Selecting your suppliers

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Selecting your suppliers

-The development of a structural procedure for the establishment of more

cooperative relationships with selected suppliers-

-A research performed at Abbott Olst-

Master thesis Operations and Supply Chain

Stef Beltman

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Selecting your suppliers

-The development of a structural procedure for the establishment of more

cooperative relationships with selected suppliers-

-A research performed at Abbott Olst-

Author Stef Beltman Student number: 1839659 E-mail: stefbeltman@gmail.com Ossenmarkt 113 8011 MT Zwolle The Netherlands Abbott Olst

Supervisor: Jeannette Vos Procurement manager

E-mail: jeannette.vos@solvay.com Veerweg 12

8121 AA Olst The Netherlands

University of Groningen – Faculty of Business Administration Master: Operations and Supply Chain

Supervisor: Dr. J.T. van der Vaart E-mail: j.t.van.der.vaart@rug.nl Co-assessor: Prof. Dr. D.J.F. Kamann E-mail: dirkkamann@yahoo.ca Netelbosje 2

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Pre face

After six months of work I am able to present you this master thesis which elaborates on the research project I performed at Abbott in Olst. Between February 2010 and July 2010 Abbott Olst granted me the opportunity to develop a structural procedure for the establishment and

management of more cooperative relationships with suppliers. This research was performed to finish the master Operations and Supply Chain at the University of Groningen.

During a research process like this you are not always fully aware of the help and support you are receiving. But now the project is finished it is time to dwell on the fact that this thesis could not have been finished without the help of a couple of people. Therefore I would like to take some time to thank them.

First of all I would like to thank the Abbott organization in Olst and all the employees who supported me throughout this research. Due to a take-over employees in Olst were confronted with huge uncertainty considering their professional future. Still everyone was prepared to assist and support me when necessary and the business atmosphere remained remarkably pleasant. In particular I would like to thank the members of the supply support team: Jos van Duuren, Co Stempher and Jeannette Vos. Without their help this research would not have been possible. My company supervisor Jeannette Vos deserves an extra compliment as she contributed to this thesis in challenging feedback sessions. Finally I would like to thank Anja Oudshoorn for her assistance in the process of acquiring a real job at another facility of Abbott.

Moreover I would like to thank both the supervisor as the co-assessor from the University of Groningen for their assistance and support during this research. Although my research design was not the most usual supervisor dr. J.T. van der Vaart was able to provide me with useful feedback considering literature and the direction of my research. Co-assessor Prof. dr. D.J.F. Kamann found the time to provide assistance and to monitor the progress of this research. Performing this research was a great opportunity and experience for me to relate theoretical knowledge to a practical situation. This was a challenging experience, but at the end of the process I can honestly say I have learned a lot.

Please enjoy the reading. Stef Beltman

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Management summary

Abbot Olst is currently confronted with developments in business which are putting pressure on their sale prices and profit margins. These business development include the increased share of generic medicines and increased power of insurance companies and governments. As a result Abbott Olst is forced to critically review their performance.

The OEMA analysis indicated that the performance and relationship with suppliers offers significant room for improvement. Analysis of the quality discrepancies, the OTIF delivery and the performance level of the procurement department confirms these statements. Therefore the management in Olst decided to develop a research project with the following objective:

“The design of a model to facilitate the process of selecting, establishing, and managing more cooperative relationships with suppliers.”

The line of reasoning supporting this project is as follows: the establishment of cooperative relationships with suppliers is supposed to contribute to the competitive performance of Abbott Olst and their suppliers. Cooperative relationships with suppliers are typified by long term mutual commitment and shared actions to improve performance. In order to succeed in this research objective a scientifically grounded selection model was developed. Goal of this model was to assist decision makers in the selection process considering suppliers. This model was used to gather and analyze data about the improvement possibilities at suppliers. By establishing more cooperative relationships with suppliers Abbot Olst could gain financial, quality and HSE improvements.

The facilitation of this process is executed by a supply support team. The supply support team consists of representatives of the logistical, quality and technical support department. By doing so the knowledge and interest of the organization is represented in the process. By establishing a multi departmental team valuable information about suppliers is discussed and shared between departments. This structural method to create multi departmental communication and

information sharing has been praised by the supply support team members.

At the end of this research process, outcomes of the selection model and discussions in the supply support team proved that Supplier 7 is the perfect candidate for a pilot project. Supply support team members indicated that the development of improvement initiatives offers room to obtain a financial improvement of €80.000. Moreover quality and HSE improvements are reported as well. As a result an action plan has been developed for Supplier 7. The action plan for Supplier 7 functions as a pilot for the establishment of cooperative relationships and the development of cooperative initiatives with selected suppliers by the supply support team.

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Abbreviations

• AHP = Analytical Hierarchy Processing

• AIDC = Automatic Identification and Data Capture • API = Active Pharmaceutical Ingredient

• BOGIN= Bond Generieke Medicijnmiddelen Industrie Nederland • HSE= Health Safety Environment

• MRP = Material Resource Planning

• NEVI= Nederlandse Vereniging voor Inkoopmanagement (Dutch Foundation of Purchasing Management)

• OEMA = Operational Excellence Maturity Analysis • OTIF = On time in full

• PDCA= Plan Do Check Act

• POP = Policies Organization Structure Processes • RFID = Radio Frequency Identification

• SCM = Supply Chain Management

• SFK = Stichting Farmaceutische Kerngetallen (Foundation Pharmaceutical Key Numbers) • SMED= Single Minute Exchange of Dies

• SOI=Supplier Owned Inventory • TCO = Total Cost of Ownership • WGP= Wet Geneesmiddelenprijzen

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1. Introduction

This report is the end result of master thesis research project performed at Abbot Olst. The goal of this project was the development of a structural procedure for the establishment and

management of more cooperative relationships with Abbott’s suppliers.

Chapter two of this report is used to elaborate on the organization context this research was performed in. This way readers are provided with the opportunity to get acquainted with the organizational setting and business processes at Abbott Olst.

Chapter three is used to explain the initial motive of this research. First of all a discussion about recent business developments in the pharmaceutical industry is presented to clarify on the initial motive relating to this research. Secondly the actual performance at Abbot Olst is analyzed in order to explain that the current performance in Olst justifies the development of a research project. Finally the research objective and criteria will be presented. This includes the introduction of questions which were used to structure the research paper.

Chapter four is used to present a theoretical reference framework which provides information about the different aspects relating to this research project. This chapter starts by discussing the general focus on supply chain management used nowadays which could be seen as a first impulse for this research project. After this discussion on a general level key topics relating to the field of purchasing and supply management are discussed.

