THE INFLUENCE OF INTERNAL AND EXTERNAL FACTORS ON THE SUPPLIER SELECTION: A STUDY IN THE SWEDISH FURNITURE INDUSTRY

Postgraduate

ABSTRACT

Sweden has a global reputation of producing exquisite and functional furniture, and the Swedish industrial design is internationally well-known. The supply of materials is necessary in every company and purchasing is responsible for coordinating and organising the supply. The materials purchased from vendors become one of the most strategic parts of the final product quality in order to reduce complaints and additional costs generated by low quality of materials. Supplier selection plays a vital role in any company as it represents a significant production of the unity prices as well as enhances organisational price competitiveness. It is essential for companies in the furniture industry and from other industries to take into consideration the internal and external organisational factors that reflect on the supplier selection process to remain competitive and to gain competitiveness before choosing potential vendors. 

The purpose of this thesis is to analyse how the internal and external organisational factors are reflected in the supplier selection criteria in the Swedish Furniture Industry. The combination of the two theories in the frame of reference, namely supplier selection process as well as internal and external organisational factors were utilised in order to accomplish this purpose.

This paper is based on the use of a multiple-case study, including six organisations or cases. The type of interview relevant for this research is the “unstructured interviews” as they are informal and are used to explore in depth a general area in which the researchers are interested, also referred as “in-depth interviews”.

One of the main outcomes found after analysing the theoretical framework and the gathered data is that quality and delivery time are heading these companies’ ranking lists affecting directly their supplier selection. Another outcome verified by the researchers of this paper is the fact that the case study companies present a decentralised approach where the purchasing departments have a total independence with regard to day-to-day supplier selection decisions. A third outcome found is that the case companies are collaborating with both national and international suppliers where all the relevant international vendors are located in Europe as companies are prioritising geographical location of their suppliers. The final outcome highlighted is the fact that economic factors do not have a relevant influence on supplier selection decisions, as it was found out in the conduction of this research.

PROBLEM DISCUSSION

Organisations have augmented their level of outsourcing and are focusing more deeply on their supply chain as a source of their competitive advantage. Therefore, deciding which suppliers to involve in the supplier chain has being taken more and more into consideration as a strategic key (Choi & Hartley, 1996). As the number of outsourced activities has increased in organisations, companies must be aware of external and internal factors that may affect their supplier selection and their competitiveness. Thus, in order to succeed in the selection of suppliers, it is necessary for companies to have a complementary alignment among the internal structural aspects of the organisation. Factors such as task specialisation, technology, span of control, size and responsibility of the administrative function, levels of hierarchy and integration, need to have a high degree of balance among each other (Johnson & Leenders, 2006). On the other hand, international competition, the search for competitive advantage and more demanding final customers in a constantly changing environment, obligate buyers to secure products on the most competitive terms available (Donaldson, 1994). Furthermore, Azadegan (2008) mentions the supplier integration only brings benefits to the manufacturing company in case a fit between one organisation’s needs and another’s resource requirements exist. 

The manufacturing of furniture is an activity with the long tradition in Sweden. Recent research on Swedish furniture industry (TMF, 2012) shown that business trade held up well in 2011. Such expansion has occurred in a year in which large parts of southern Europe’s furniture production were badly hit by the economic crisis. The Swedish furniture exports was estimated at 15.7 billion Swedish Krona for 2011 and the main markets remain Norway with a share of 33 per cent, followed by Denmark 11 per cent, while Germany maintains its position as the third with a total of 10 per cent of Swedish exports. Swedish furniture also exported mainly to EU countries as well as to Asia and the United States. For years, China's furniture exports have increased very sharply, which is obviously a major challenge for the Swedish producers.  In 2011, the Swedish import was at the same level as for 2010, resulting in a better trade balance. In order to maintain its position and strengthen its competitiveness, the Swedish furniture industry is working with innovation and design, and to be a leader in areas such as quality, environment and social responsibility. In order to maintain this growth and development in the industry, it is important for the companies involved in this market to take into consideration how internal and external organisational factors impact on the supplier selection process before choosing potential vendors.

PURPOSE OF THE PAPER

This paper has the purpose to analyse how the internal and external organisational factors are reflected in the supplier selection criteria in the Swedish Furniture Industry.