• Ingen resultater fundet

Determining Sourcing Strategies

6. Analysis

6.4 Determining Sourcing Strategies

extremely difficult to formulate a strategy on a category basis for dairy products, since the category involves a multitude of suppliers and products that need to conform to national brands and customer preferences (Interview 2, pg. 8). This contributes to the complexity and number of PDs that CT has to handle.

(Gelderman & Van Weele, 2003). Furthermore, the theoretical framework proposes the sourcing approach of spot markets, which CT does not directly rely on as way to purchase their products.

On the other hand, the buyer is working on preapproving more suppliers for organic potatoes positioned in the bottleneck quadrant. This is not only to secure supply and reduce the risks of single sourcing, but also because index numbers derived from the current situational overview indicate an increasing demand of organic potatoes especially in Denmark and in Sweden. Similarly, the buyer is also searching for alternative suppliers for cottage cheese and allergy products in order to reduce dependency on the suppliers for these products. Consequently, the buyer is to a certain extent employing a diversification strategy, where volumes are currently concentrated in a single supplier (Kraljic, 1983). Furthermore, it can be argued that the buyer is also pursuing a long-term diversification strategy by investing time in looking for alternative sources of supply. Nonetheless, inventory and backup plans are not explicitly considered and the bottleneck quadrant does not constitute that one sourcing approach should be used prioritized over another as it is initially proposed in the theoretical framework.

Regarding barbeque potatoes positioned in the strategic quadrant, CT has formed a strategic alliance with the supplier. This largely conforms to what is stated in the theoretical framework, which emphasizes that partnerships and long-term relationships should be established with suppliers for strategic products. However, whether products are positioned in the strategic quadrant or not does not affect whether a buyer will engage in a long-term or cost-based contract as suggested in the theoretical framework. Furthermore, the buyer is working on preapproving more suppliers for barbeque potatoes and this strategic initiative deviates from theory. On the other hand, for the product of milk, CT currently attempts to reduce its dependency on Arla by searching and approving new suppliers and is thus unsure whether to consider milk as strategic or leverage. Possible strategic movements and perspectives on Arla as a supplier will be elaborated further in the following sections of the analysis.

As previously mentioned, each buyer has their own preferences and way of buying. Some buyers prefer to purchase agricultural commodities through e-auctions, while others favor the more traditional way of utilizing the phone to contact suppliers and some buyers use a combination of

those methods. However, CT relies on a framework purchasing agreement, if the tendering process is used. This includes firstly reviewing the Scanmarket by sending out a RFQ in order to screen prices and request quotations in order to ultimately establish the fact base (PPT About Coop Trading). Relevant documents are then submitted through the Scanmarket, including logistical specifications, which are specific to the respective countries, product and quality requirements, and code of conducts. Quick guides for logistics labels are also sent and depending if the tender requires samples, CT might request samples to be tested (PPT About Coop Trading).

Nonetheless, the strategic buyer does claim that some conditions need to be fulfilled in order to use certain approaches. Aligned with theory, the strategic buyer claims that competition in the form of number of suppliers needs to exist in order to perform a successful e-auction. In addition to this, the buyer also asserts that the difference in prices offered by bidders need to be close enough to generate enough pressure for obtaining the most optimal price. The buyer explicitly states that if this does not occur then suppliers will in general “enter a new price and a new price – and it won’t get close to the first price that the first supplier entered” (CT Interview 1, pg. 19).

In addition to the sourcing approaches being determined individually by buyers, the risks and conditions that seasonality impose also significantly affect the manner in which frozen potatoes are sourced. As previously mentioned, this is considered when products are grouped in categories.

In fact, the reliance on long-term and fixed price contracts for frozen potatoes does not change based on whether not a specific frozen potato product is bottleneck or strategic. As previously justified, using and renewing long-term and fixed price contracts is instead based upon harvesting patterns and the avoidance of re-purchasing potatoes at higher prices. Consequently, harvesting patterns for the category of frozen potatoes largely require buyers to engage in forward buying.

Furthermore, the strategic buyer argues that because of the risks that seasonality imposes, it is important that CT does good tendering, inform, and prequalify suppliers in order to have the exact specifications and expectations aligned when the last negotiations are initiated in the middle of May (CT Interview 1, pg. 2).

However, for dairy products, macroeconomic factors and regulations can mediate the extent and direction which prices fluctuate. For instance, in the case that prices are are forecasted to remain

low, CT is incentivized to pursue the usage of fixed price contracts for a significant period of time.

However, the supplier in question will most likely not be inclined to enter such an arrangement and thus a compromise of three to six month open-end contracts, which can be changed will mostly likely be agreed upon (Interview 2, pg. 9).

Overall, CT mainly relies on the sourcing approaches of tendering, e-auctions, alliances and partnerships, short-term and long-term contracts, as well as open end and fixed-price contracts.

Deviating from the theoretical framework, CT does not seem to be utilizing the spot market and cost-based contracts when sourcing agricultural commodities. It can be argued that CT does not rely on the spot market because it sources products that are intended for its private label brands. This requires a certain degree of negotiation on especially quality requirements and in terms of product descriptions. This is especially important in order to conform to customer preferences, which can differ from country to country and in attempting to harmonize these differences in order to benefit from volume bundling and production economies of scale on the part of suppliers.

Open end contracts are also commonly used and such contracts can be changed either on a three, six, or twelve-month basis, depending on what CT and the supplier agrees upon. However, the buyer argues that three-month open end contracts are not particularly useful, since changes are rarely integrated before re-negotiations must be done again. In general, open end contracts require awareness of market developments on the part of both CT and the supplier in question and this can sometimes be challenging especially with products situated in the routine quadrant. Lastly, cost-based contracts are not used by CT due to reasons related to competitiveness.

6.5 Supplier Perspectives: The Dutch Windmill Model versus the