different approaches. Further, inductive process design theories are based on observations according to Fejes & Thornberg (2019). Morgan (2014) gives validity to this description and illustrates the deductive process as the opposite.

Hence, the deductive process starts with a theory that is tested through observation according to Yin (2015). Moreover, there is according to Fejes & Thornberg (2019) a third approach is named the abductive process. The abductive approach is according to Fejes & Thornberg (2019) a process with the ambition to construct new hypotheses, the hypotheses should be constructed to explain the empirical subject.

Our study will be based on a deductive approach where theories will be tested through observations. The deductive approach will be preferable for analyzing how global sourcing departments in LSEs work to secure accepted quality on outsourced components.

Furthermore, theories in the studied area will be collected and then proved through observations that agree with Yin´s (2015) descriptions of the deductive process. Morgan (2014) expounds that the collected empirical data should be compared with the collected theories. Hence, our science will be based on theories that we will compare to the collected empirical data.

There is according to Säfsten & Gustavsson (2020) a disadvantage with the deductive process, the disadvantage is that the research actively searches for empirical material which supports the collected theories. Hence, important information could be disregarded due to this mindset according to Säfsten & Gustavsson (2020). Jacobsen (2002) confirms that this could be a

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disadvantage to the deductive approach. Despite this, we still believe that a deductive approach will be the best option for our research.

3.2 Research Method

The aim of the thesis is to answer the stated research questions, in order to collect relevant information, there are two main methods for this process; the qualitative and the quantitative.

The primary difference between these two research approaches, according to Saunders, Lewis

& Thonhill (2019) is to distinguish the methods regarding the numeric and the non-numeric data. The quantitative approach is often defined as a data collection procedure with numbers and compared with the qualitative method, that is generating non-numeric data, for instance, performing interviews to receive information.

Additionally, Ghauri, Grønhaug & Strange (2020) elaborate on how the quantitative research method is more of a standardized approach that emphasizes testing and measurement of a specific phenomenon, with an objective perspective to receive the data collection and draw conclusions. The approach is often associated with various surveys and is characterized by the relationship with numbers and statistics. The qualitative method, however, emphasizes on understanding a specific phenomenon from the respondent’s point of view, with a more subjective insider view with a close connection to the data collection and therefore drawing a conclusion with the respondent’s answers and their own thoughts. This method is in

distinction to the quantitative in the way that it analyzes the interactions in the interview and could be considered to be more formal and more structured. Furthermore, the use of the qualitative research method enables the researcher to conduct a study with more developed, broad and informal results (Yin, 2015).

Accordingly, due to how the ambition and aim of the thesis are to receive a greater and deep understanding of how the Covid-19 pandemic has affected Swedish LSE in their global sourcing operations, the usage of the qualitative approach would thereby be considered the appropriate method for this study. Thus, the reason for the decision is to have the possibility of obtaining more developed answers on the interview questions, which in turn can provide the thesis with the empirical findings required to analyze and draw conclusions on and hopefully can answer our main research questions. Additionally, Bryman & Bell (2017) demonstrate that one of the main characteristics of the qualitative interview is how the researcher has the intention to search and aim for well-formulated, detailed and developed answers that could answer the question formulations.

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Furthermore, Silverman (2016) states that within a qualitative approach, compared to the quantitative, the appropriate procedure is to perform a study with a fewer number of respondents because this contributes to a thorough analysis with accurate reasonings and comparisons. In addition to the arguments presented above, Eriksson & Kovalainen (2015) explain that one benefit of the qualitative research approach is the possibility of

supplementary questions which enable the interviewer to investigate deeper into a specific subject.

With the information regarding the approach stated above, the chosen method in qualitative interviews feels applicable for the data collection of empirical findings of this thesis.

3.3 Data Collection

The outcome for the entire study is dependent on the data collection, regardless of the study’s construction through a quantitative or a qualitative method. The data collection involves two different types of sources, the primary and the secondary data. The difference between these two sources is the following: the primary data is empirical findings collected by the

researcher, this could be performed through various surveys, interviews specifically with the reason to study the research problem of the thesis. This is beneficial for the researcher due to the possibility of specifying the amount of data and especially what specific type of

information needed. The secondary data is compared to the primary data which has already been studied or collected and has been published available for any individuals often online, for instance, market research or organization information (Ghauri et al. 2020).