Chapter five is used to present the methodology used in this research. A design research project can be framed in different ways, depending on the point of view of the researcher. Therefore interested readers should be offered the opportunity to assess the line of reasoning used in a research. With this consideration in mind, an extensive explanation about choices made in every research step is offered in this chapter.

Chapter six is used to describe the actual content and working of the selection model. This includes a presentation of the different elements of the model. Moreover an explanation is offered about the argumentation which was used to design the different elements of the model.

Chapter seven is used to present final results. These results are based on the outcomes of the model, but additionally information will be provided about aspects which were discussed during the final supply support team session.

Chapter eight is used to interpret and discuss the results of this research project. This chapter includes a discussion about the applicability of the model, a discussion about the results and a discussion about the research project itself. Finally recommendations will be provided to Abbott Olst.

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2. Organizational context at Abbott Olst

This chapter will be used to elaborate on the organizational context this research project was performed in. This way readers are provided with the opportunity to get acquainted with the organizational setting and business processes at Abbott Olst.

The first section will be used to explain the history of the site of Abbott in Olst, moreover the characteristics and structure of the current organization will be presented. In the second part the impact of legal requirements on processes is discussed. The third section will be used to present the characteristics of three departments which were closely involved in this research project. Section four will elaborate on the products which are produced in Olst. Section five is used to describe the characteristics of Abbot, the new owner of the site in Olst. Finally in section six a recap of this chapter is provided.

2.1. History Abbott Olst

Abbott’s production site in Olst has a long history of (former) owners. They will be presented shortly in the next session. Moreover the characteristics of the current organizational setting are presented.

Roxane

The production site in Olst was established in 1938 when a pharmaceutical company called Roxane moved into an empty cold meat manufacturing site. The established infrastructure at the manufacturing site in Olst was well fitted to produce Roxane’s pharmaceuticals. Roxane’s main product during their first production years was insulin.

Philips Duphar

Starting in the Second World War the Dutch pharmaceuticals department of Philips started a process to acquire Roxanne. Between 1942 and 1948 Philips was able to acquire the entire

company. Until 1980’s the site in Olst was used to mix and pack liquid and solid pharmaceuticals for the Philips Duphar group. During this period the processes at the site in Olst were

mechanized. The availability of knowledge and expertise about electronics in the Philips organization was used to manage these new processes.

Solvay

In 1980 Philips decided to change their business strategy into a core competency focus on the electronics business. The pharmaceutical branch of the organization was put out for sale. The Solvay Group acquired all of the shares. As a consequence the Solvay Group adapted the Duphar sites of Philips in their pharmaceutical sector. Apart from a pharmaceutical sector, The Solvay Group consisted out of a chemical and a plastic sector at that time.

The pharmaceutical sector of the Solvay Group consisted out of nine manufacturing sites worldwide. Central headquarters in Brussels was responsible for coordination and

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While being part of the Solvay group the production site in Olst developed four distinct processes focused on the filling and packaging of the following products: lactulose, hormones, mebeverine and vaccines. The active pharmaceutical ingredients (API) of these products are produced in other Solvay facilities. The filling and packaging of influenza vaccine has been qualified as the most important process in the production site in Olst. The production site Olst employed 240 FTE in 2009 and distributed its products in 66 countries worldwide.

Figure 1: Production sites in the pharmaceutical sector of the Solvay Group

Figure 2: Organogram Abbott Olst, as valid on 01-06-2010

2.2. Good manufacturing and distribution practices

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to safeguard public health1_{. GMP and GDP legislations require pharmaceutical companies to}

dedicate extra time and resources to extensive quality control procedures and activities.

2.3. Departments

This section will be used to elaborate on the three departments which were closely involved in this research project. General information about these departments is presented to provide background information about the organizational context of this research. The contacts between representatives of these departments and suppliers are discussed in more detail.

Logistical department

The logistical department is the department which is responsible for supply chain management in Olst. This supply chain management process consists out of 5 disciplines: procurement, warehouse, pre-press, scheduling and customer service.

The warehouse is responsible for the following tasks: processing of the physical logistical processes (receipts, storage and shipping) for products and waste; sampling and weighing of raw materials and active pharmaceutical ingredients and the internal transportation between the warehouse and production site in Olst. The warehouse in Olst contains on average between €X and €X million worth of inventory2_{, which is stored over approximately 10.850 locations. Inventory reach}

is on average 3,5 months3_{. Due to GMP and GDP policies quality control procedures in the}

warehouse in Olst are more extensive compared to common procedures in other warehouses. The procurement department takes care of the process of buying required goods and services to achieve the targets of the manufacturing site in Olst. The procurement department in Olst is supported by a global purchasing department which is coordinating business from Basel. This global department is responsible for the negotiation of yearly contractual agreements with suppliers about prices and delivery quantities. The procurement department in Olst is

responsible for the functional handling of the purchasing process. Among its responsibilities are the handling of acquisitions, placing of orders and handling of complaints. Recently the

procurement department has decided to expand its activities by focusing on a new aspect of procurement: strategic supply management. Between April 2009 and April 2010 the purchasing portfolio had a reach of € X.

The pre-press department is responsible for the preparation of new and changed printing material. Yearly customers adapt the lay-out and text of the packaging of their products. In close

cooperation with customers and suppliers the pre-press departments develops and adapts packaging according to customer requirement and internal technical requirements.

The scheduling department is responsible for the alignment between available resources and capacity to a 12 months rolling demand forecast. Production planning is facilitated by the usage of production cycles. The scheduling department is also responsible for ordering of long term materials, which is based on a Parrot Plan (a project which resembles the economic order quantity ordering procedure). The scheduling department uses SAP to manage capacity,

1_{http://www.pharmpress.com/shop/product_display.asp?ProductID=9780853697190} 2_{Distracted from the financial administration}

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inventory levels and product recipes. In the current organization setting logistical integration between Abbott Olst and suppliers is to a large extent lacking.

The customer service department is responsible for management of the delivery process to customers. The customer service department’s main responsibility is the delivery of the right quantity of products at the right time and under the right conditions. Activities associated with the customer service process are planning and coordination of transport and administrative control.

Technical support department

The technical support department is responsible for the realization of capital investments, machine optimization, process optimization, packaging developments and planned maintenance. These responsibilities typically result in long term projects focused on optimization. Projects require close cooperation with internal and external stakeholders. Of special interest for this research project is the optimization of packaging products and processes. The technical support department focuses on the development of performance by the use of continuous improvement project in cooperation with internal and external stakeholders.

