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Dissertation

Exploring the Digitalisation of Engineer-to-Order Procurement:

A Case Study

Faculty of Economics and Business

Newcastle University Business

School

MSc Operations and Supply Chain Management

MSc Technology Operations Management

2016/ 2017

Author

Student number

Lukas Menke

University of Groningen:

S3101320

Newcastle University:

0160289710

Supervisors

Dr Graeme Heron

Dr Wout van Wezel

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Abstract

In previous years, the digitalisation accounts for almost 50% of the capital investments by European industrial companies. A main priority is the digital transformation of supply chains to increase overall efficiency and productivity. However, there are large disparities in the degree of digitisation amongst industries; the engineer-to-order (ETO) capital industry greatly lags behind repetitive mass manufacturing sectors. The ETO business environment is accompanied by specific requirements and characteristics, such as low production volume high customisation and project-based environment. Consequently, the main business foci are agility and flexibility, and not efficiency and productivity. This research project focused on exploring barriers and influencing factors of ETO procurement by solving a real operations problem during the digital transformation. The investigated procurement department faced many challenges in the adoption of a global, standardised B2B-network technology across its supply chain. The implementation process and role of digital technologies in ETO procurement was under-investigated to draw on previous literature for this business problem. This research contributes to filling this gap by addressing how ETO procurement departments can develop digitalisation strategies aligned to local business objectives, processes and supplier relationships. With action research embedded in a single case study, this research interviewed the head of supply chain management, but informal conversations and objective procurement data were also gathered and analysed.

The analysis identified six major influence factors that constrained the digitalisation programme in the researched ETO procurement department: internal processes and systems; product characteristics; ETO product specifications; supplier relationship management; procurement department; and organisational change management. These influencing factors are mainly dependent on local procurement activities and processes. Therefore, a globally standardised digitalisation approach may not sufficiently consider the local characteristics of business units, markets and supply chains. The research identified internal factors as prevalent barriers for the supply chain digitalisation compared to upstream supplier barriers. Accordingly, this project provided a framework addressing internal and external barriers. The framework allows better overview on critical success factors and strategy development of digitalisation strategies aligned to business objectives, processes and supplier relationships. Further work needs to be done to establish whether the identified framework - tailored to this real operations problem – and identified influence factors and barriers are applicable to supply chain digitalisation in general.

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Acknowledgement

This dissertation is the result of the final phase of my student career, which I partly spent in Groningen and Newcastle upon Tyne. An exciting, intensive, interesting and valuable time will end soon. But: Where one adventure ends, another begins.

Several persons have contributed in various ways to this dissertation.

First, I would like to thank my supervisor Dr Graeme Heron from Newcastle University Business School. The discussions and feedback were always motivating and valuable to progress and improve this research project. I am extremely thankful for his support and valuable input to finish the dissertation, despite some issues in the gathering of primary data.

I would like to thank my company supervisor for giving me the research opportunity, as well as for insightful conversations about their business and this topic.

Thanks also to my friends and the people I met at Newcastle University and University of Groningen. Finally, I take this opportunity to express my gratitude to my family and friends for their support and encouragement.

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Table of contents

List of Figures ... ix List of Tables ... ix List of Abbreviations ... x 1 Introduction ... 1 2 Theoretical Background ... 3 2.1 Engineer-to-Order Industry ... 3

2.2 Emerging Role of Procurement ... 5

2.3 Supply Chain Characteristics ... 7

2.3.1 Supplier Relationship Management ... 7

2.3.2 Product Characteristics ... 10

2.3.3 Organisational Change Management ... 12

2.3.4 Technological Characteristics and Capabilities ... 14

2.4 Supply Chain Segmentation ... 16

2.4.1 Previous Research in Segmentation of ETO Supply Chains... 16

2.4.2 Supplier Segmentation ... 17

2.4.3 Supply Chain Segmentation ... 18

2.5 Digitalisation and Industry 4.0 ... 20

2.5.1 Cloud Computing ... 21

2.5.2 Challenges for Procurement ... 23

2.5.3 Benefits for Procurement ... 24

2.5.4 Critical Success Factors ... 26

2.5.5 Technology Adaption ... 28

2.6 Research Questions ... 29

3 Methodology ... 30

3.1 Research Design ... 30

3.2 Research Characteristics of Action Research ... 31

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vii 3.4 Data Analysis ... 33 3.5 Research Quality ... 35 3.6 Ethical Implications ... 36 4 Unit of Assessment ... 37 5 Results ... 37

5.1 The Role of Procurement in the ETO Business ... 37

5.2 Digitalisation in the ETO Business Environment ... 39

5.3 Influencing Factors ... 40

5.3.1 Internal Processes and Systems ... 40

5.3.2 ETO Product Characteristics ... 41

5.3.3 ETO Product Specifications ... 44

5.3.4 Supplier Relationship Management ... 45

5.3.5 ETO Procurement Department ... 47

5.3.6 Organisational Change Management ... 48

5.4 Perceived Benefits of Digitalisation ... 53

5.5 Perceived Challenges of Digitalisation ... 53

5.6 Main Findings ... 55

6 Discussion... 56

6.1 Framework ... 56

6.2 Critical Success Factors ... 58

6.2.1 Organisational Characteristics and Capabilities ... 58

6.2.2 Internal Integration of Processes and Systems ... 59

6.3 Strategic Development of Digitalisation ... 60

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6.8 Recommendations for Further Research ... 66