Our thesis intention is to establish a great quantity of empirical findings through the different interviews with Swedish LSEs, therefore the primary data will be our main data collection source. Due to the fact that the Covid-19 pandemic is an ongoing pandemic and thereby the amount of research in our research field is limited, the primary data will provide the thesis with the data we require to induce conclusions strengthened by the interviews. However, the usage of secondary data is necessary and inevitable for comprehensive arguments and information in the introduction-, the theoretical- and the methodology sections.

3.3.1 Primary Data

The usage of primary data in a report is, compared to the use of secondary data, is more of a process that involves an additional amount of time for the creation of information-gathering methods to receive data (Bell, Bryman & Harley, 2019). Schindler (2019) agrees regarding

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how the primary data is more of a process that takes more time, additionally the author states how the primary data is generally the focus within research studies regarding the business subject.

Furthermore, Ghauri et. al. (2020) elaborates three major advantages related to the collection of primary data;

1. Ability to collect information with specific objectives to the purpose of the research.

2. Ability to choose what approach to receive the required data as well as the number of

respondents for surveys or interviews

3. The close connections to the collection, with awareness of nuances of interpretations

and various objectives, can construct the gathering method with confidence to receive the accurate answers needed and therefore be confident of a great result.

Moreover, Yin (2015) states how primary data is acquired from different types of information collecting methods, where interviews are often used, and different aspects connected to the interview are important. For instance, the researcher needs to observe what type of feelings or responses the respondents present on a specific question and thereby enable the researchers to investigate and analyze further in an area to collect more detailed primary data.

As mentioned in the data collection part, the process of answering the stated research

questions for our thesis will be conducted with primary data through different interviews with managers associated with global sourcing operations at the company in question. Our

understanding is that this type of method will enable developed, valuable and deeper data collection compared to the usage of surveys or other methods. Unfortunately, the situation with Covid-19 complicates the opportunity of performing interviews in person, however, we consider that the use of zoom/teams will be functioning well. The possibility of

supplementary questions and eye-to-eye connections is still available, and this is a beneficial and suitable option for the process of data collection.

3.3.2 Secondary Data

The secondary data collection is as mentioned previously, information and data which was collected not purposefully by the researcher. Regardless of this, the secondary is of significant importance in creating an extensive thesis. Additionally, the secondary data could be more accessible than the primary, due to the access to online published material on various

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platforms compared to information gathered by the researcher herself through qualitative or quantitative methods. Historically, economists have been dominating the usage of secondary data in the research field concerning business because of available statistics published by, for instance, International Monetary Fund (IMF), World Bank, stock markets and national government and agencies (Hair, Page & Brunsveld, 2020).

The principal secondary data retrieved for this thesis are from literature connected to the subject, academic articles and journals that can strengthen the following parts; the introduction, the theoretical framework and the methodology part.

3.3.3 Interview Structure

Interviews are described by Trost (2010) as a way to collect empirical material, interviews have the advantage that opinions are allowed to emerge from the respondent. Alvesson &

Sköldberg (2017) express that interviews could be assimilated into an everyday conversation;

hence, the situation becomes more informal. Moreover, the researcher has according to Alvehus (2019) control to steer the interview in the desired direction.

There are according to Eriksson & Kovalainen (2008) three different approaches to conduct a qualitative interview. The three different approaches are: Structured interviews, Semi-

structured interviews, and Unstructured interviews (Eriksson & Kovalainen, 2008).

Structured interviews are standardized interviews that usually consist of questions starting with the word “what” (Eriksson & Kovalainen, 2008). Interviews with structured

characteristics are according to Eriksson & Kovalainen (2008) based on a standardized script with low flexibility. Furthermore, unstructured interviews are the opposite of structured interviews according to Eriksson & Kovalainen (2008). Unstructured interviews are according to Feijes & Thornberg (2019) interviews without any prepared script. Hence, Unstructured interviews can be steered in any direction (Feijes & Thornberg, 2019).

Semi-structured interviews are according to Saunders, Lewis & Thornhill (2009) an interview process with more flexibility compared to structured interviews. Saunders et al. (2009)

explicates that semi-structured interviews ask a question based on different themes, this gives the researcher the opportunity to adjust the questions to achieve the right answers. This is according to Larsen (2009) an advantage with qualitative interviews compared to surveys, it is hard for the researcher to reformulate questions in a survey if it revealed that the answers do

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not match the expectations. Bell & Waters (2016) confirm this and express that a researcher has the opportunity to ask follow-up questions and thereby get a deeper answer.

