Oskari Seppälä FURTHER DEVELOPMENT OF SUPPLI- ER PORTAL Technology and communication 2014 FOREWORD This thesis was concluded during spring It has been done in co-operation with Wärtsilä Global Logistic

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Oskari Seppälä FURTHER DEVELOPMENT OF SUPPLI- ER PORTAL Technology and communication 2014 FOREWORD This thesis was concluded during spring It has been done in co-operation with Wärtsilä Global Logistic Services, unit of Material Management. The supervisor from Vaasa University of Applied Sciences was Mr. Pekka Ketola. From Wärtsilä my supervisor was Ms. Terhi Ylisirniö, a Process Development manager from Materials Management unit. I would like to express my gratitude for both of them. The idea for the thesis came up in a conversation with Mr. Lauri Somppi, a Strategic Purchasing manager. And I would like to thank Mr. Somppi for that. Mr. Antti Heikkinen and Mrs. Pirjo Simola have been helping with the online survey and I m thankful for them. Doing this thesis has been a great challenge and it has provided to me plenty of knowledge and skills which you surely need to have in today s working life. In Vaasa Oskari Seppälä VAASAN AMMATTIKORKEAKOULU UNIVERSITY OF APPLIED SCIENCES Kone- ja tuotantotekniikka ABSTRACT Author Oskari Seppälä Title Further Development of Supplier Portal Year 2014 Language English Pages 45 Name of Supervisor Pekka Ketola The purpose of the thesis was to develop Wärtsilä Supplier Portal. The developing was done by researching and analyzing the suppliers feedback regarding the Wärtsilä Supplier Portal. The feedback was collected with an online survey. The results were compared to the corresponding survey results from the previous year to observe the trend of the user satisfaction. This thesis is divided into three main chapters: company overview, theoretical framework and the feedback. The theoretical framework of this thesis proceeds logically focusing on the topic of the thesis. The main area concentrated was supply chain management, procurement and e-business in general. Suppliers feedback was carefully analyzed to see the current status and the future development potential. The feedback from the last year was also utilized in this comparison. This gave a possibility to see what has been the trend of the user satisfaction compared to the previous time period. From the collected and analyzed information plenty of considerable improvement proposals came up. Usage experiences displayed some existing problems. New functions related feedback proposed new functions that could be implemented to the Portal. Communication related feedback and feedback comparison gave us the current status of Portal. Keywords B2B, Purchasing portal, Services, Development VAASAN AMMATTIKORKEAKOULU Kone- ja tuotantotekniikan koulutusohjelma TIIVISTELMÄ Tekijä Oskari Seppälä Opinnäytetyön nimi Further Development of Supplier Portal Vuosi 2014 Kieli Englanti Sivumäärä 45 Ohjaaja Pekka Ketola Tämän opinnäytetyön tarkoituksena oli kehittää Wärtsilän toimittajaportaalia. Kehittäminen toteutettiin tutkimalla ja analysoimalla toimittajien antamaa palautetta Wärtsilän toimittajaportaalista. Palaute koostui verkkoympäristöön tehdystä palautelomakkeesta ja viime vuonna kerätystä palautteesta. Verkkoympäristöön tehty palautelomake tehtiin osana opinnäytetyötä. Työ rakentuu kolmesta pääkappaleesta: yrityksen esittelystä, teoreettisesta viitekehyksestä, sekä palautteisiin liittyvästä osiosta. Työn teoreettinen viitekehys etenee loogisesti tärkeimmistä työn aiheeseen liittyvistä ja syventävistä alueista. Nämä alueet ovat toimitusketjun hallinta, hankintatoiminta ja sähköinen liiketoiminta. Toimittajien palaute tutkittiin huolellisesti nähdäksemme missä olemme nyt ja mihin meidän pitäisi suunnata kehitystä. Viime vuoden palautteet olivat myös mukana vertailussa. Niiden perusteella saatiin tietoa siitä, mikä oli jo kehittynyt edellisestä vuodesta. Kerätystä ja analysoidusta informaatiosta on nostettiin esille merkittävimmät kehitysehdotukset. Nämä ehdotukset löytyvät opinnäytetyön loppupuolelta. Avainsanat B2B, hankintaportaali, huoltotoiminta, kehittäminen 2 TABLE OF CONTENTS FOREWORD ABSTRACT TIIVISTELMÄ 1 INTRODUCTION Choosing the subject Research Plan Outcome INTRODUCTION OF THE COMPANY Wärtsilä Corporation Services Material Management Supply Management THEORETICAL FRAMEWORK Supply Chain Management Definition of Supply Chain Management Relationships in Supply Chain Management Advantages and Disadvantages of Supply Chain Relationships Procurement Concept of Procurement The Role of Procurement in Supply Chain Purchasing Process After Sales Service Business to Business Commerce The Terminology in Business-to-Business and the Data Integration Electronic Business Tools SUPPLIER FEEDBACK SURVEY... 