7 Conclusion ... 67

References ... 68

Appendix ... 79

A Overview of ETO and MTO Operations Characteristics ... 79

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ix

List of Figures

Figure 2.1 Customer order decoupling point ... 3

Figure 2.2 Capgemini Procurement Process Model ... 6

Figure 2.3 Cloud characteristics, service and deployment models ... 22

Figure 2.4 DeLone and McLean Model of Information Systems Success ... 26

Figure 2.5 Overview of Literature Review ... 29

Figure 3.1 Research Protocol ... 31

Figure 5.1 Relative Procurement Volume and Purchased Items in FY 16/17 ... 42

Figure 5.2 Ishikawa-diagram ... 51

Figure 6.1 Development of a digitalisation strategy... 57

List of Tables

Table 2.1 Organisational Characteristics ... 13

Table 2. 2 Overview of different segmentation criteria ... 19

Table 3.1 Coding tree ... 34

Table 3.2 Reliability and validity in case research ... 35

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x

List of Abbreviations

CODP Customer Order Decoupling Point

ETO Engineer-to-Order

IS Information System

IT Information Technology

MNE Multinational Enterprise

MTS Make-to-Stock

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Introduction

In 2003, the article “IT doesn’t matter” by Carr (2003) in the Harvard Business Review aroused widespread attention amongst corporate executives. Carr identified a commoditisation of information technology (IT) and queried the strategic value of IT to achieve an operational advantage, finally recommending corporations to reduce IT spend. In the meantime, a new trend has emerged - an accelerating digitalisation and interconnection of products, value chains and business models, also framed as Industry 4.0 – the fourth industrial revolution. Industry 4.0 refers to a wide range of modern technologies, such as Internet of Things, cloud computing, cyber-physical systems and augmented reality. The new technologies are commonly appraised to improve mass customisation, flexibility, resource efficiency, customer satisfaction, quality and simultaneously reduce lead times, costs, time to markets and organisational hierarchies (Lu, 2017; Lasi et al., 2014). In contrary to the recommendations by Carr (2003), European industrial companies currently invest €140 billion per annum in industrial internet applications, representing 3.3% of their annual revenue and 50% of the annual capital investment (Koch et al., 2014). Despite the appraisal of new opportunities for businesses, there are also barriers and challenges in the change process, such as required IT management skills and process alignment (Cameron and Green, 2012; Mattos and Laurindo, 2015).

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The relationship between these characteristics and digitalisation in ETO industries has not been researched yet. The following action research aims to identify and analyse the specific influencing factors and challenges faced by Siemens Power Generations Services during digital transformation. The procurement department of the servitised ETO business faces the following problem: As part of the industrial conglomerate, the local ETO procurement department is obligated to integrate their local suppliers into a cloud-based, standardised B2B-network. However, only two local suppliers currently participate in the standard application due to various barriers and challenges, and perception of few benefits. The ultimate goal of this research is a solution for Siemens and its specific problem. The recent literature has not provided any guidelines for the strategic alignment of digitalisation to the needs of supply chains characteristics, organisational functions and business partners. The research project aims to identify the specific influencing factors in the ETO business environment and discuss the benefits and challenges perceived by Siemens. From an academic perspective, the research is an early attempt to conceptualise the strategy development of digitalisation in a multi-stage approach within ETO procurement and supply chain management, providing new insights into the digitalisation in a specific sector that has not been researched.

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Theoretical Background

The chapter discusses the characteristics of the ETO industry as well as the evolving role of procurement within an organisation. After presenting various supply chain characteristics and segmentation strategies, the digitalisation and Industry 4.0 will be elaborated in terms of challenges, benefits and critical success factors. This chapter concludes with the research question and several supporting questions.

2.1

Engineer-to-Order Industry

A recent systematic literature review by Siddiqui and Raza (2015) demonstrates an increasing academic attention towards supply chain and procurement digitalisation focusing on mass manufacturing and retailing. A recent study by Gepp et al. (2015) recognised that ETO businesses have less progressed towards digital transformation compared to these industries. A reason for differences in sectors may be that the use of IT-applications is influenced by product, process, customer, and firm characteristics (Whitaker et al., 2016).

Literature about the manufacturing sector has mainly studied repetitive, mass manufacturing and neglected the specific requirements and characteristics of the ETO capital goods industry (Gosling and Naim, 2009; Hicks et al., 2001; Yang, 2013). The main characteristics of an ETO business are summarised as follows: low production volume, high degree of customisation, complex products and systems, demand volatility, long lead times, contractual relationships and project-based environment (Mello et al., 2017; Gosling and Naim, 2009; Corsi et al., 2013). In addition to the specific characteristics, the ETO business can also be distinguished by its supply chain and production design. In his seminal article, Olhager (2003) classifies manufacturing companies based on their customer order decoupling point (see Figure 2.1).

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The framework defines the customer order decoupling point (CODP) as “the point in the manufacturing value chain for a product, where the product is linked to a specific customer order” (Olhager, 2003, p. 320). There are significant differences in operations characteristics between the manufacturing categories (Rahman and Shariff, 2003). Appendix A illustrates the differences between ETO and MTS. For an ETO supply chain is the CODP generally located at the manufacturing or design stage. The upstream activities are forecast-driven, while the following activities after the CODP are customer-driven (Corsi et al., 2013). Previous literature by Christopher and Towill (2002) distinguishes the supply chain operations based on the location of the CODP; a lean supply chain setting is preferable upstream of the CODP, whereas the downstream supply chain should focus on agility. Accordingly, the performance criteria differentiate for activities upstream and downstream of the CODP, either by focusing on efficiency or flexibility.

To date, several studies indicate the influence of the location of the CODP on the supply chain design, as well as planning and delivery decisions (e.g. Childerhouse and Towill (2011), Olhager (2003, 2010)). A case study by Olhager (2010) confirms that companies take the CODP into strategic consideration for the production and supply chain design and planning. However, the CODP can cause at least two conflicts in organisation resulting in uncertainty and complexity. The first conflict is between planning based on forecasts or reliable customer data between. Another operational conflict can occur due to foci on efficiency as well as agility that are each accompanied with different operational objectives (Childerhouse and Towill, 2011). An increased supply chain integration may mitigate the caused uncertainty and complexity of the potential conflicts. In the case of ETO supply chains, the CODP may be located at the suppliers’ side, whereby the focal firm may be completely driven by reliable customer order data that can prevent the identified conflicts inside the focal manufacturing firm.

The location of the CODP may also influence the supply chain integration. An investigation by van Donk and van Doorne (2015) demonstrates a relationship between CODP location and supply chain integration. According to the multi-case study, ETO and MTO firms may place special emphasis on upstream relationships and supplier integration, while MTS firms interact more with their customers. However, they acknowledge that the supply chain integration is also shaped by products (Fisher, 1997) and power relations (Kraljic, 1983).

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customer-driven information. Mason‐Jones and Towill (1999) identify that the information decoupling point equally located as the material decoupling point. However, they suggest moving the information decoupling point further upstream. An important consideration, as an upstream CODP can increase the accessibility of valuable consumer data internally and across supply chains that may enahnce the supply chain performance.

On the one hand, the ETO supply chain with its upstream information decoupling point may enhance the information flow and supply chain performance, as well as decrease the uncertainty and complexity (Childerhouse and Towill, 2011). On the other hand, many studies (e.g., Hicks et al. (2001); Gosling and Naim (2009); Mello et al. (2017)) describe the high level of uncertainty - in terms of specifications, demand, lead times and process durations - as main factors for significant financial, technical and time risks in ETO supply chains. As an example, Hicks et al. (2001) assess the unknown product specifications at the beginning of many projects as a main source of uncertainty. The unpredictability combined fixed contracts from the first project stage can interfere the profitability of projects. The unknown specifications also mean challenges for the procurement department to quickly respond to new product requirements. Bertrand and Muntslag (1993) perceive the effective purchasing of internally unavailable components and materials as a major task for ETO procurement. Likewise, Gosling and Naim (2009) evaluate the procurement function as a major bottleneck for lead times in ETO supply chains, if procurement is not capable to ensure supply chain flexibility.