Quality department

The quality department is responsible for control and improvement of quality levels throughout the business processes in Olst. In the pharmaceutical industry assurance of quality is of great importance. Both legal requirements (GMP/GDP) as customer demands require companies to produce and distribute according to the high quality standards. Compliance to quality specifications requires Abbott Olst to devote resources and time to quality actions. As a result quality control and assurance have a high impact on the lead time as displayed in figure three:

Product Quality Control Total lead time Share of quality control

Lactulose 15 days 32 days 45,5%

Hormone 9 days 33 days 27,3%

Figure 3: Order fulfillment lead time, adapted from Supply Chain KPI's 2010 –Abbott

In Olst different disciplines have their own responsibilities and tasks to control and improve quality of products and processes.

The quality control department is responsible for control of quality by publishing release

notification of raw materials, semi finished goods and finished products when products comply with original product specifications. Progress of the process depends on validation through release notifications. Activities consist out of microbiological testing of materials and control of the administrative documents which accompany products.

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Based on risk assessment suppliers are categorized and certified, resulting in required auditing and control procedures. Suppliers are categorized in the four types, with accompanying control and audit procedures as presented in figure four.

Supplier class Products

A Active pharmaceutical ingredient; semi finished goods; finished goods. B Primary packaging material; filters; printed secondary packaging material C Critical services: validation and calibration; storage and transport; GMP cleaning D Non critical material: non printed secondary packaging material and non critical

services

Figure 4: Supplier classification, adapted from auditing procedure Abbott Olst

2.4. Products

The production process in Olst is focused on the filling and packaging of API. Production typically consists out of two stages: filling and packaging. In the filling stage the bulk of API is distributed and filled in primary packaging. Primary packaging is the package that holds the API that is being processed. In Olst the different active product ingredients are filled in syringes, capsules, flasks, bottles, blisters and sachets. After products are filled secondary packaging is added in the packaging stage. In this stage the primary package is put into printed secondary packaging like carton boxes and medical enclosures are added. In the final packaging stage products are put into outer boxes. A visualization of the different process stages is presented in figure five. Product groups currently produced in the Olst site will be discussed shortly in the next session.

Lactulose

Abbott produces lactulose under the Duphalac brand name. The API in Duphalac is lactulose. Lactulose is used for patients with constipation. Duphalac liquid is produced in bottles, containers and sachets.

Mebeverine

Abbott produces mebeverine under the Colofac Retard brand name. The API in Colofac Retard is mebeverine hydrocholoride. Colofac Retard is used for patients who suffer from abdominal pain and cramps, bowel disturbance and intestinal discomfort related to irritable bowel syndrome. Colofac Retard is produced in capsules.

Hormones

Abbott produces female sex hormone under the Femoston brand name. The API in Femoston is estradiol (also known as oestradiol) and dydrogesterone. Femoston is used as a hormone replacement therapy for women with disorders caused by natural or surgically induced menopause. Femoston is produced in tablets.

Primary package Printed secondary package: Box Printed secondary package: Enclosure Secondary package: Outer box

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Influenza vaccine

Abbott produces influenza vaccine under the Influvac brand name. The API in Influvac is antigen of influenza strains. Antigens are propagated in fertilized hens’ eggs. Filling of Influvac has to take place in a completely sterilized environment. Influvac is used as prevention for influenza, especially for those who run an increased risk of associated complications. Influvac is produced in prefilled syringes.

Marketing injectables

Abbott Olst has capacity available on its sterile manufacturing site which is used to produce marketing injectables. Abbott Olst functions as a contract filling and packaging producer for syringes. Third parties supply Abbott with API and corresponding packaging. Abbott takes care of the packaging and filling for these companies as packaging and filling of API requires high levels of expertise and technology.

2.5. Integration with Abbott

In 2009 Solvay announced a focus of their activities and investments in their chemical and pharmaceutical sector. Future investments in value added activities and strategic projects should be made available by the proceedings of the sale of their pharmaceutical sector. During 2009 Solvay and Abbott developed an acquisition plan which was completed in February 2010 after antitrust clearances had been obtained. The sale of Solvay was closed for a value of € 5.2 billion. This section will be used to present background information about the organizational structure and characteristics of Abbott. In the remaining part of this report the production site in Olst will be referred to as Abbott Olst.

Abbott’s products are marketed in more than 130 countries worldwide and represented a turnover of approximately € X billion in 2009. Abbott has four main areas of business which are displayed with its accompanying product groups in figure six.

Medical devices Pharmaceuticals

Diabetes Care Animal Health Vascular Spine Laboratory Diagnostics Molecular Point of Care Healthy Living Medical Nutrition Pediatric Nutrition Diagnostics Nutrition Anesthesia Anti-Infectives Cardiovascular Immunology Metabolics Neuroscience Oncology Pain Care Renal Care Virology Figure 6: Overview of business areas at Abbott (before acquisition of Solvay)

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With the acquisition of Solvay Abbott achieved a stronger market position. At the moment an integration team is working on integration and exchange of best business practices. The actual transition from two separate businesses towards one integrated organization is expected to require a high amount of time due to differences between both organizations and systems. Completion is not expected before 2011. For the time being both organizations operate

independent from each other, but the name of Abbott is already used in the former Solvay sites. In the Netherlands the new Abbott organization will employ approximately 2300 people in nine facilities. Dutch Abbott facilities are responsible for the sales and marketing, distribution, research and development and production of Abbott’s products. The facilities are visualized in figure seven.

Figure 7: Abbott facilities

2.6. Recap

To conclude this chapter a short overview will be provided about the contents of this chapter. The organization setting at the pharmaceutical manufacturing site in Olst has changed many times. In general it can be concluded that the site in Olst has been owned by different

multinationals. Nowadays the site in Olst is owned by multinational Abbott. The production site in Olst currently employs 240 people and distributes its products in 60 countries. The site in Olst produces lactulose, mebeverine, influenza vaccines and marketing injectables products. The processes in Olst are to a large extent influenced by regulations considering quality requirements, which are called GMP and GDP.

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3. Defining the research project

This chapter is used to introduce the research project performed for Abbott Olst. The purpose of this chapter is to provide the reader with a clear picture about the motives, objectives and expected products of this research. Moreover this chapter intends to structure the research paper by presenting questions relating to the different chapters.