28 3 4.1 Background Information Analyzing the Feedback Usage Experiences New Functions Related Feedback Communication Related Feedback Comparing the Feedback of 2014 to Feedback of CONCLUSIONS AND DISCUSSION REFERENCES LIST OF APPENDICES 4 LIST OF FIGURES Figure 1. Revenue generation model 2012 p. 7 Figure 2. Personnel 2013: Divided into human recourse areas p.8 Figure 3. Corner stones of Material Management p.9 Figure 4. Supply chain network p.10 Figure 5. Supply management in Division and Business Lines p.12 Figure 6. Relationships in the supply chain. p.14 Figure 7. The strategic triangle p.17 Figure 8. Porter s Value Chain model p.18 Figure 9. Purchasing process model p.19 Figure 10. The difference between e-commerce and e-business p.24 Figure 11. Usability of the functions. p.29 Figure 12. Usage of similar portals for other customer s p.30 Figure 13. Wärtsilä Supplier Portal against other portals p.31 Figure 14. Technical capabilities p.32 Figure 15. Suppliers contacting Wärtsilä p.33 Figure 16. How the suppliers would like to give feedback p.34 Figure 17. Usability of functions, comparison p.35 5 1 INTRODUCTION 1.1 Choosing the subject This thesis is about developing Wärtsilä Supplier Portal. It has been made for Wärtsilä Global Logistic Services, Unit of Material Management. I have been working at Wärtsilä since May 2013 as an operative purchaser. The supplier portal is quite a new tool for Wärtsilä subcontractors and also for me as a purchaser. Choosing the supplier portal as a subject for the thesis was a logical decision, because the supplier portal is a tool between the subcontractor and the purchaser. Wärtsilä wants to develop the supplier tools together with the suppliers in order to create tools that serve both businesses effectively. 1.2 Research Plan The research of this thesis starts by doing background studies and investigating theoretical literary. Background studies also include making our feedback survey to have information about the user satisfaction concerning the supplier portal. Maybe the most important part of the research was to collect and analyze feedback from the subcontractors. Comparing last year s (2013) feedback to this year s feedback gave a great perspective to what is the trend of the user satisfaction. 1.3 Outcome The main outcome of this thesis was have many qualified and considerable improvement proposals. These proposals include all kind of improvement ideas, what should be removed, what should be added. As the improvement proposals come from single users, it is important to analyze if it is a user or system issue, in order to create a functioning tool for all users. It is also very critical for us to know where we are going. Analyzing the feedback will tell us that. The outcome 6 should also be shown on my expertise and knowledge as a purchaser. This will help me to understand different roles in the supply chain management. 7 2 INTRODUCTION OF THE COMPANY 2.1 Wärtsilä Corporation Wärtsilä provides complete lifecycle power solutions in the marine and energy markets. Wärtsilä Corporation has been divided into three business areas: Ship power, Power plants and Services and into four human resource areas, including also Industrial operations. As it can be seen in Figure 1., Services is the largest business area of Wärtsilä. The total revenue of Wärtsilä in the year 2012 was 4,72 billion euros. /3/ Figure 1. Revenue generation model /8/ Wärtsilä had almost employees, 114 nationalities, 160 offices and 70 countries around the world in the end of Wärtsilä is a public limited company and the shares of Wärtsilä are listed on the Helsinki Stock Exchange. Close to 60% percent of the personnel is under Services (Figure 2.). /8/ 8 In Finland Wärtsilä has over 3600 employees in different locations. Those locations are: Helsinki, Vaasa, Espoo and Turku. Wärtsilä headquarters are located in Helsinki. Figure 2. Personnel 2013: Divided into human resource areas. /3/ 2.2 Services Wärtsilä will support its customers throughout the lifecycle of their installations. Wärtsilä provides wide portfolio and services for shipping and power generation. This portfolio includes training, spare parts, technical support and maintenance. Key drivers on the market are increased focus on total cost of ownership and lifecycle efficiency, growth of gas as a fuel in both shipping and power generation, accelerating technological development and cost pressure which increases demand for expertise. /8/ Material Management The Wärtsilä Global Logistic Services material management includes: 9 Inventory & planning Strategic purchasing Operational purchasing The main objective of material management is to have right parts available in the right quality and quantity while minimizing inventory value. The material management is based in 10 locations: Winterthur, Trieste, Drunen, Zwolle, Surgères, Mulhouse, Vaasa, Busan, Turku and Rubbestadneset. The corner stones of Material Management can be seen in Figure 3. Figure 3. Corner stones of Material Management. /10/ The strategy of Material Management is to focus on problem solving and simplification on order to gain speed, flexibility and efficiency. /10/ Supply Management The purpose of the