Our study will consist of semi-structured interviews, this interview method will provide the research with relevant empirical material. We have constructed an interview guide that will be the starting point for all of our interviews. The advantage of this method is that we have the possibility to change our questions and guide the respondents to achieve the answers we are aiming for. The semi-structured interviews will give the opportunity for our respondents to express thoughts and achieve more articulate answers. Lastly, semi-structured interviews will give more profound thoughts to the studied area and the respondents own views. We have to be aware of a problem that is mentioned by Holme, Solvang & Nilsson (1997), a problem with semi-structured interviews is that the interview can disappear from the subject. Hence, our study will use a prepared interview script which will help our research to collect correct empirical data.

3.4 Operationalization

The operationalization in the table presented above presents how the initial idea of how the interviews will be conducted and the specific structure and order the various questions will be presented to the respondents. Patel & Davidson (2019) declare how the theoretical framework presented in the thesis is required to be operationalized. This translation process of the

theoretical concepts into specific questions in an interview guide, assists and guides the researcher during the interview. Säfsten & Gustavsson (2020) describes a similar reasoning and states the importance of composing the concepts in the theoretical section into measurable questions that can provide the researcher with knowledge and information regarding a field or subject.

The table below states the operationalization of our theoretical review and our interview guide. The questions are associated with the theoretical concepts of the thesis, which hopefully will enable an effective data collection process with every manager from the various companies.

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Theoretical Concept Questions Purpose of the questions

General Information 1-4 Questions regarding the individual’s position at the company in question and if the respondents wish to be

anonymous. The purpose is to get an understanding of the person through a presentation.

Global Sourcing Operations 5-12 Understand and investigate the company’s global sourcing operations, the involvement in various countries and the Covid- 19 effects on this international strategy.

International Purchasing Offices

13-16 Get the understanding of the importance of IPOs in the countries the company has active operations, the collaboration with these, and Covid-19 differences.

Relationship Management 17-20 Comprehend the importance of business relationships, how the management and the

collaboration before and after the pandemic has changed.

Quality Assurance 21-25 The purpose is to understand the company’s quality assurance of products before and after the pandemic, the differences, and the challenges.

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Digitalization/Globalization 26-28 Understand the importance of digitalization during the pandemic as well as how the globalization has increased potential business partners.

Future

Outlook/Expectations

29-31 The individual ideas regarding the future of global sourcing and how the pandemic will change and develop this international business strategy.

Table 1 - Operationalization

3.5 Quality

3.5.1 Reliability

Reliability is according to Olsson & Sörensen (2011) the degree of conformity between the different measuring measurements in the research. The high degree of conformity implicates that the study has high reliability (Olsson & Sörensen, 2011). Lapan (2012) describes that the survey should achieve identical answers also the second time the investigation is provided.

The investigation needs to be performed by the same people to achieve similar answers (Christensen, Engdahl, Grääs & Haglund, 2016). There should always be a questioning point of view to a survey’s reliability according to Ejvegård (2009). Since the researchers construct the measuring instruments by themselves it could according to Ejvegård (2009) be angled to the interest of the researcher.

To achieve high reliability to our qualitative study the interview process is important

according to Ejvegård (2009). Ejvegård (2009) introduces a method to analyze the reliability, similar questions in the interviews should be asked twice at intervals of time. If the answers are similar the reliability could be considered high. Hence, our research will be designed to achieve high reliability. To achieve high reliability our interviews will be recorded, this will reduce the risk to misunderstand the answers from our respondents.

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3.5.2 Validity

Olsson & Sörensen (2011) argues that validity is just as important as reliability for the research. High validity implies that the research measures the right things for the study (Olsson & Sörensen, 2011). There is according to Larsen (2009) easier to achieve high

validity in qualitative research compared to quantitative. This is due to the fact that qualitative research has the opportunity to reformulate the questions if the answers do not match the expectations (Larsen, 2009). Wästerfors & Sjöberg (2008) express that triangulation is one method to achieve high validity to the study. Triangulation is according to Wästefors &

Sjöberg (2008) when research consists of a variety of sources and respondents. Merriam (1994) confirms that triangulation is a preferable method to achieve high validity.

Furthermore, to achieve high validity to our research we have to formulate the interview question in a way where we receive the right answers. If the answers do not match our expectations for the research, we need to reformulate the question like Larsen (2009)

describes. Since the study will consist of interviews with different companies the research is in line with the triangulation method. The ambition is to compile questions that give answers to the studied area, the empirical material is collected to in the end give an answer to the research question.

