optimizingthesupplychain! performance!at!ericsson!ab1058947/fulltext01.pdf · acknowledgement!...

Optimizing the Supply Chain Performance at Ericsson AB

A Study of Lead Time Reduction and Service Level Improvement

Jesper Larsson Marcus Stenberg

Supervisor at Ericsson: Christer Johansson

Supervisor at LiU: Magnus Berglund Examiner at LiU: Mats Abrahamsson

LIU-IEI-TEK-A--16/02656--SE Department of Management and Engineering

Linköping University, Sweden

ACKNOWLEDGEMENT This master thesis is the final examination of the authors’ Master in Industrial Engineering and Management at the Institute of Technology at Linköping University, Sweden. The past 20 weeks have been spent at the premises of Ericsson AB in Kista, from where a global supply chain has been studied and resulting in many interesting meetings. First, we would like to extend our sincerest thanks to all the Ericsson employees that we have met during this journey. Each of them have been very helpful and shown great engagement to the project and thereby contributed to the result of this study. Among these employees, we would like to give further acknowledgements to Christer Johansson, our supervisor who made this master thesis possible and that has been a great support during the entire time. Thank you for giving us the opportunity to acquire a global perspective on a major international company. Moreover, we want to thank Sheikh Faisal ur Rehman, Myra Benrabah, Lars Magnusson and Katarina Pettersson for your patience and friendliness, without you this would not have been possible. We would also like to thank Magnus Berglund, our supervisor at Linköping University who has guided us through the project and has been a great support, both in good and tough times. Thanks to our opponents Sofia Rosenquist and Melina Wiklund for meaningful feedback and great discussions during the project. It has been a great journey and good luck with your future careers! Last, but not least, we want to thank all the fantastic people at Linköping University who have been part of five unforgettable years. A chapter has come to an end and now it is time for a new one, in one we take off as engineers. With this said, the authors just want to wish you, the reader, a pleasant and informative reading. Kista, 2016-‐06-‐21 Jesper Larsson Marcus Stenberg

EXECUTIVE SUMMARY

Title Optimizing the Supply Chain Performance at Ericsson AB -‐ A Study of Lead Time Reduction and Service Level Improvement

Background Ericsson has recently experienced difficulties to meet the customer

demand, which has led to lost market shares. This is mainly due to the long and unpredictable lead times within their supply chains. Therefore, Ericsson seeks to increase their ability to meet the customer demand by reducing the customer order lead time. A shorter lead time would imply a greater responsiveness and improved service level towards the customers. A directive from the company was to base the study on the supply chain for the customer Algeria Telecom Mobile.

Purpose The purpose of the study is to give recommendations for

improvements that reduce the total lead time in a supply chain perspective in order to improve the customer service level.

Methodology To be able to fulfill the purpose, four objectives were distinguished and

supported with existing frameworks for analyzing supply chains. The first step was to create a current state map, which was achieved by conducting 24 interviews with people working within the supply chain. The second step was to identify potentials for lead time reduction. This was done by categorizing the supply chain parts and the problems that were gathered during the current state mapping into meaningful groups, and thereafter prioritize the categories with the greatest potential. The third step was to generate alternative solutions by conducting a second literature review based on the potentials that was identified during the prior step. The general solutions were later modified in order to fit the current supply chain. It resulted in eight Ericsson specific solutions. The fourth step was to evaluate these solutions in combination, which led to a recommended combination of solutions that provided the greatest lead time reduction. Also the requirements for implementing these solutions were presented in this step.

Conclusions The recommendation for Ericsson is to rearrange their current supply chain for the studied customer and use two different supply chains; the Regional supply chain and the Alternative supply chain. The two arrangements will both be based on the implementation of a supply hub, which implies a movement of the customer order decoupling point closer to the customer. The Regional supply chain will cover the main flow and be used when the customer orders products from a product portfolio that has been agreed within the region. The Alternative supply chain will act as a complement and cover the flow of products outside the regional product portfolio.