This section explained the ETO environment with its specific characteristics, such as procurement processes and activities. In the next chapter, the changes in procurement will be analysed more in detail.

2.2

Emerging Role of Procurement

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Besides the strategic focus of procurement nowadays, the function still involves the tactical and operational activities of purchasing. The purchasing process model by van Weele (2010) broadly divides the purchasing process into six concurrent steps and distinguish between tactical and operational purchasing. After the specifications are determined and the supplier is selected, the final stage of the tactical purchasing process is the contract creation. The following operational purchasing activities starts with ordering, followed by expediting and evaluation of the order, and the follow-up. Due to the evolvement of procurement, the Capgemini Procurement Process model by Capgemini (2013) gives a more comprehensive overview on general procurement process considering operational, tactical and strategic tasks and activities. Additionally, the model distinguishes between two separate cycles, as well as value generation and value capturing (see Figure 2.2).

Figure 2.2 Capgemini Procurement Process Model (Capgemini, 2013)

Earlier research by Hicks et al. (2000a) already suggest a more increased role and relevance of procurement in ETO companies due to vertical disintegration and outsourcing. For example, the share of purchased components and services and subcontractors can account for up to 75% of the total value of an ETO project (Kjersem and Jünge, 2016) and up to 80% of the project costs (McGovern et al., 1999).

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long lead times in ETO-projects (Little et al., 2000). The consulting group McKinsey quantifies the benefits of a strengthened supplier involvement for the shipbuilding industry, aslo an ETO capital goods industry, in reduced development time and material costs by 40% and 15-35%, respectively (Held, 2010). An important factor for ETO firms, improved lead times can account for comparative advantages (Hicks and McGovern, 2009).

On the other hand, Hicks et al. (2000b, p. 188) state that the ETO procurement functions are generally “departmentalised and predominantly clerical in nature” due to predetermined sourcing decisions by detailed customer specifications and design decisions. Therefore, the effectiveness of procurement in ETO projects is mainly evaluated by the correct and accurate processing and forwarding of these specifications to the suppliers. The specification types also have an influence on the degree of exploiting external innovation. Functional specifications can give suppliers the freedom and scope for innovative solutions, while more detailed technical specifications can ensure the customer requirements (McGovern et al., 1999).

In view of all that has been mentioned so far, one may suppose that a single procurement strategy aligned to the overall ETO business and corporate strategy may be coherent and sufficient. However, the next parts will demonstrate that a single supply strategy may not be coherent due to various supply chain characteristics. Additionally, the influence of the evolving role of procurement on various aspects of supply management will be discussed.

2.3

Supply Chain Characteristics

2.3.1 Supplier Relationship Management

The extended scope of procurement are also highlighted in a wide-spread trend from adversarial buyer-supplier relationships to closer, collaborative and long-term relationships (Lindgreen et al., 2013). Kanter (1994) describes buyer-supplier relationships as an affiliation between “companies in different industries with different but complementary skills link their capabilities to create value for ultimate users”. The interaction with suppliers in ETO projects is generally twofold: During the tendering stage, the procurement department gathers information about components regarding costs and lead times and starts negotiations with potential suppliers to match specifications and costs. The second phase highlights the contract execution and includes the actual purchase and delivery of products and services (McGovern et al., 1999).

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supplier relationships goes beyond the short-term economic value by enabling enhanced innovation, supplier development and reputation that can be monetised in the longer term (Brito and Miguel, 2017). Recent literature emphasise the advantages of long-term, collaborative relationships and partnerships compared to transactional, adversarial, arm's-length relationships offering a higher level of satisfaction, trust and performance (Whipple et al., 2010; Chicksand, 2015). This is supported by Lindgreen et al. (2013) whose study identified better performances in relational purchasing in nine of ten performance criteria. Reasons for enhanced performance might be explained by transaction economies (Williamson, 1985), as well as economies of scale and scope (Das et al., 2006).

Additionally, trust and commitment can further improve the supply chain coordination with joint planning and information sharing enabling more efficient supply chains and reduced total costs (Day et al., 2013). The supply chain coordination can facilitate the management of the two main types of flow within the ETO supply value chain (Bertrand and Muntslag, 1993). Nonetheless, Chicksand (2015) evaluate the role of power as more important compared to trust and commitment. He assesses power balancing between business partners as the most important driver for building partnerships and collaboration that may also reflect a crucial factor for increased supply chain digitalisation.

Up to now, purchasing activities still involve transactional and relational practices with varying degrees and nature of relationships, particular in the ETO capital industry (Hicks et al., 2000b).

Earlier literature (e.g. Fawcett and Magnan (2002) and Frohlich (2002)) mostly characterise the supply chain integration based on two dimensions: strength and scope. However, Eriksson (2015) critique the two dimensions as insufficient to cover the ETO supply chain integration. He adds the SCI duration and depth as supplementary dimensions to comprehensibly observe the complex ETO projects involving various business partners. Van Donk and van Doorne (2015) show a strong connection between the CODP location and the type and degree of supply chain integration and the information sharing. Based on the contingency perspective, however, the degree of each dimension “should be tailored to the specific circumstances of the purchasing situation” (Eriksson, 2015, p. 48).

On the one hand, the ETO business may aim for an enhanced level of the previously presented dimensions due to high uncertainty, complexity and customisation. On the other hand, project-based supply chains with discontinuous and low demand can hamper the long-term supplier integration and relationship (Hicks et al., 2000a). Additionally, Corsi et al. (2013) recognise a predominant focus on internal integration to increase the responsiveness. The former research highlights that the SCI is generally desirable in an ETO context, but the actual implementations may result in a varying degree of integration.

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way, Hicks et al. (2000b, p. 185) appraise the collaborative relationship to “extend the boundary of the firm and exert indirect control over their resources”. The benefits are reflected in a data analysis by Olhager and Prajogo (2012) that documents a positive relationship of supplier partnerships on business performance. The real-time supply chain information can improve the supply chain agility and can create synergetic effects, particularly important for ETO firms to manage the complex activities and high degree of uncertainty and risks (Handfield et al., 2015; Olhager and Prajogo, 2012; Eriksson, 2015).