In the first section background information about the initial motive for this research project will be provided. The motive for this research can be related to general developments in the

pharmaceutical industry and more specific motives issues at the site in Olst. General business developments will be discussed in the first section, while the issues in Olst will be discussed in section two. Based on the different motives for this research project research objectives and criteria were developed. This includes the introduction of questions which were used to structure the research paper. They are discussed in the second session of this chapter.

3.1. Initial motive for research: developments in the pharmaceutical industry

Pharmaceutical industries traditionally focused their resources and investments in research and technology and quality projects. This was required as customer required innovative products which complied to the highest standards. Moreover margins where usually high as sale prices were protected by patents. As a result the efficiency and effectiveness in pharmaceutical manufacturers was traditionally low compared to other industries. A graph by the NEVI which dates back to this period visualizes this in figure eight:

Figure 8: Performance in different industries, adapted from NEVI handbook (2000)

Nowadays pharmaceutical companies are increasingly devoting effort to the improvement of efficiency and effectiveness. This section will be used to discuss recent developments which changed the market environment and focus in the pharmaceutical industry. After a discussion of these general developments the situation at Abbott Olst will be discussed in more detail. Developments in pharmaceutical industry

Traditionally the pharmaceutical industry was characterized by high profit margins. Due to rising living standards, long life expectancies and a demographic expansion in older segments of the population the prospects of the pharmaceutical industry were valued as prosperous around 20004_{. However due to different market developments profit margins in the pharmaceutical}

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the Netherlands. Between 1996 and 2009 average prices on the Dutch medicine market decreased with 50 %.

Figure 9: Price development average medicines, adapted from the SFK year report 2009

The developments which caused the decrease of prices on the medicine market will be discussed in more detail. Developments and figures are mainly distracted from the situation on the Dutch medicine market, however the example of the Dutch market resembles the situation in other countries as well.

• Increased share of generic medicines

On the pharmaceutical market two different types of products are sold which distinctly differ from each other.

On the on hand spécialité products are sold. Spécialités are medicines which are based on an API which was developed by the manufacturer of the drug. As development of medicines requires a considerable amount of time and resources spécialités are protected by patents. During the patent term no other manufacturers are allowed to produce and sell medicines which contain the same API. This policy is developed to stimulate research and development activities in pharmaceutical companies. Thanks to patents innovators have a certain payback time for their investments in research and development.

On the other hand generic medicines are sold on the medicine market. Generic medicines are the therapeutical equivalent of original medicines with an expired patent as they contain the same API. As manufacturers of generic medicines use an established API they can save on research and development activities, resulting in lower sale prices. The main strategy for generic manufacturers is to produce as lean as possible. According to the Bond Generieke Medicijnmiddelen Industrie Nederland (BOGIN) prices of generic medicines are 20% till 80% lower than original medicines5_{. The market share of generic medicines has increased over}

time, and generic medicines are nowadays generally accepted as figure ten shows.

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Figure 10: Usage of medicines in Netherlands. Based on prescriptions. Figure is adapted from year report SFK (Stichting Farmaceutische Kerngetallen)

• Increased power of insurance companies and governments

In 2006 the Dutch government introduced the Wet marktordening gezondheidszorg (Wmg). This law is a result of the governmental strategy focused on the development of an

increasingly efficient and effective healthcare system. This efficiency and effectiveness is expected to be gained by allowing more market power in the healthcare sector. The Wmg provides insurance companies and governments more control over the usage of medicines. Governments and insurance companies determine which medicines are compensated when prescribed. Selection of compensated medicines is based on different variables, from which price is an important one. This forces pharmaceutical manufacturers to decrease their prices.

• Government pricing policies

In 1996 the Wet Geneesmiddelenprijzen (WGP) was implemented by the Dutch government. The essence of this law is a price policy which requires manufacturers to adapt their Dutch prices to the levels in surrounding countries: England, France, Belgium and Germany. According to SFK prices of medicines have decreased with 15% since 1996 due to this

regulation. These explicit price control policies are implemented in virtually all industrialized nations (2004) to check against the pricing power of pharmaceutical companies and keep medicines affordable. Moreover high volume buyers like governments in the United States, Canada, Europe and Japan are demanding discounts for their large volume consumption6_.

As a logical consequence of the decreased sales price in the pharmaceutical supply chain pharmaceutical manufacturers like Abbott are confronted with decreasing margins. As prices decrease companies are forced to improve their performance. First of all this is required to improve margins during the patent protected payback period of spécialité medicines. Moreover increased performance provides pharmaceutical manufacturers the opportunity to be more competitive after the patent on their more mature spécialités has passed.

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3.2. Initial motive for research: performance at Abbott Olst

Assessment of the performance in Olst: Operational Excellence Maturity Analysis

Yearly every Abbott site is assessed by a global operational excellence team. In this Operational Excellence Maturity Analysis (OEMA) a team assesses the management infrastructure, technical system, mindset and capabilities of a site. The results of this year’s assessment were used by the management team to develop improvement projects.

Considering logistics and procurement a relative low level performance at supplier related items was identified in the OEMA. Specifically the OEMA showed that current supplier performance and the current level of partnerships with suppliers could be improved to a higher more integrated level as visualized in figure 11.

Item Current score Characteristics Desired / mature score Characteristics Supplier performance

1,5 Material identified before use.

Annual meetings with suppliers.

Shared yearly feedback.

4 Materials are time, on-quantity and on-costs. Performance is continuously improved.

Low level of quality control on supplied products. Supplier

partnerships

2 Some evidence of strategic partnerships wit suppliers. Some evidence of openness to new concept of

purchasing.

4 Partnerships as a strategic weapon.

Suppliers are viewed as business partners with transparent lines of communication.

Figure 11: Scores from OEMA 2009

Management at the site in Olst acknowledged the correctness of these observations. Additional information was gathered to support these observations. These will be discussed in more detail in the next session.

Performance at Abbott Olst

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Figure 12: Service Level and OTIF performance, adapted from KPI report June 2010

In a monthly Demand and Operations meeting reasons for non-OTIF delivery to customers are analyzed and discussed. Figure 13 shows the share of supply issues on non-OTIF delivery to customers.

Non OTIF

Total Production _Supplier7 _Warehouse

164 34 48 82

100% 21% 29% 50%

Figure 13: Analysis of OTIF and Non OTIF performance, adapted from D&OP data (October 2009 – June 2010)

Figure 13 clearly shows that supplier issues influence the performance of Abbott Olst. In the next session supplier performance is reviewed in more detail. This provides more information about the inferior supplier performance which was indicated in the OEMA.