The estimated customer order lead time for the Regional supply chain

is 17 days, which is a reduction of 80 % in the normal case for the studied supply chain. The lead time for the Alternative supply chain is more difficult to estimate precisely, but it will be reduced in comparison with the current situation. Moreover, the service level towards the customer will be increased for both the Regional and the Alternative supply chain. To summarize the recommendations that are forwarded to Ericsson, they are listed below:

• Implement a regional supply hub • Agree on a regional product portfolio • Implement time slots for inbound flows • Use BPO as a payment method instead of Letter of Credit • Use a CIP, DAP or DAT Incoterm • Implement a product configurator and let the customer place

orders on commercial descriptions or a solution id. • Integrate processes and activities throughout the supply chain and

establish a greater information exchange.

TABLE OF CONTENTS 1 INTRODUCTION .......................................................................................................................... 1 1.1 Background ...................................................................................................................................... 2 1.2 Purpose ............................................................................................................................................ 3 1.3 Directives .......................................................................................................................................... 3 1.4 Target Group .................................................................................................................................... 3 1.5 Requirements for Academic Assignments ........................................................................................ 3 1.6 Scientific Approach ........................................................................................................................... 4 1.7 Disposition of the Report ................................................................................................................. 5

2 BUSINESS INTRODUCTION.......................................................................................................... 7 2.1 Ericsson AB ....................................................................................................................................... 8 2.2 Business Unit Radio .......................................................................................................................... 9 2.3 Group Supply .................................................................................................................................. 10 2.4 The Supply Chain Network ............................................................................................................. 11 2.5 Algeria Telecom Mobile ................................................................................................................. 14 2.6 The Overall System ......................................................................................................................... 15

3 THEORETICAL FRAMEWORK ..................................................................................................... 17 3.1 The Supply Chain ............................................................................................................................ 18 3.2 Supply Chain Management ............................................................................................................ 20 3.3 Customer Service ........................................................................................................................... 20 3.4 Supply Chain Integration ................................................................................................................ 21 3.5 Analyzing Supply Chains ................................................................................................................. 22 3.6 Distribution Models ........................................................................................................................ 26 3.7 Inventory Handling ......................................................................................................................... 29 3.8 Supply Chain Strategies .................................................................................................................. 30 3.9 Supply Chain Time Compression .................................................................................................... 33 3.10 Supply Chain Transparency ............................................................................................................ 38

4 Specification of Task ................................................................................................................. 41 4.1 Clarification of Purpose .................................................................................................................. 42 4.2 The Studied System ........................................................................................................................ 42 4.3 Specification of Purpose ................................................................................................................. 43 4.4 Question Formulation .................................................................................................................... 46 4.5 Summary of the Specification of Task ............................................................................................ 53

5 METHODOLOGY ........................................................................................................................ 57 5.1 Approach ........................................................................................................................................ 58 5.2 Planning Phase ............................................................................................................................... 62 5.3 Current State Mapping ................................................................................................................... 66 5.4 Identifications of Potentials for Lead Time Reduction ................................................................... 68 5.5 Generation of Alternative Solutions ............................................................................................... 70 5.6 Recommended Solutions and Requirements for Implementation ................................................ 71 5.7 Final Phase ..................................................................................................................................... 73

6 Current State Mapping ............................................................................................................. 75 6.1 Supply Chain Structure ................................................................................................................... 76 6.2 Supply Chain Performance – Lead Times ....................................................................................... 83 6.3 Business Context – Strategies ........................................................................................................ 88 6.4 Experienced Problems and Suggested Solutions ............................................................................ 88

7 IDENTIFICATION OF POTENTIALS FOR LEAD TIME REDUCTION .............................................. 97 7.1 Categorization ................................................................................................................................ 98 7.2 Prioritization ................................................................................................................................. 105

8 GENERATION OF ALTERNATIVE SOLUTIONS .......................................................................... 107 8.1 General Solutions ......................................................................................................................... 108 8.2 Ericsson Specific Solutions ........................................................................................................... 120

9 RECOMMENDED SOLUTIONS AND REQUIREMENTS FOR IMPLEMENTATION ...................... 131 9.1 Evaluation and Recommendation ................................................................................................ 132 9.2 Requirements for Implementation .............................................................................................. 139

10 CONCLUSIONS ........................................................................................................................ 141