Wärtsilä Global Logistic Services Supply Management is to manage all the supplies according to the specific requirements of the Division and Business Lines specific. This can be seen in the Figure 4. There are for example right quality, lead time and cost. 10 The roles of Supply Management: Management of strategic sourcing Creating, developing and managing the supply chain Managing supplier agreements: quality, reliability, lead time and cost Securing supplier capacity and qualification Managing supplier development /14/ Figure 4. Supply management in Division and Business Lines. /14/ 11 3 THEORETICAL FRAMEWORK 3.1 Supply Chain Management The objective of this chapter is to introduce supply chain management. Different definitions and basic principles are presented. How the relationships effects on the supply chain advantages and disadvantages are explained. The structure of supply chain is also introduced Definition of Supply Chain Management The easiest way to define a supply chain would be: a few companies that process materials and at some point they reach the customer. However, the supply chain management is a wider concept than this. The supply chain management has been defined by Christopher: The management of upstream and downstream relationships with suppliers in order to deliver superior customer value at less cost to the supply chain as a whole. /2/ Terms upstream and downstream comes from the analogy of water flow in a river. Upstream means organization s nearby source and downstream means organization s nearby the end-customer. Each partner is responsible for adding value to a product. /6/ Some companies use the supply chain management to differentiate between the outgoing and incoming material flows. Outgoing material flows relates to the products that are distributed by the company to its customers. This is known as physical distribution. Incoming material flows covers all activities needed from supplier to consumption within the company itself. This is known as materials management. However, the scope of supply chain management goes one step fur- 12 ther. It also takes into consideration optimizing the material flows from the supplier s supplier. /15/ Even though the supply chain management is often the term that is mostly heard it could be also called demand chain management. This reflects to the fact that the chain is driven by market instead of suppliers. Also the word chain could be replaced by word network. That leads to a definition: a network of organizations cooperatively working to control, manage and improve the flow of materials and information from supplier to end-user. /2/ Figure 5. Supply chain network. /2/ The seven basic principles of supply chain management: 1. Segment your customers based on the service needs and adapt the supply chain to serve these segments profitably. 2. Customize the logistics network to the service requirements and profitability of customer segments. 3. Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation. 4. Differentiate product closer to the customer. 13 5. Manage sources of supply strategically. 6. Develop a strategy that supports multiple levels of decision making and gives a clear view of the flow of products, services and information. 7. Adopt performance measures to gauge collective success in reaching the end-user effectively and efficiently. /1/ Relationships in Supply Chain Management One of the basic assumptions of supply chain management is that the companies involved in the supply chain are willing to work close together and to develop partnership relationship. /15/ The impact of a specific supplier relationship depends on how it fits into the company operations and strategy. There is a number of technical, commercial and organizational solutions in a supplier relationship that affects the costs and the benefits of both companies. /5/ David Ford has examined the buyer-seller relationships in industrial markets. His view is that the relationship will develop as a process through time. Product and process technologies of the two companies are the most important factors when determining the nature of the relationship. When a company evaluates potential suppliers there is not any commitment in the beginning of the relationship. The evaluation of the new supplier consists of three factors: experience, uncertainty and distance. The new supplier will be judged through experience which comes from the current and previous relationships. The buyer will face uncertainty of potential costs and benefits when dealing with the new supplier. The distance between buyer and seller has several aspects: Social distance: unfamiliar way of working Cultural distance: differences in the norms, values and ways of working Technological distance: product and process differences 14 Time distance: the time from placing the order to the moment when the product is delivered. Geographical distance: physical distance of the companies Ford has also stated that the development of buyer-seller relationships can be seen as a process where the experience increases, uncertainty and distance reduces, commitment grows and they adapt to each other in terms of investments and savings. /4/ Figure 6. Relationships in the supply chain. /15/ The supply chain in this diagram can be seen as number of processes and connections that extend across organizational boundaries. The focal firm is the controller in this supply chain and it must manage the whole chain: Purchasing and supply deals with the focal firm s immediate suppliers. Physical distribution deals with the first tier customers. 