Supplier impact – Delivery reliability

Figure 14 is used to present data on the delivery reliability of incoming goods. At Abbott Olst the term OTIF is used to measure delivery reliability. Measurement of the OTIF is based on the recorded delivery data and the actual delivery date. Based on this check the following OTIF scores were registered in the period between 1-1-2010 and 8-2-2010.

The table clearly shows that delivery reliability of suppliers is not on a high standard. Delivery problems can have a negative effect on different aspects of the internal and external business environment. Low confidence in the supplier, a high amount of contingencies, a low internal stability and high processing costs are among reported consequences (Slack and Lewis, 2008).

Category Number of deliveries Right deliveries Percentage on time and in full (OTIF)

Average 250 194 77,6%

Lowest OTIF week 51 46 90,2%

Highest OTIF week 46 27 58,7%

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Supplier impact – Quality discrepancies

Quality performance of suppliers is analyzed in different systems at the site in Olst. Every quarter a quality discrepancy report is published by quality officers about quality discrepancies of supplied products. These quality discrepancies can lead to several negative side effects: waste, rework, rescheduling and the requirement of increased quality control.

Figure 15 and 16 are used to present an overview of the different discrepancies in the period during 20099_{. In discrepancy reports Abbott Olst distinguishes between major and minor}

discrepancies. The distinctive factor in this categorization is the impact of discrepancies on the process. Major discrepancies require extensive coordination between quality officers and production specialists.

Period 2009 Major quality discrepancies Minor quality discrepancies Discrepancies % Disrepancies of deliveries Total deliveries Quarter 1 2 10 12 1,45 % 833 Quarter 2 1 14 15 1,45 % 1035 Quarter 3 11 23 34 3,11 % 1092 Quarter 4 1 29 30 2,60 % 1152 Total 15 76 91 2,21 % 4112

Figure 15: Overview of discrepancies. (Based on discrepancy report 2009)

Figure 16 is used to present information about the share of quality discrepancies in the deliveries for these suppliers.

Percentage of discrepancies of total deliveries

30% 30% 25% 18% 8% _7% _7% 6% 4% _3% _3% 2% _1% _1% 0% 0% 0% 0% 0% 0% 5% 10% 15% 20% 25% 30% 35%

Figure 16: Supply discrepancies of supplier with > 15 deliveries, adapted from discrepancy report 2009

In total 91 discrepancies were reported in 2009 which accounted for 2,21 % of the total deliveries. For a pharmaceutical manufacturing company like Abbott Olst a low amount of quality

discrepancies is of high importance. Management in Olst acknowledges that the current amount of quality discrepancies is at an unsatisfying level Especially the 15 yearly major discrepancies

8_{It has to be noted that these decisive scores could prove to be a slightly dishonest presentation of reality. The check in}

the warehouse is based on delivery dates recorded in SAP. It is possible that adjustment have been made after the realizations of a purchasing order (both from customer as from the supplier). This is not considered in the current OTIF measurement.

9_{Quality discrepancy reports are covering the products from suppliers which supply more then 15 deliveries on a yearly}

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are regarded as poor as they affect the continuity of business processes on a monthly base. An analysis executed on the sterile filling department during the IVV production season (September-July) of 2009 provided an example of the financial consequences associated with these

discrepancies.

Associated costs are made up from the following cost drivers: costs of extra machine hours; costs of extra man hours; costs of replacing/extra material and costs of rejection. Figure 17 provides an overview of the accompanying data.

Discrepancies Machine hours

Man hours Material costs

Rejection Total

Total 26 €25.483 €12.798 €40.988 €841.656 €920.925

Average 1 €980 €492 €1576 €32.371 €35.420

Figure 17: Discrepancies during IVV production season (September-July) 2009

The table clearly shows that quality of supplied products has a high impact on the business processes in Olst. Quality discrepancies result in extra costs due to rework and rejection. The analysis only takes financial consequences into consideration. Consequences on lead times, rescheduling and organizational unrest are not considered, while they are very well conceivable. Assessing the level of the procurement function in Olst

Due to the development of a supply chain vision and perspective on businesses the view on procurement has changed. In a supply chain perspective the supplier base is viewed as a key strategic element in the value chain10_{. With this supply chain perspective in mind, companies are}

changing their attitude towards suppliers. In the traditional opinion the supply base was

considered to be a cheap source for goods and services. On contrary, in the modern supply chain view, selected suppliers from the supply base are considered to be partners which support companies in achieving their strategic goals. These more cooperative relationships between buying and supplying companies are referred to as strategic partnerships and are characterized by mutual trust and long term commitment. This should provide companies the opportunity to jointly integrate and optimize business processes. The main goal of this optimization process is the improvement of performance.

According to de Korte and Slingerling (2000) the development of strategic partnerships with suppliers requires the procurement function to fulfill different purchasing needs. These needs are categorized in different purchasing levels by de Korte and Slingerling. De Korte and Slingerling provide an overview of these purchasing levels in the NEVI purchasing handbook. These levels are visualized in figure 18. The general philosophy behind this pyramid is that a higher level of performance in the purchasing pyramid can not be reached unless supporting foundations are operating as supposed. The presence of partnerships is regarded as an element of high

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Figure 18: Level of procurement, adapted from de Korte and Slingerling (2000)

As indicated in the OEMA the procurement function is starting to open up for new concepts of purchasing. More concrete, the procurement department has decided that the development of more cooperative partnerships is going to be a key development project for the upcoming period. In order to achieve the desired state of the procurement function, including strategic

partnerships, lower levels of the procurement function have to be fulfilled. Figure 19 presents a stock-tacking of the procurement performance at Abbott Olst in the current organization context as discussed with the procurement manager.

Level What Working Partially Missing

1

Order procedure √

Delivery time control √ Acquisition control √ Invoicing √ 2 Inventory levels √ Delivery reliability √ Assortment control √

Supplier performance measurement √ 3

Supplier selection √

Audits √

Cost price √

4

Multi disciplinary teams √

Integral costs approach √

Figure 19: Stock tacking of procurement performance based on purchasing pyramid (Korte and Slingerling 2000)

Structurally improving performance by cooperating with suppliers

In order to improve supply chain performance the procurement department in Olst had decided to focus effort into the development of more cooperative relationships with a group of selected suppliers. By developing cooperative improvement initiatives with these suppliers the

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The development of cooperative relationships with suppliers is regarded to be unnecessary and undesirable for the entire supply base of a company due to a couple of reasons. First of all the development of cooperative relationships with suppliers is expected to require effort and time from a variety of people, both at the suppliers as at Abbott. Moreover not every supplier offers the same attitude and potential considering a cooperative relationship. Therefore Abbott needs to decide which suppliers are selected for the development of cooperative relationships. Abbott aims to develop partnerships with a selected amount of suppliers which offer the prospect of serious improvement feasibility and potential.