3.6 Research Ethics

Helgesson (2017) explicates that research ethics is theoretically reflections about right or wrong in research. To achieve a good research ethic the researcher should not break personal trust in their respondents (Helgesson, 2017). Kvale & Brinkmann (2014) confirms

Helgesson’s (2017) statement about research ethics, they develop the arguments by

introducing ethics within interviews. Good research ethics within interviews can be fulfilled by asking respondents if they want to be anonymous (Forsman, 1997). This is affirmed by Kalman & Lövgren (2017), they also highlight the importance to obtain respondents permission to publish their statements in the research. Moreover, if the interview should be recorded, there must always be an approval from the respondents (Kvale & Brinkmann, 2014). Kalman & Lövgren (2017) express that the researcher always is responsible for

research ethics, this implicates that the researcher should not interpret the answers they collect from the respondents. Further, according to Kalman & Lövgren (2017) it is also important to inform the respondents about the purpose of the study. Our thesis has been following

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Linnaeus University guidelines on how personal data should be handled from GDPR (Lnu, 2021).

We have in our study worked to achieve good research ethics. Hence, we have always informed our respondents about the purpose of the study and their opportunity to be

anonymous. Moreover, before every interview, we have asked our respondents for permission to record the interview. By following these steps, our research will achieve high research ethics and our respondents decide what they want to publish for the thesis. Appendix B displays how we have handled personal data from our respondents.

3.7 Source Criticism

Criticism of sources is according to Thurén & Werner (2019) an important part to identify what is true and false. The researchers are according to Ejvegård (2009) responsible to present reliable sources which present truthful information. According to Eriksson & Wiedersheim- Paul (2014), source criticism is used to analyze the validity and reliability of the sources.

Furthermore, Ejvegård (2009) explicates that scientific articles can be considered as reliable.

We have throughout the study worked to achieve high reliability of our sources. Critical thinking has characterized the selection process of sources included in the thesis. Further, to achieve high reliability, older sources have been supported with newer versions of sources.

Moreover, important information has been reinforced by several sources published by different authors. The majority of our sources are scientific articles that are peer-reviewed articles, these sources have been critically analyzed and will therefore provide our thesis with high reliability.

3.8 Authors Contribution

Both authors have been involved in all chapters of the thesis and the conducted interviews.

Analysis and discussions have been executed together, to ensure that we perceived the material similarly. We have divided the work into two different sections, global sourcing &

business relations and quality assurance & digitalization/globalization. However, during the constructing of the thesis, Johan has been responsible for global sourcing & business

relationship management parts, while Emil has been responsible of the quality assurance &

digitalization/globalization parts.

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Chapter Author

Introduction Johan Frykman Järlefelt & Emil Svensk Theory Johan Frykman Järlefelt & Emil Svensk Methodology Johan Frykman Järlefelt & Emil Svensk Empirical Findings Johan Frykman Järlefelt & Emil Svensk Analysis Johan Frykman Järlefelt & Emil Svensk Conclusion Johan Frykman Järlefelt & Emil Svensk

Table 2 - Authors Contribution

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4 Empirical Findings

The fourth chapter will present the empirical material for the thesis. There will be a

presentation of each respondent and their company. The primary data will be divided into the different studied areas.

4.1 Cases

Name ^Position ^Company ^Interview

platform

Time Date

Håkan Lindvall ^{Head of} CAPEX Managers

Ericsson Microsoft Teams

40:20 2021-04-29

Sten C Nilsson ^Director Supplier Quality Assurance-

Sourcing

Husqvarna Group Zoom 44:13 2021-04-29

Urban Sörqvist ^Category Account Manager for

Electronics

Saab Skype for

Business

51:02 2021-05-05

Elaine Leong ^Supplier Quality Engineer

Volvo Penta Microsoft Teams

44:12 2021-05-05

Magnus Karlsson ^Supplier Value Engineer

manager

Large International company founded

in Sweden

Microsoft Teams

33:20 2021-05-07

Table 3 - Cases

4.1.1 Ericsson – Håkan Lindvall

Ericsson is a manufacturer of information and communication technologies, the company is the world leading in the business (Ericsson, 2021). Håkan Lindvall has been working at

Sourcing Globally in a Locked World -: A qualitative study of the Covid-19 Pandemic Effects on Swedish LSEs Global Sourcing Operations