Improving spare parts supply chain management at Kverneland Group

Abstract

The top management of the Kverneland Group, a Norwegian MNC which develops, produces and distributes agricultural machinery, wants to improve the performance of its spare parts supply chain and considers making some adjustments of its current purchasing strategy. In the present setting, all spare parts which are needed at the central warehouse are ordered from the Kverneland factories which developed the machines to which the respective parts belong. However, since most of the spare parts are not manufactured inhouse by Kverneland factories but produced externally, the factories usually have to order the required parts from external suppliers on behalf of the warehouse. According to the proposed future purchasing strategy, the warehouse would order the parts directly from the external suppliers and they would also be delivered directly to the warehouse. Against this background, this thesis analyzes possible consequences of a change from the current to the future setting for the Kverneland Group, the Business Area After Sales and the Kverneland factories. The proposed purchasing strategy would especially affect the administrative ordering and physical order handling activities which are currently executed by the factories on behalf of the warehouse. Furthermore, the future setting would affect the total lead times of spare parts which have a high influence on the stock levels and the capital tied up in inventory at the central warehouse. The main purpose of this study is to find out if Kverneland should stay with its current setting of sourcing spare parts or if the group should implement the proposed purchasing strategy. At the end of this thesis, main conclusions and recommendations are drawn which can be used as guidelines for the implementation of the proposed purchasing strategy. Furthermore, this study discusses which compensation fees the warehouse should pay towards the factories if the future setting would be realized.