11 DISCUSSION ............................................................................................................................ 145 11.1 Critical Review of the Result ......................................................................................................... 146 11.2 Generalization of the Result ......................................................................................................... 147 11.3 Research Ethics ............................................................................................................................ 147 11.4 Contributions of the Study ........................................................................................................... 147 11.5 Recommendations for Further Studies ........................................................................................ 148

BIBLIOGRAPHY ...................................................................................................................................... I

APPENDIX A. COLLECTION OF ABBREVIATIONS ................................................................................. X

APPENDIX B. RESPONDENTS – PLANNING PHASE ............................................................................. XI

APPENDIX C. RESPONDENTS – CURRENT STATE MAPPING ............................................................. XII

APPENDIX D. GENERIC INTERVIEW QUESTIONS ............................................................................. XIII

APPENDIX E. LITERATURE RESEARCH ............................................................................................... XV

LIST OF FIGURES FIGURE 1. ERICSSON’S OPERATING REGIONS. SOURCE: BRAUN (2016) ........................................................................ 8 FIGURE 2. THE MAIN PARTS OF A RADIO BASE STATION. SOURCE: JOHANSSON (2016A) ............................................ 9 FIGURE 3. OPERATIONS OF GROUP SUPPLY. SOURCE: JOHANSSON (2016A) .............................................................. 10 FIGURE 4. THE OVERALL SYSTEM. ................................................................................................................................ 15 FIGURE 5. THE GENERIC VALUE CHAIN. SOURCE: PORTER, M.E. (P.37, 1985) ............................................................. 18 FIGURE 6. WHERE THE DIFFERENT SERVICE ELEMENTS ARE MEASURED. SOURCE: BASED ON OSKARSSON ET AL.

(P.37, 2013) ......................................................................................................................................................... 21 FIGURE 7. ACHIEVING AN INTEGRATED SUPPLY CHAIN. SOURCE: STEVENS (1989) .................................................... 22 FIGURE 8. A FRAMEWORK FOR CASE ANALYSIS. SOURCE: TAYLOR (P.4, 1997) ........................................................... 25 FIGURE 9. THE CLASSICAL DISTRIBUTION SYSTEM. SOURCE: BASED ON SKJOTT-‐LARSEN ET AL. (P.133, 2007) .......... 26 FIGURE 10. THE TRANSIT DISTRIBUTION SYSTEM. SOURCE: BASED ON SKJOTT-‐LARSEN ET AL. (P.133, 2007) .......... 27 FIGURE 11. THE REGIONAL DISTRIBUTION SYSTEM. SOURCE: BASED ON SKJOTT-‐LARSEN ET AL. (P.133, 2007) ....... 28 FIGURE 12. THE DIRECT DISTRIBUTION SYSTEM. SOURCE: BASED ON SKJOTT-‐LARSEN ET AL. (P.133, 2007) ............. 28 FIGURE 13. THE CODP IN RELATION TO THE MANUFACTURING SITUATION. SOURCE: BASED ON SHARMAN (P.73,

1984) ................................................................................................................................................................... 33 FIGURE 14. THE STUDIED SYSTEM. ............................................................................................................................... 43 FIGURE 15. THE FOUR OBJECTIVES OF THE STUDY. SOURCE: BASED ON TAYLOR (P.4, 1997) .................................... 45 FIGURE 16. APPROACH OF THE FIRST OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) ....................................... 49 FIGURE 17. APPROACH OF THE SECOND OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) .................................. 50 FIGURE 18. APPROACH OF THE THIRD OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) ...................................... 51 FIGURE 19. APPROACH OF THE FOURTH OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) .................................. 52 FIGURE 20. THE APPROACH FOR FULFILLING THE OBJECTIVES OF THE STUDY. SOURCE: BASED ON TAYLOR (P.4,

1997) ................................................................................................................................................................... 53 FIGURE 21. THE TYPICAL APPROACH OF A MARKET SURVEY. SOURCE: LEKVALL AND WAHLBIN (P.183, 2001) ........ 59 FIGURE 22. THE OVERALL APPROACH OF THE STUDY. SOURCE: BASED ON LEKVALL AND WAHLBIN (P.183, 2001)