However, previous research findings have not been consistent regarding the relationship between supply chain integration and performance. There is a growing body of literature that question an increased supplier integration and intensified relationships as unconditionally advantageous (e.g. Chicksand (2015), Das et al. (2006), Johnsen and Lacoste (2016), Kull et al. (2013) and Leeuw and Fransoo (2009)). The shift from vertical integration to network relationships has caused more complex supply chain structures involving different supply chain actors and relationships (Harland, 1996). A detailed examination of these complex structures in supply networks by Dubois and Pedersen (2002) challenges the view of SCI and partnership as unconditionally desirable. The unique attributes and interdependencies influence the dyadic relationship, supply strategies and supplier performance. Even more controversial are the findings by Das et al. (2006) who identify the possibility of diminishing or negative returns on investments in supply chain integration. Johnsen and Lacoste (2016) have introduced the term “dark side”. An excess in SC integration effort may create unilateral or mutual dependencies resulting rigidities, inflexibilities, opportunism and coordination issues (Das et al., 2006; Johnsen and Lacoste, 2016). An important consideration for complex ETO projects, as a high level of flexibility and responsiveness across the supply chain is required to satisfy the changing customer demand.

A tool that reflects the diversity of suppliers and supplier relationships is developed by Bensaou (1999). The classification of buyer–supplier relationships is based on the specific investments by buyers and supplier:

• Market exchange • Captive buyer • Captive supplier • Strategic partnership

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The framework by Bensaou (1999) is appraised and refined by many scholars. For example, Leeuw and Fransoo (2009) approve the variables and add interconnection of drivers. The buyer-supplier relationships are dynamic “that needs to be nurtured and developed”, instead of a static set of relational characteristics and resources (Johnsen and Lacoste, 2016, p. 92).

Considering the ETO market conditions with a high level of demand uncertainty, the supplier relationship management (SRM) towards intensified supplier relationships and integration may be preferable. The advice by Johnsen and Lacoste (2016) to develop relationships under continuous assessment of dependence and power level may be especially crucial in ETO businesses, where power “is biased toward the supplier” (Hicks et al., 2000a, p. 418). Nevertheless, the increased supply chain integration with applied techniques such as concurrent procurement can result in a competitive advantage. The components of a project are ordered before all design information are available to reduce lead times (Mello et al., 2017). The ordering based on preliminary or incomplete information requires joint of modification and coordination that may further intensify buyer-supplier relationships (Hicks et al., 2001).

Another factor may also strengthen the aim towards long-term supplier relationships by ETO companies. According to previous literature, many ETO procurement departments prefer to select known, local suppliers. Main reasons are mentioned in the reuse of existing design configurations, the supply chain responsiveness and the familiarity between business partners (Held, 2010; Hicks and McGovern, 2009). In context of this case study, the findings by Lin (2014) and Zhang et al. (2016) demonstrate the SCI as a prerequisite to realise comprehensive digital transformation across the whole value chain. The presented research demonstrated a trend towards increased SCI and partnerships. However, different degree of relationships may be still desirable for some supplier relationships.

2.3.2 Product Characteristics

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Considering the different, product characteristics, Christopher and Towill (2002) incorporated the findings from Fisher (1997) and suggested clustering of products in terms of life cycle, delivery duration, demand volume, demand variety and product variability. The product clustering is followed by developing of individual cluster strategies. Godsell et al. (2011) rate the demand volume and variability of SKUs as the most important criteria to characterise the demand profile and to decide between a lean or agile supply strategy. Due to low demand volume and high product variability, an agile supply chain strategy is desirable for ETO companies, instead of a primary focus on efficiency. The former literature demonstrates the requirement of “a diverse set of strategies and tactics for a diverse set of purchases and suppliers” (Hesping and Schiele, 2015, p. 138). The product portfolio by Kraljic (1983) can enable this classification of purchases and the subsequent development of purchasing strategies and key performance criteria based on two dimensions - profit impact and supply risk. The profit impact is defined by volume, share of total costs, business growth impact, while supply risk is determined by the product availability, substitution opportunity and available suppliers. The four classes of purchases are as follows:

• Strategic items (high profit impact and high supply risk) • Bottleneck items (low profit impact and high supply risk) • Leverage items (high profit impact and low supply risk) • Noncritical items (low profit impact and low supply risk)

The models can be useful tool to identify which products and buyer-supplier relationships require more attention and different purchasing tactics for an improved resource allocation (González-Benito, 2007). Kraljic (1983) recommends only critical products should result in partnerships with suppliers, otherwise an exploitation of buying purchasing power may be appropriate.

Since the model development in 1983, there has been criticism on the product portfolio approach by. First, Olsen and Ellram (1997) argue that the focus on power balances can be dangerous due to the risk of opportunistic behaviour. Intensified relationships may be also necessary for new or complex products - an important factor for the procurement activities within the researched company, where many purchases are customised, unique and complex.

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with often hundreds of components requiring in an enormous coordination effort with a wide range of suppliers.

The product characteristics vary in terms of annual volume, demand variability, variety, complexity and criticality as well as its interface with other components and services (Christopher and Towill (2002); Dubois and Pedersen (2002)). However, Hesping and Schiele (2015) state that a differentiation of products and services into sourcing categories may not be sufficient and shall not be the final stage of a coherent supply strategy development. They suggest develping individual strategies for every supplier within a category to “reflect diverse supplier roles and capabilities” (Hesping and Schiele, 2015, p. 146). An important factor for this research, as the latest research by Schumacher et al. (2016) has demonstrated that the organisational capabilities and aspects affect directly the readiness for digitalisation.

This section highlighted the many factors and characteristics incorporated in procurement strategy. The demand variety, volume and velocity of replenishment as well as satisfaction are important concepts in relation to Siemens and their local supply base given the broad range of categories and services procured. The section that follows moves on to study the prevailing organisational and technological capabilities that can facilitate the technology change.

2.3.3 Organisational Change Management

A study by Johnson et al. (2007) identify a significant impact of the organisational structure on the adoption of technologies. A centralised procurement function may have a positive relationship on adoption of supply chain technology.