As supplier performance impacts the entire organization the decision making process and development process considering supplier relationships to is complex. Different criteria can be used and combined for the selection of suppliers. Moreover supplier issues have a high impact on different stakeholders. To support decision makers in these processes the management of Olst is looking for a selection tool which assists in and structures the selection process. This model should support decision makers in the measurement and analysis of the expeced performance improvements related to cooperation with suppliers. The concept of this tool relates to an aspect of procurement mentioned by de Korte and Slingerling (2000): supplier selection.

The development of a structural selection process is supposed to contribute to the development of partnerships with suppliers thanks to the following arguments:

• Performance on lower hierarchal procurement performance levels is satisfied (supplier selection)

• Selection can be used to develop missing lower level initiatives (inventory levels / delivery reliability / performance measurement)

• A selection procedure will contribute to multi disciplinary communication as different departments will be involved

3.3. Research objective and expected results and criteria

This section is used to present the research objective of this research project. As the research project is developed from a problem solving perspective expected results and criteria are presented as well. These results and criteria were used to structure the research process. To support the readability of this report questions were formulated which relate criteria to the different chapters.

Research objective

Based on discussions with the principal (procurement manager) and information gatekeepers of this research project the following research objective has been developed:

“The design of a model to facilitate the process of selecting, establishing, and managing more cooperative relationships with suppliers.”

Expected results and criteria

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problem solving research a different approach is used to structure the research product: product specification.

De Leeuw (2005) explains the role of product specification in a design research: product specification is used to formulate design specifications and functional requirements of a design. Moreover the product specification is used to facilitate and shape the research process.

The product specification of a research encompasses a description of the product to be developed including the expected results and criteria of the research process. The most important questions to be answered in the product specification stage are considered to be the following:

• What has to be designed and what’s the goal? • What are the criteria of the design?

• In which context should the design be used?

The product specification for this research process was developed in discussions with the principal (procurement manager) of the project. The next sections will be used to discuss the design specification of this research.

Expected results of model:

• The model should select a limited amount of suppliers with which a more cooperative relationship should be established

Buying firm typically selects a small number of critical suppliers to focus their improvement efforts (Watts and Hahn, 1993). Categorization of suppliers should result in a selected group of suppliers which warrant the allocation of time and resources in order to develop possible improvement initiatives. Categorization of suppliers should be based on the feasibility and the expected potential of the different possible improvement initiatives. By combining these two aspect the ranking of the supply base should assist users in the selection of a limited group of suppliers which allow for more cooperative relationships due to a high feasibility and potential. Ultimately this should result in the development of actions plans considering the development of cooperative relationships with selected suppliers.

Question related to these expected results are the following:

• What is the actual ranking of suppliers by the model?

• Which supplier(s) are selected for the development of a more cooperative relationships? Chapter seven is used to provide information about these questions.

Criteria of model:

• The model should rank the improvement potential for a group of suppliers

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• The model should measure the improvement potential of and provide suggestions for improvement initiatives for the following departments:

o Production / technical support department o Quality department

o Logistical department

In the current situation the departments presented above are responsible for communication and actions with suppliers. In the current situation these departments interact relatively independent with suppliers, based on knowledge and expertise concerning processes and developments relating to their specialism. Taking this organizational setting into account the items should be suited to the knowledge and expertise available at the different departments. This should result in specific items for the different specialists. The usage of isolated items can be used to decide on project owners when improvement initiatives are developed. By discussing scores and the accompanying supplier strategy knowledge and expertise is shared throughout the team. To satisfy this criteria the following question should be answered: Which items are used in the model? Chapter six is used to provide information about this question.

• The model should rank and visualize improvement potential from initiatives to be developed in cooperation with suppliers in the following areas:

o Financial improvement potential o Quality improvement potential

o Health / Safety/ Environment improvement potential

Establishment of more cooperative relationships and the development of improvement initiatives require both the supplier as Abbott to devote time and resources. In order to allocate this time most effective it is necessary that selection of suppliers and initiatives should be based on the room for improvement. Measurement criteria should be formulated and classified according to Abbott’s standard formulations.

To satisfy this criteria the following question should be answered: How are financial, quality and HSE improvement potential measured? Chapter six is used to provide information about this question.

• The model should acknowledge feasibility of improvement initiatives

Feasibility of initiatives is an important distinctive factor which should be taken into account in the model. The feasibility of initiatives can be influenced by a wide variety of factors like

distance, dependency, attitude, technology standards etc.. For every improvement initiative users can determine to what extent the development of an initiative is feasible. Feasibility should be assessed for every initiative in particular as the different initiatives would demand different requirements considering for instance technology levels and dependency.

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• The model should highlight “quick” wins possibilities at suppliers

The model is supposed to encompass a function which brings attention to quick wins. Quick wins are formulated as initiatives with a high feasibility while resulting in substantial improvements, warranting a great deal of attention. Due to the amount of data to be generated by the selection model future users requested a functionality to filter data. When scores comply with quick win criteria these items should at least be discussed during supply support team sessions.

To satisfy this criteria the following question should be answered: In what way does the model select and highlight attention points? Chapter six is used to provide information about this question.

Expected context of the model:

• The model should increase interdepartmental communication concerning suppliers issues

In the current situation different departments (production/quality/logistics) are interacting with different representatives from suppliers. For department specific information this is logical and justified, however in the current situation representatives from different departments are confronted with miscommunication due to existence of departmental silos. As processes flow, departments are confronted with communication and actions of their colleagues. Changes in policies and developments initiated by a certain department have impact on a broader organizational context as visualized in figure 20.

Figure 20: Visualization of cross functional impact of actions and policies

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Figure 21: Vision of new communication structure

As figure 21 shows the supply support team members represent the Abbott organization in relation to suppliers. Knowledge, actions and communication should be shared between the three supply support team members. The team should function as a uniform focal point for supplier issues. In communication with suppliers the team members can decide if a representative is responsible for specific department related issues. In figure 21 the organizational setting at the supplier resembles the context at Abbott. In reality the departments or individuals responsible for interacting with Abbott could be different.

