DEVELOPING THE SUPPLIER BASE OPTIMIZATION PROCESS FOR THE INDUSTRY SECTOR : A CASE STUDY OF SIEMENS PAKISTAN

Abstract

The number of suppliers at Drive Technology Division (DTD) expanded due to many factors, making its existing supplier base too complex to be managed effectively and efficiently. The improper supplier management may have drastic impacts on end customers and also disturbs the fulfillment process, thus impacting the overall supplier management process and creating hurdles in the achievement of ultimate objectives of supply chain management i.e.; cost effectiveness and responsiveness. This study is based on a single case company division (DTD), a division of the Industry Sector at Siemens Pakistan, and action research is the methodology chosen to perform this research. DTD is already working on optimizing its supplier base; therefore the study aims to check the overall optimization procedures devised and implemented by the DTD to manage its supply base performance effectively. The ultimate purpose of the study is to embrace the detailed process that covers all the aspects needed to optimize the supplier base successfully, so that any company in Pakistan with a similar issue may refer to the SBO of Siemens’ DTD. The process explained in this study has its basis from a conceptual process formed based on the literature analysis and the best practices available for optimization. The process is cyclic and systematic involving four major segments incorporating eight intermediate stages. The testing of the overall procedure resulted in abolishing 1200 suppliers out of a base of 1500, showing a reduction of 76% in the current supply base. The results seem to be quite satisfactory, promising a long term outcome and a supplier base that is easily manageable comprising a list of preferred suppliers which work jointly with DTD as strategic partners in the supply chain. Optimization does not stop at reducing the number of suppliers only, the process goes even beyond incorporating the evaluation, development and relationship management of suppliers, but this study is mainly focused at reducing the number of suppliers, however the supplier development and evaluation initiatives developed by Siemens are discussed and their position in the SBO procedure is also briefed.