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Organisational Capabilities

Absorptive capacity Brandon‐Jones et al. (2013)

Dynamic capabilities Prahalad and Hamel (2006); Teece et al. (1997)

Employees’ commitment Gebauer et al. (2010)

IT management skills Cameron and Green (2012)

Leadership capabilities Alos-Simo et al. (2017) Network capabilities Kohtamäki et al. (2013) Organisational learning Slater and Narver (1995) Previous change experiences Heckmann et al. (2016)

Organisational Culture & Structure

Adhocracy culture Senarathna et al. (2014)

Attitude towards technology Petter et al. (2013)

Established routines Heckmann et al. (2016)

Organisational infrastructure Heckmann et al. (2016) Reward & incentive systems Petter et al. (2013)

Training programmes Brandon‐Jones et al. (2013); Dubruc et al. (2014)

Top management support Lin (2014)

Table 2.1 Organisational Characteristics

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On the one hand, a digital transformation that lacks coherence with corporate culture and organisational setting can further trigger resistance among the workforce (Dubruc et al., 2014). On the other hand, changes also require the “unfreezing” of existing corporate values and behaviours by employees that can create in turn apathy and conflicts (Lewin, 1952). Accordingly, Gebauer et al. (2010) recommend a deep interaction between management and employees about their beliefs and behaviours for a sustainable change success. Also, the case company has recognised the importance of managers as “role models for the company’s strategic direction and ensure the sustainable and efficient use of available resources – thus inspiring and empowering their teams to give their best for the company” (Siemens, 2014, p. 31). The individual alignment of these organisation-wide changes with underlying beliefs can stimulate the local commitment (Nuutinen and Lappalainen, 2012). An important consideration for the case study, where the company-wide digitalisation strategy has resulted in a centralised, standardised technology adoption that may neglect the local needs. Alos-Simo et al. (2017) and Braunscheidel et al. (2010) support the before mentioned organisational conditions by adding an adaptive culture and transformational leadership as important attributes to stimulate change. A transformational leader is able to advance with a “continuous, frequent, explanatory, open, and reciprocal communication” towards employees that can prevent resistance (Král and Králová, 2016, p. 5173). An enterprise with established routines for the entire procedure of organisational changes can further enable the acceptance by employees due reduced novelty and uncertainty (Heckmann et al., 2016).

2.3.4 Technological Characteristics and Capabilities

In addition to organisational characteristics and management aspects that can facilitate the technology change, Schumacher et al. (2016) demonstrate the necessity to assess the current technological capabilities based on their conceptual maturity model for Industry 4.0. However, the findings by Gunasekaran et al. (2009) show that management aspects are evaluated a more important by practice. An additional approach is found in the well-established TOE framework that considers the technical, organisational and environmental context. Based on the TOE model, a survey by Lin (2014) highlights an increased technology adoption when employees perceive relative advantages of a new supply chain technologies in comparison to their legacy IT systems. Another major study finds that the view on technology adoption by decision makers changes in the course of diffusion of technology innovations (Shih, 2012). There is commonly a shift from a focus on technology effectiveness towards efficiency during the life cycle of an innovation. Early technology adopters aim a competitive advantage by technology, while adopters at later life cycle stages are mainly concerned with a smooth adoption and integration process.

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skills of individuals may reduce the potential of technology. Besides the technical capabilities, the effectiveness of an IT solution is affected by “actions and reactions of users” (Corsi et al., 2013, p. 271). Cameron and Green (2012) suggest that IT management skills should be present across the organisation. A surprising finding of the study by Lin (2014) is that technological characteristics affect the general decision, but not the scope and subsequent extensions that are mainly influenced by organisational and environmental factors, such as competition. An important factor for the procurement department, as Chae et al. (2005, p. 446) identify that the technological capacity does not predetermine the influence of IT on inter-organisational collaboration but represent “the emergent properties of the interplay between IT and existing relationships between partners”. A prior assimilation of existing IT within supply chain networks can also contribute to the smooth introduction of more advanced IT applications across supply chains (Mattos and Laurindo, 2015).

The insights by Chae et al. (2005) and Mattos and Laurindo (2015) highlight that an adoption of B2B-networks will require the implementation by more than one supply chain member. Previous research has established that organisational characteristics can be extended on the inter-organisational context (Fawcett and Magnan, 2002; Kull et al., 2013; Whipple et al., 2010). Varying organisational cultures, structures and process design of business partners can impede supply chain integration (Braunscheidel et al., 2010). By drawing on the socio-technical system theory, Kull et al. (2013) suggest that buying organisations and their suppliers shall examine the respective discrepancies in social, technical and environmental characteristics and processes. The evaluation is followed by an adjustment between technical design and organisational attributes to prevent resistance and mismatches. However, the approach may not be feasible for the joint implementation across supplier networks. Kull et al. (2013, p. 76) also acknowledge that a macro view on decision-making across supplier networks may impede its feasibility due to “a greater number of decision variables along with an increased number of known, unknown, and conflicting inter-relationships”.

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2.4

Supply Chain Segmentation

The previous sections highlighted that the unique characteristics of an ETO business environment are also influential on procurement strategies and activities. An alignment of these strategies to individual segments with specific internal and external characteristics may create synergies and ensure the success of change across supply chains. As demonstrated in the previous section, a prevalent tool in operations management are segmentation and classifications to “reduce the complexity of empirical phenomena through providing parsimonious groups that can be used as units of analysis for understanding competitive behaviour” (Willner et al., 2016, p. 245).

The distinction of companies goes beyond the merely differentiation based on the CODP. First, the ETO firms can have varyingly distinct ETO characteristics. In their influential analysis of the ETO environment, Bertrand and Muntslag (1993) highlight that ETO firms differ in terms of product complexity, degree of customisation, as well as market and competition characteristics. As an example, the degree of uncertainty and long lead time is contingent on the level of engineering in an ETO firm (Gosling et al., 2011). Consequently, a single ETO supply chain type may be “too generic” (Gosling et al., 2011, p. 1003).

Second, ETO procurement may not be applicable to an “one-size-fits-all” approach due to different characteristics of suppliers, supplier relationships and purchased goods and services (Protopappa-Sieke and Thonemann, 2017). Hence, Brandon‐Jones et al. (2013, p. 846) suggest to modify “practices to suit the category and the purchasing context”.

In the next section, different approaches for a categorisation/ segmentation will be presented that can be contemplated in this research project to associate specific opportunities and barriers based on different segments, categories and characteristics.

2.4.1 Previous Research in Segmentation of ETO Supply Chains

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have not been mentioned. In general, previous studies have not dealt with the implication for procurement in-depth. An exception represents the framework by Gosling et al. (2011) that matches eight ETO sub-categories in the ETO construction industry with specific procurement contracts based on risk and opportunity implications. The paper may provide an innovative framework for decision making, but may not be extrapolated to other ETO industry sectors due to the industry focus.

2.4.2 Supplier Segmentation

Despite more than 30 years since the seminal paper by Kraljic (1983) and many adaptions and criticism of portfolio approaches in procurement, the supplier segmentation is accompanied by several shortcomings and is still in its infancy according to Rezaei and Ortt (2012). The supplier segmentation can incorporate various variables, including quality, technical capabilities and financial health (Rezaei and Ortt, 2012; Day et al., 2010). According to Osiro et al. (2014), a majority of the past literature has applied a two-dimensional approach for a segmentation and evaluation of the supplier base, such as Kraljic (1983) as well as Bensaou (1999), Gelderman and van Weele (2003), and Olsen and Ellram (1997).