3.4. Recap

The pharmaceutical industry was traditionally characterized by favorable business prospects. As pharmaceutical manufacturers were used to high profit margins the necessity to focus on efficiency and effectiveness was relatively low compared to other industries. Thanks to this environment the pharmaceutical industry was lacking behind in the implementation and introduction of cost saving developments. Recent developments cause pharmaceutical

manufacturers to focus more attention on performance improvement. Due to the introduction of government policies and increasing competition average prices in the industry are decreasing. These developments caused Abbott Olst to develop a research project focused on the

improvement of business performance. The research project comprises the development of a model to assess improvement potential of cooperative initiatives with suppliers. By doing so decision makers should be supported in their decision making process considering more cooperative relationships with selected suppliers. Moreover interdepartmental communication should by achieved between the different members of the supply support team.

Quality Technical Logistics

Technical

Quality Logistics

Supplier

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4. Theoretical background

This section is used to offer background information about supply chain management topics which played a key role in this research project. The goal of this chapter is to present a theoretical reference work which provides readers more information about topics and content which influenced this research project to a large extent:

First of all the supply chain network perspective is discussed as it functions as a fundament for developments considering buyer-supplier relationships in the supply chain. After this discussion the focus will be on topics which are more specifically relating to this project: developments in purchasing. The traditional and modern view on purchasing are discussed to offer readers insight in the development of strategy on purchasing. In order to provide more information about the intended relationship between Abbott and selected supplier the characteristics and establishment of cooperative relationships are discussed in more detail.

4.1. Supply chain network and supply chain management

This section will be used to elaborate on the perspective which is nowadays used in most companies to manage and improve business processes: the supply network perspective. The main question to be answered in this discussion is why optimization between supply chain partners is nowadays regarded to be crucial for business.

When looking at a company from a supply network perspective, a company is placed in the context of all other companies it interacts with (Slack, Chambers and Johnston, 2007). In a supply network goods, people and information flow through a network which is based on customer-supplier relationships between the different actors. Companies are recognizing the need to use a supply network perspective in business. Supply chain management is the collection of

approaches which are used to cover supply network issues. Supply chain management has been discusses widely, resulting in different definitions and approaches. In this paper the definition offered by Simchi-Levi et al. (2008) will be used to define supply chain management:

“Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements”.

This integration approach towards actors and processes in the supply chain has been recognized (Simchi-Levi et al., 2008; Frohlich and Westbrook, 2001) as a key factor for manufacturers in achieving the improvements necessary to remain competitive. Forced by globalization and technological developments customer expectation have changed: customers demand for shorter product life cycles, decreased costs and increased service levels (Simchi-Levi et al., 2008; Piplani and Viswanathan, 2003; Croxton et al. 2001). Van Weele and Rozemijer (1996) discuss the impact of these forces on the nature of competition in more detail: First of all, globalization of trade has intensified competition over the globe. Among enablers of this globalization are deregulations, new trade zones and improved transportation techniques. As a result companies are relocating and reconfiguring their activities in global chains.

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growing fast. Thirdly customer preferences are continuously changing. Traditionally customers valued their products on the combination of quality and price. According to Treacy and

Wiersema (1993) customers of tomorrow will employ an expanded the concept of value, including convenience of purchase, service, uniqueness and reliability. In order to adapt to changing business conditions companies need to be able to work closely together with supply chain partners to manage , integrate and improve processes. Companies are starting to realize that improvements will come from outside the company walls (Piplani and Viswanathan, 2003). Lewis and Lytton (1995) summarize the view about the interdependencies in a supply chain as follows: “Chains are only as strong as their weakest link, and the same goes for supply chains. Unless you, your suppliers and your customer are all pulling in the same direction, none of you will ever succeed in turning in a world-class performance.”

Croxton et al. (1997) discuss eight processes which need to be implemented and managed across a supply chain to achieve supply chain integration. Figure 22 is used to present these processes. These eight key processes function throughout the chain and cut across firms and functional silos within firms. These eight processes need to be implemented both on a strategic level as on an operational levels.

Figure 22: Integrative processes, adapted from Croxton et al. (1997)

Of special interest in the research of Croxton et al. (1997) is their discussion about supplier relationship management covered in the procurement process. They advise companies to forge close relationships with a small subset of its suppliers, and maintain more traditional

relationships with others. This perceived role of suppliers seems to be a repetitive element in different other approaches to supply chain integration (SCOR; Slack and Lewis, 2008; Frohlich and Westbrook 2001).

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Traditional approach to purchasing: Arm’s length approach

This section will be used to describe the ins and outs about purchasing and the traditional purchasing strategy. A definition of purchasing strategy is presented and developments and views are discussed.

The purpose of purchasing is discussed widely in literature. In this paper the definition of Watts, Kim and Hahn (1995) is used to define the purpose of purchasing:

“To acquire the right quantity of the right items (quality and design) required in manufacturing the products at the right time and at the right price.”

Although this statement is clear, the vision and execution of purchasing has evolved over time. This means the actual determination of “right” has evolved over time.

Traditionally purchasing was considered to be a transactional function focused on the purpose of buying as cheaply as possible. According to Humphreys, McIvor and McAleer (2000) the

traditional purchasing function was characterized by operating arms-length contractual relations, resulting in a operational clerical purchasing function. This traditional view on purchasing is illustrated by the statement of Dillforce (1986) on purchasing:

“Price has been the principal yardstick by which manufacturers have traditionally selected their suppliers. By spreading their purchases among several suppliers, it is argued, manufacturers can achieve the cheapest price and the greatest assurance of a secure flow of material.”

According to De Toni and Nassimbeni (1999) the traditional purchasing approach is characterized by four elements. First of all buying companies interact with many suppliers. Secondly the relationships between buyer and supplier are usually short term as buyer want to maintain the possibility to switch between suppliers depending on market opportunities. Thirdly price is used as the main vendor selection criteria. Finally customization efforts between buyer and suppliers are at a low level. Dyer et al. (1998) summarize the traditional view on purchasing: the arm’s length model of supplier management advocates minimizing dependence on suppliers and maximizing bargaining power. Among reported effects of the traditional purchasing approach are dramatic reductions in materials costs, amounting to 25 percent or more (Morgan, 1987).

4.2. Strategic purchasing and supply management

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Strategic purchasing

In order to be competitive and serve customer demands companies should develop the right competitive strategy. As Watts et al. (1995) discuss the purchasing strategy should be consistent with and reinforce other functional and corporate level strategies.

This is visualized in figure 23.

