Initiating and developing a supplier base in a new context

Licentiate thesis, 2013

The aim of this thesis is to explore the initiation and development of a supplier base in a new context from the perspective of a firm. An abductive approach was used to make a case study of the development of a supplier base in China by a Swedish firm, FlexLink. Prior to the development of this supplier base, FlexLink was active in a network of suppliers responsible for all of FlexLink’s production and most of its assembly operations. Most of that supply network was located in Europe; but this began to change as FlexLink took the initiative to expansion to China. In this study, the development of the supplier base in China is thoroughly investigated. The framework has three major building blocks: involvement in buyer/supplier relationships, activity interdependencies, and collaboration types. These building blocks were used as tools to elaborate and understand the main research issue: How do economies emerge when a firm initiates and develops its supplier base in a new context? The analysis shows that when firms develop their supplier bases, economies of scale and scope, integration and innovation emerge to different extents and in different situations. Economies may take place simultaneously to varying extents in different parts of the supplier base. The framework contributes to understanding the development of a supplier base. It provides tools and concepts for analyzing the details of a case of supplier base development in a new context that can help to identify the economies that emerge or can be expected to emerge in each state of the network development. The study primarily contributes to the field of purchasing and supply management by providing a conceptualization of the three generic forms of economies. The study suggests that there is interplay among economies, as exploiting one provides opportunities for developing the others. Furthermore, with regard to the context of the study, it is concluded that the practice of emerging country sourcing, rather than focusing on inexpensive product acquisition, would benefit from taking a supplier base development approach. Research in this field can also gain from a holistic view and from studying these developments from a supplier base or supply network perspective. Future research doing a network-level analysis of this phenomenon requires a focus on the perspectives of multiple actors in the network to identify the effects of the interaction among them on the opportunities and challenges throughout the development of supply networks.