On the one hand, all previously mentioned two-dimensional portfolio approaches suffer from some shortcomings. Dubois and Pedersen (2002) acknowledge that two dimensions result in a limited number of variables that can omit important elements, whereby not all contingencies are captured. Another shortcoming is the static perspective on purchasing actions and strategies instead of capturing the interdependencies between different products (Hesping and Schiele, 2016), the evolvement of varying supplier relationships (Rezaei and Ortt, 2012) and possible reactions on the purchasing strategies by suppliers (Gelderman and van Weele, 2003). Therefore, a network approach that embraces interdependencies with other suppliers and competitors may be more appropriate. The result may result in a more coherent, holistic view on supplier networks and products to recognise network potentials and therefore enhance the procurement contribution.

On the other hand, Olsen and Ellram (1997) appraise the simplicity of the two-dimensional models as an effective tool to discuss discrepancies and achieve a jointly agreement of the importance of products, suppliers and relationships. The portfolio approach may be therefore more valuable for the process “as a platform for a fruitful discussion about possible purchasing approaches among the involved stakeholders” than the final classification (Hesping and Schiele, 2016, p. 113).

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suppliers more effectively based on the supplier potential in terms of their individual willingness and capabilities. Nevertheless, the findings would have been more useful and less fuzzy for practitioners and academics, if they had mentioned a tool for evaluating the relevance.

In the same way, Hesping and Schiele (2015) state that a segmentation approach shall not be implemented on the basis of “technical characteristics”, such as final products or geographical regions, but driven by “market-, competence- or problem oriented-thinking” (Hesping and Schiele, 2015, p. 144). Accordingly, the scholars provide guidance by a multi-stage development of procurement strategy towards individual supplier strategies aligned to the overall business strategy. The corporate strategy is the focal strategy for the development of a procurement strategy which is subsequently deduced into category strategies and further into tactical sourcing levers that incorporates the differences of suppliers within a category. Finally, the last stage is the development of a single strategy for each supplier within a tactical sourcing lever (Hesping and Schiele, 2015).

However, the research is not solely concerned with the resistance of suppliers but also of internal barriers. A more holistic segmentation including all key players of the supply chain may add more value to this research project. The following section present and discuss therefore approaches of supply chain segmentation.

2.4.3 Supply Chain Segmentation

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segmentation can increase the complexity and fuzziness of the approach. This is an important factor to this research as it identifies a trade-off between complexity and manageability.

Product & demand characteristics Demand volume Demand volatility Product lifecycle Product complexity Forecasting ability Product volume Product relevance Contribution margin

Channel and customer characteristics Customer type Customer specifics Customer priority Customer requirements Channel type

Order type

Supply characteristics Component supply flexibility Component lead-time Component supply reliability Component value

Supply process volatility Supply capacity constraint

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2.5

Digitalisation and Industry 4.0

As pointed out in the previous sections, the application of innovative technologies are essential for the integration of “physical objects, human actors, intelligent machines, production lines and processes across organizational boundaries to form an intelligent, networked and agile value chain” (Erol et al., 2016). The increased digitisation and interconnection of products, value chains and business models are also framed as Industry 4.0 – the fourth industrial revolution. Industry 4.0 refers to a wide range of modern technologies, such as Internet of Things, cloud computing, cyber-physical systems and augmented reality. The digital transformation will cause disruptive changes for business models, supply chains and processes (Lu, 2017).

The general benefits of Industry 4.0 are evaluated to improve the mass customisation, flexibility, resource efficiency, customer satisfaction, quality and simultaneously reduce lead times, costs, time to markets and organisational hierarchies (Lu, 2017; Lasi et al., 2014; Koch et al., 2014). The new technologies can provide additional customer value by extending customisation and providing value solutions. Despite the perceived benefits, many companies have not yet implemented a strategy to fully digitalise their supply chain due to perceived barriers and challenges. For example, companies perceive a considerable vagueness regarding the security, ownership and transparency of data in corporations and legislative due to insufficient legal regulations (Glas and Kleemann, 2016). More drawbacks are highlighted in the 2015 study by IBM, including the significant IT investments and scarce IT skills (Koch et al., 2014).

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such as the researched B2B business network - as a decisive technology for real-time dynamic data analytics that will be presented more in detail.

2.5.1 Cloud Computing

Cloud computing can offer the technological requirement of seamless interaction between buying organisations, suppliers, service providers and freight forwarders, independently of location and other constraints. A recent study by Ardolino et al. (2017) determines cloud computing as a major facilitator in the further progression of servitization. Cloud computing system can enable the storage and synchronisation of large amount data creating “data lakes” that are necessary for predictive analytics to prevent breakdowns in the case of Siemens Power Generation Services.

The National Institute of Standards and Technology (NIST) defines cloud computing as:

“a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

In the case company, the global B2B-network is provided by a third-party service provider as a software as a service (SaaS).The literature identified several opportunities from a business perspective: lower costs, process standardisation and efficiency, transaction frequency, and supply chain transparency and flexibility (Cámara et al., 2015; Marston et al., 2011). A major benefit is the continuous synchronisation and data sharing for joint forecasting, planning, production and delivery of products and services. The continuous information sharing and updating enables “to anticipate dynamic customer requirements” (Mattos and Laurindo, 2015, p. 81) – possibly a major driver for ETO businesses to adopt the application. Siebenmorgen (2015) concludes that B2B-networks as SaaS are an effective approach to facilitate cross-company, collaborative processes that can finally enhance the automation, efficiency and integration within the value chain.

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additional advantages compared to traditional on-site technology installations. First, cloud computing can be tailored to the needs of the user and additional capacities or software components can be added on-demand (Mezgár and Rauschecker, 2014). Second, the variety of payment models (e.g. pay-per-use or flat rate) can enable an alignment to the organisational needs resulting in reduced upfront costs as well as maintenance costs compared to traditional, on-premise IT applications (Cao et al., 2017). However, the existing literature shows various challenges for cloud applications as a networking tool. Much of the identified challenges are concerned with data security and privacy (Marston et al., 2011; Cámara et al., 2015). The issues are also restrained by vague legal regulations in regard to corporate data security and intellectual property rights that could not be solved by diverse deployment modes (Ryan and Loeffler, 2010). Additionally, Mezgár and Rauschecker (2014) identified the insufficient industry standards as another drawback resulting in a lack of interoperability and data migration between cloud systems. The complex integration of cloud systems with existing cloud applications and on-premise IT software might be an even larger challenge for companies (Marston et al., 2011). The lack of standardisation reduces the portability of cloud components to run software elements on different cloud system. In contrast to previous literature, Chae et al. (2005, p. 446) state that “the effect of IT is not predetermined by its technological capabilities (e.g., easy, cheap, and fast connection between partners)” - the interaction between IT, existing supplier-buyer relationships and goal alignment also influence the efficacy of supply chain digitalisation.