Figure 23: The supportive role of functional strategies, adapted from Watts (1995)

This process of aligning the purchasing function with the corporate strategy is referred to as strategic purchasing by Carr and Pearson (1999). They defined strategic purchasing as:

“Strategic purchasing is the process of planning, evaluating, implementing and controlling strategic and operating purchasing decisions. “

In 1980 Porter already concluded that purchasing is an essential part of the firm as it influences the ability of a firm to achieve strategic plans. As discussed by Carr and Pearson (1999) strategic management of resources can increase the competitiveness of a firm. As typical industrial firms spend more than fifty percent of sales on purchased products (Morgan, 1987) this statement can easily be justified. Watts et al. (1995) concluded that it is critical that suppliers have the

capabilities to meet a company’s strategic priorities. Kamann (1999) adapted this vision in his Process-Organization Structure-Policies (POP) model. Kamann (1999) suggest that the design of the purchasing function should be in line with the POP design of an entire organization. This is visualized in figure 24. The POP concept implies that there is no ideal purchasing solution. On contrary, the right POP design is different for every company as every company has a different corporate strategy.

Figure 24: POP model, adapted from Kamann (1999)

Supplier management

With the adaptation of purchasing strategy as a crucial factor in achieving sustainable

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performance is missing. Carr and Smeltzer (1999) concluded that firms with strategic purchasing are able to facilitate long-term, cooperative relationships and communication with suppliers. Therefore strategic supply management and buyer-supplier partnerships are nowadays widely advocated as the right way to improve purchasing and competitive performance (Croxton et al., 2001). Supplier management is described by Carr and Pearson (1999) as:

“Supplier management represents an investment by the buying firm in the supplier that may reduce transactions costs and yield a more cooperative relationship.”

Lewis and Lytton (1995) describe the cooperative relationships which are typical for supplier management: on-going and based on quality performance backed by confidence and trust. Slack and Lewis (2008) describe that partnerships are formed with a degree of trust that effectively substitutes for the ownership of assets. They are composed of relatively enduring inter

organizational cooperative agreements, involving flows and linkages for joint accomplishment of individual goals linked to the corporate mission of each firm.

The framework of Slack and Lewis (2008) is used to discuss cooperative relationships in more detail. Slack and Lewis (2008) mention two distinctive elements of close relationships: attitude and actions. Figure 25 displays the different elements they use to compose attitude and trust. The more intangible elements associated with attitude are to a large extent dependent on

communication between a supplier and buyer. The more tangible elements associated with actions relate specifically to this research project as they cover improvement initiatives and the development of suppliers performance.

Figure 25: Elements of a close partnership relationship, adapted from Slack and Lewis (2008)

The importance of the intangible aspect for a successful cooperative relationship is confirmed in other research as well. A clear understanding of expectations, mutual trust, information exchange and dedication to a common direction for the future is mentioned by Humpreys, Lo and McIvor (2000). Mohr and Spekman (1994) refer to this as the behavioral aspects in a relationship, which include attributes (commitment, trust) and communication behavior. Christoper and Towill (2000) state that ethos of trust and commitment has to prevail in a partnerships relationship. Carr and Pearson (1999) present more examples of actions which can be included in cooperative relationships: exchange of personnel, training and education of supplier’s personnel and direct investments. By doing so, companies can achieve lower costs, better communication,

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open communication among supply chain partners; long term strategic orientation. The

combination of these capabilities should result in sustainable competitive advantage as a firm is able to establish and leverage beneficial relationships.

Benefits of cooperative relationships with suppliers

The benefits associated with the establishments of cooperative relationships with suppliers are often mentioned on a general level. Cooperative relationships can improve supplier performance and contribute to competitive priorities of a buying firm. Examples are offered by Chen et al. (2004) and Carr and Pearson (1999) which discovered a positive impact of cooperative

relationships on financial performance and customer responsiveness. Apart from these general benefits literature also shows the effect on performance in actual aspects of business. These benefits are tangible and intangible and are related to many different aspects of business. Figure 26 is used to present an overview of actual benefits discovered in literature.

Subject Source

Reduced inventory (management) costs Krajewski and Ritzman, 2005; Cachon and Lariviere, 2001 Reduced lead times Ngai, 2010;

Implementation of supplier expertise in product and process development

Simchi Levi et al., 2008; De Toni and Nassimbeni, 1999; Mendez and Pearson, 1994; Krajewski, 1995

Increased trust and communication Mohr and Nevin, 1990; Paulraj and Lado, 2004; Zollo et al., 2002

Increased delivery reliability Slack and Lewis (2005)

Increased quality Yang et al. 2009; Lockstöm, 2010; Prahinksi and Beton, 2004 Improved awareness at suppliers personnel Scannel and Calantone; 2000; Inman, 1990

Figure 26: Overview of benefits associated with strategic supplier management

Issues in the relationships between companies

Although the possible benefits of cooperative relationships between buyers and suppliers are obvious there are some issues which should be taken into account. Based on these benefits it can be expected that supply chain actor would be willing to support and cooperate with each other. However, reality proves to be different:

According to Rindfleisch and Heide (1997) companies will unscrupulously seek to serve their own self interests. This phenomena is referred to as opportunism. When companies are starting to develop a more cooperative relationships companies should take the agenda of their partners into account. However not every company is able to do so. Ultimately this phenomena can result in a concept which is referred to by Flynn and Flynn (2003) as obstructionism. According to Flynn and Flynn (2003) the unsupportive behavior associated with obstructionism is not unusual between supply chain partners.

According to Flynn and Flynn (2003) dependency between a buying and supplying company has a significant impact on the level of obstructionism in a relationship between a buying and supplying company. Obstructionism is expected to occur when the power and dependence between supply chain actors is out of balance. This is referred to as a relationship with

Selecting your suppliers

Selecting your suppliers

-The development of a structural procedure for the establishment of more

cooperative relationships with selected suppliers-

-A research performed at Abbott Olst-

Master thesis Operations and Supply Chain

Stef Beltman

Selecting your suppliers

-The development of a structural procedure for the establishment of more

cooperative relationships with selected suppliers-

-A research performed at Abbott Olst-

Pre face

Management summary

Table of contents

Abbreviations

1. Introduction

2. Organizational context at Abbott Olst

2.1.

History Abbott Olst

2.2.

Good manufacturing and distribution practices

2.3.

Departments

2.4.

Products

2.5.

Integration with Abbott

2.6.

Recap

3. Defining the research project

3.1.

Initial motive for research: developments in the pharmaceutical industry

3.2.

Initial motive for research: performance at Abbott Olst

3.3.

Research objective and expected results and criteria

3.4.

Recap

4. Theoretical background

4.1.

Supply chain network and supply chain management

4.2.

Strategic purchasing and supply management