15 Logistics refers to materials and information management. Inbound logistics deals between the focal firm and the first tier suppliers and outbound logistics deals between the focal firm and the first tier customers. /6/ Advantages and Disadvantages of Supply Chain Relationships The relationship within the supply chain must provide at least the following results: Improved quality Increased flexibility Shorter delivery times Faster implementation when changes on a product Increased reliability of deliveries Reduced stock levels Lower prices Process and product innovations Increased communication /15/ There can be also disadvantages within the relationships. The supplier can become very dependent on only one manufacturer. And if the circumstances have changed after a long-term contract it may result to the end of a relationship. /15/ It can also lead to the point that small and medium-sized enterprises ends up holding the inventories. /6/ This of course affects negatively to profitability of those small and medium-sized enterprises. 3.2 Procurement This chapter will define the procurement and the related main functions. In the first chapter the concept of procurement is presented. Then the role of procure- 16 ment is explained. Lastly, the purchasing process will be introduced as a complete process from specifying to evaluating Concept of Procurement Weele has defined procurement as managing the company s external resources in a way that the supply of all goods, services, capabilities and knowledge which are necessary for maintaining and managing the company s primary and support activities is secured at the most favorable conditions. /15/ Generally the aim of the procurement is to make sure that the organization has the supply of the needed materials secured. Procurement makes a connection between a company and a supplier. In addition, Weele has listed some key activities of procurement: Determining the purchasing specifications of the goods that need to be bought (quality and quantity) Selecting the best possible supplier Preparing and concluding negotiations with the supplier Establishing agreements and legal contracts Placing the orders to the selected suppliers Monitoring and controlling the orders Follow-up and evaluations (settling claims, keeping product and supplier folders up to date) /15/ The Role of Procurement in Supply Chain Procurement makes a connection between a company and a supplier. This is presented in Figure 7. There are three stakeholders in the strategic triangle and tool for every stakeholder for handling the relationships: 17 1. Primary customers. Products and services have to be tailored to the needs of more differentiated customer target groups, which require specific market strategies. Tool: marketing. 2. Major competitors. Companies must not only be able to respond to customer needs. They have to have competitive advantage. Tool: benchmarking. 3. Major suppliers. Companies have to continuously review company s core activities. Supply chain strategies need to be developed. Tool: sourcing. According to Weele, there are some authors that have added a fourth group of stakeholders, named employees or unions. /15/ Figure 7. The strategic triangle. /15/ 18 Business strategies are often based on Porter s value chain model. The value chain model assumes that the company s earnings come from the functions of the company as a common achievement. There are two types of functions on the model: 1. Primary activities: Inbound logistics, operations, outbound logistics, marketing & sales and service. These are the functions that focus physically to the products which will be delivered to the customer. 2. Support activities: Firm infrastructure, human resource management, technology development and procurement. These functions enable and support the primary activities. /15/ Figure 8. Porter's Value Chain model. /12/ The function of the procurement refers to purchasing inputs used in the value chain, not to the purchased inputs themselves. These purchased inputs include raw materials, supplies and other consumable items, as well such assets as machinery, buildings, and laboratory and office equipment. /12/ 19 The examples show that the purchased inputs may be related to both activities. According to Weele, this is one reason why Porter classifies procurement as a support activit
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