Together, these studies indicate that cloud computing can provide various benefits and have considerable advantages compared to traditional on-premise software applications. Its novelty and immaturity also present several challenges for organisations that currently may reduce currently its attractiveness.

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2.5.2 Challenges for Procurement

The new technologies in Industry 4.0 will have a substantial impact on the operational and administrative processes of a company, organisational function and individuals (Geissbauer et al., 2016, p. 4). A challenging role in the digitalisation process is often assigned to the procurement function that has to cope with several new tasks during and after the supply chain digitalisation (Glas and Kleemann, 2016).

Before implementing, procurement departments need to examine the supporting tools and applications in terms of their strategic fit to their digitalisation vision, strategies, processes as well as existing IT-architecture (Siebenmorgen, 2015; Schumacher et al., 2016). The large number of available technologies and software vary in its impact and technological maturity. The technology assessment is exacerbated by the intangibility of technologies and managerial difficulties to specify own requirements (Geissbauer et al., 2016). Consequently, the implementation is generally time-consuming and require adequate resources in procurement. In ETO businesses, the procurement managers are often still involved in ETO projects in addition to the digitalisation projects (Nissen, 2007). In general, technology change always result in technological uncertainty due to new or incompletely specified processes or products (Burkhardt and Brass, 1990). As a consequence, the IT productivity paradox can occur, if the exploitation of new IT systems does not immediately reflect a productivity gain (Brynjolfsson and Hitt, 1998). In the past, an internal or external consulting and training has been proven necessary to maximise the potential of these new technologies, but can also result in substantial costs.

In the course of a technology implementation, there will be fundamental, internal changes in organisation and processes of procurement (Gunasekaran et al 2009). The digitalisation will result in the automation of routine work and more efficient procurement processes. However, the performance improvement will not be achieved by merely implementing an innovative technology, but “a human interface is required to maximise the information and transactional improvement potential” (Brandon‐ Jones et al., 2013, p. 828). Additionally, the procurement employees shall be encouraged to acquire the skills to deploy and embed the technologies into their current purchasing processes and sourcing strategies (Johnson et al., 2007; Mora‐Monge et al., 2010).

In the same way, recent studies by Cámara et al. (2015) and Cao et al. (2017) have shown no direct relationship between cloud computing and supply chain performance. The strategic fit of digitalisation approaches will also require an alignment with suppliers that can require significant coordination effort by procurement. In addition to the large scale of the supply network, its heterogeneity can require a segmentation to effectively manage various suppliers that might be another drawback towards a holistic technology implementation.

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other’s needs are prerequisite for successful technological assimilation. As a result of this, cloud computing in combination with additional effort towards supply chain integration (Cámara et al., 2015), information sharing capabilities and inter-organisational trust (Cao et al., 2017) can eventually result in improved operational performance according to the findings by Cámara et al. (2015) and Cao et al. (2017). A major driver for the improved performance may be the increased supply chain agility triggered by an integration of financial, physical and information flows across the chain that can facilitate transactional tasks. In this section, it was presented that there may be several challenges for the procurement department and its suppliers. The following section will move on to study the benefits identified in previous research.

2.5.3 Benefits for Procurement

The net benefits of Information systems (IS) are defined as the “extent to which IS are contributing to the success of individuals, groups, organizations, industries, and nations” (Petter et al., 2013, p. 11). Examples of measures can be reflected in productivity, efficiency, cost reductions and improved decision-making amongst others.

There is little agreement in literature on the impact and extent of actual performance improvements by information technology across supply chains (Johnson et al., 2007). The early findings by Frohlich (2002) and Johnson et al. (2007) of an improved business and operational performance by e-procurement technologies has been acknowledged by Schumacher et al. (2016) in their latest research. However, they critique the isolated application of these technologies that have only led to isolated efficiency gains and have impede the creation of synergies. Many researchers merely identified an indirect impact on operational performance (Devarj et al., 2007; Kim, 2017) or financial performance (Yu, 2015). Piera et al. (2014) recognised a direct cost reductions of 8 to 12% for the buying organisation, while Zhang et al. (2016) identified an improved supply chain performance mediated by the supply chain integration.

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Additionally, type of products and purchase categories is generally seen as a factor strongly related to the share of products purchased via e-procurement technologies and its perceived benefits. In their analysis of procurement technologies within American SMEs, Gunasekaran et al. (2009) found that MRO items and office supply accounted for 88% of the purchases via e-procurement technologies. In comparison, the ETO products are highly complex and customised and the high degree of uncertainty also requires more human judgement in the operational purchasing processes. Therefore, Mello et al. (2017) evaluate the opportunities for information technologies to standardise and automate procurement processes as limited. The efficiency improvements in purchasing may be a relatively negligible factor for the procurement department in this case as the main focus is on the flexibility and agility. In the same way, a survey by Gepp et al. (2015) show that the digitalisation in German ETO businesses has been much less progressed compared to other industries, such as automotive. The managers of ETO businesses assess only a small potential for Industry 4.0. Another survey concerning the digitalisation of procurement highlights that the construction industry – as part of capital goods sector with ETO-projects – has not yet applied a standard solution (Zunk et al., 2014). Another insight is the considerable differences in the digitalisation progress and knowledge among the ETO companies. However, the study makes no attempt to explain the identified differences among the companies by analysing additional organisational factors.

In contrast, Corsi et al. (2013, p. 270) appraise multinational, multilayer IT solutions as effective tools to reduce the complexity and uncertainty in ETO processes for standardisation due to a “standard language” of defining procedure and expediting information sharing across the value chain. ETO firms can also benefit from new opportunities for simplifying the tendering process by online applications (Brandon‐Jones et al., 2013). As a result, the B2B network can streamline procurement processes and increase the visibility across the whole supply chain (Gruenen et al., 2017). Gruenen et al. (2017) also expect that big data analytics with gathered data from B2B-networks may trigger the start of predictive analytics in procurement to better react to demand signals. The predictive procurement insights can highlight a decisive future tool for ETO businesses to cope with the high demand uncertainty.

Other researchers, however, who have looked at e-procurement, have found an even larger impact on relational purchasing. Baglieri et al. (2007), for example, state that the perceived benefit on the buyer-supplier relationship is higher than on purchase process efficiency. Likewise, Lindgreen et al. (2013, p. 84) suggest a larger impact of IT in relational purchasing, where “information technology acts not just to support current business activities, but rather to redefine or drive such activities”.

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2.5.4 Critical Success Factors

The previous section on digitalisation in procurement demonstrated the benefits and challenges mentioned in recent literature that has focused on repetitive mass production. However, the consideration of the specific production environment is required for Industry 4.0 and other digitalisation projects. Strandhagen et al. (2016) recognise a relation between the repetitiveness of production, CODP location and the applicability of Industry 4.0 technologies perceived by manufacturing companies. Hence, the next section will aim to discuss specific factors identified in literature that can contribute to the success of technology adoptions within an ETO supply chain. A challenge identified in IS literature has been the definition of the dependent variable success as well as its determinants. The The DeLone and McLean Model of Information Systems Success (D&M IS Success Model) proposed six interrelated dimensions of success: System Quality, Information Quality, Use, User Satisfaction, Individual Impact, and Organizational Impact (see Figure 2.4).

Figure 2.4 DeLone and McLean Model of Information Systems Success (DeLone and McLean, 2003)

In broad terms, a critical success factors can be defined as any element or activity that is necessary to achieve the goal and objective of a project (Gunasekaran et al., 2009). A comprehensive literature review on critical success factors for information systems identified large number of antecedents of IS success, as well as 15 factors consistently mentioned in IS research. However, Petter et al. (2013, p. 40) acknowledged that “the IS with different purposes and goals may focus on different IS success variables”. Another drawback of general success factors may be that some of them may not be controllable by the managers. With a focus on electronic procurement technologies, Moon (2005) found that the major impact on the technology adoption in procurement may be caused by procurement processes and behavioural aspects.

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management commitment, communication and supply chain integration as essential for technology adoption that may be also applicable to the digitalisation of procurement in the ETO context. Lasi et al. (2014) assert the early involvement of stakeholders and external business partners in the concept generation of digital transformation as a decisive factor. This may be especially critical for a conglomerate company like Siemens with business units with diverse supply chains structures and product portfolios to achieve the synergies of digitalised procurement. Mattos and Laurindo (2017) also identified pressure on supply chain partners as an important instrument for interorganisational technology adoption, while Brandon‐Jones et al. (2013) suggest to focus on identifying the key performance objectives and existing technologies within the supply chain as the basis to effectively allocate the limited resources for the technology adoption.

On the other hand, Gunasekaran et al. (2009) state that the business environment and scope as well as additional supply chain characteristics, such as the volume and type of products, suppliers and procurement strategies, have an impact on the critical success factors in technology adoption across supply chains. Moreover, Shih (2012) showed that the dynamics in technology adoption in supply chain is shaped by the local factors of a company – including size, market competitiveness and available resources - as well as its interdependencies with external business. In the light of the ETO business environment, the supply chain integration and control based on an online B2B-network may be particularly crucial to ensure the customer order fulfilment, minimise the risk of supplier opportunism and supply distortion caused by the large number of components and low purchasing power (Hicks et al., 2000a).

Previous research has already documented the non-applicability of some standard IT-software in ETO supply chains (Bertrand and Muntslag, 1993; Little et al., 2000; Wortmann, 1995). Bertrand and Muntslag (1993) state that the standard MRP II system can only support the production of standard products and is not suitable for complex, customised and one-of-a-kind products due to missing system features and unsuitable elements. In an analysis of information systems in ETO and MTS environments, Wortmann (1995) found that data is useful as a reference for designing customer-specific products, but not required for the automated material and capacity planning. Hence, he concludes that technology adoption within ETO companies shall tolerate incomplete, partly inconsistent or not up-to-date basic information in the MRP system.

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already accessible via cloud services, while the product specifications and manufacturing IT systems have not been integrated yet (Corsi et al., 2013).

In conclusion, previous studies on technologies in ETO supply chains are not consistent, mainly concerned with production control and legacy information systems.

2.5.5 Technology Adaption

As discussed earlier, the D&M IS Success Model by DeLone and McLean (2003) aims to evaluate IS based on six interrelated factors. The created model illustrates that IS characteristics and quality directly impact the intention to use and actual use of an IS that will ultimately determine the net benefit of an IS (see Figure 2.4).

In contrast to a standardised approach, an adaption of the procurement technology for an individual supply network may be more sufficient to prevent misalignment between technologies and intended use. Therefore, Adrodegari et al. (2015, p. 913) suggest that “ETO companies have to adapt managerial paradigms, business models and ICT tools developed for other (i.e. the repetitive) sectors”. The introduction process may include to “design not copy” and “adapt not adopt” (Godsell et al., 2011). A case study by Johnson et al. (2007) demonstrate the necessity to align the technology to the sourcing strategy of an organisation. Similarly, Adams et al. (2014) emphasise the necessity to jointly identify suitable supply chain IT solutions with business partners across firm boundaries to avoid resistance and a lack of willingness. An integration of internal functions and external business partners into cross-functional work teams during the implementation process can eventually ensure a joint accountability and broad commitment. Beyond the decision on the extent of integrative technologies, the implementation strategy shall also decide on the participating business partners, the introduction date and the involving employees (Eriksson, 2015). As a result, the positive impact is determined by the applied B2b-network technology, but rather “by the interplay between IT and the characteristics of the relationship between suppliers and customers” (Mattos and Laurindo, 2017, p. 55).

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2.6

Research Questions

Figure 2.5 Overview of Literature Review

The literature review illustrated that there are opportunities and challenges for the company and its suppliers in the implementation of a global B2B-network as SaaS by a third-party provider. Additionally, the importance of supply chain integration and collaborative buyer-supplier relationship for the successful IT implementation is emphasised. However, the literature is too general to sufficiently explain the specific barriers that may be faced by local business units and their suppliers. Consequently, a more detailed analysis can lead to more differentiated strategies for the implementation of new technology based on differentiation characteristics and adaption, instead of adoption. The main research question can be formulated as follows:

How can global, web-based B2B-networks be effectively adapted by local business units and suppliers? - A digital strategy perspective

In order to answer the main research question, several supporting questions are formulated:

I. What are the factors influencing the adoption of the B2B-network across the ETO supply chain? II. What are the perceived benefits and challenges by ETO procurement for adopting the

organisation-wide B2B-network?

III. What are the critical success factors for ETO procurement regarding the technology adaption in procurement processes?

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