AND TAYLOR (P.4, 1997) ..................................................................................................................................... 61 FIGURE 23. APPROACH OF THE FIRST OBJECTIVE. SOURCE: TAYLOR (P.4, 1997) ......................................................... 68 FIGURE 24. APPROACH OF THE SECOND OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) .................................. 70 FIGURE 25. APPROACH OF THE THIRD OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) ...................................... 71 FIGURE 26. APPROACH OF THE FOURTH OBJECTIVE. SOURCE: BASED ON TAYLOR (P.4, 1997) .................................. 73 FIGURE 27. THE LOCATION OF THE MEMBERS IN THE STUDIED SUPPLY CHAIN. ......................................................... 77 FIGURE 28. THE L/C PROCESS BETWEEN EAB AND ATM. ............................................................................................. 78 FIGURE 29. THE INFORMATION AND MATERIAL FLOW IN THE STUDIED SUPPLY CHAIN. ........................................... 80 FIGURE 30. THE LEAD TIMES IN THE INFORMATION FLOW. ........................................................................................ 84 FIGURE 31. THE LEAD TIMES IN THE MATERIAL FLOW. ............................................................................................... 85 FIGURE 32. THE REASONS FOR LONG LEAD TIMES IN THE LOCAL PROCESSING PHASE. ............................................ 100 FIGURE 33. THE REASONS FOR LONG LEAD TIMES IN THE PRODUCTION. ................................................................. 102 FIGURE 34. THE REASONS FOR LONG LEAD TIMES AT EDC GBG. ............................................................................... 104 FIGURE 35. THE REGIONAL SUPPLY CHAIN. ................................................................................................................ 135 FIGURE 36. THE ALTERNATIVE SUPPLY CHAIN. .......................................................................................................... 137

LIST OF TABLES TABLE 1. COMPARISON OF FRAMEWORKS FOR APPROACHING LOGISTIC CASE STUDIES. SOURCE: BASED ON

OSKARSSON ET AL. (2013), STOCK AND LAMBERT (2001) AND TAYLOR (1997) ................................................. 23 TABLE 2. ACTIONS FOR LEAD TIME REDUCTION. SOURCE: OSKARSSON ET AL. (2013) ................................................ 36 TABLE 3. PRACTICAL WAYS FOR LEAD TIME REDUCTION. SOURCE: MASON-‐JONES AND TOWILL (1998) BASED ON

EVANS, TOWILL AND NAIM (1996) ..................................................................................................................... 37 TABLE 4. THE QUESTION FORMULATION. .................................................................................................................... 54 TABLE 5. COMPARISON OF FRAMEWORKS FOR APPROACHING SURVEYS. SOURCE: BASED ON LEKVALL AND

WAHLBIN (2001) AND PATEL AND DAVIDSSON (2011) ...................................................................................... 58 TABLE 6. METHODS TO ANSWER THE SUB QUESTIONS OF THE FIRST OBJECTIVE. ...................................................... 68 TABLE 7. METHODS TO ANSWER THE SUB QUESTIONS OF THE SECOND OBJECTIVE. ................................................. 70 TABLE 8. METHODS TO ANSWER THE SUB QUESTIONS OF THE THIRD OBJECTIVE. ..................................................... 71 TABLE 9. METHODS TO ANSWER THE SUB QUESTIONS OF THE FINAL OBJECTIVE. ..................................................... 73 TABLE 10. LEAD TIMES FOR DIFFERENT ACTIVITIES AND PROCESSES IN THE STUDIED SUPPLY CHAIN. ...................... 86 TABLE 11. THE CUSTOMER ORDER LEAD TIME IN THE BEST, NORMAL AND WORST CASE SCENARIO. ....................... 88 TABLE 12. THE IDENTIFIED PROBLEMS AND SUGGESTED SOLUTIONS. ........................................................................ 95 TABLE 13. CATEGORIZATION OF THE SUPPLY CHAIN PARTS. ....................................................................................... 99 TABLE 14. ROOT CAUSES FOR THE LONG LEAD TIME IN THE LOCAL PROCESSING PHASE. ........................................ 101 TABLE 15. ROOT CAUSES FOR THE LONG LEAD TIME IN THE PRODUCTION. ............................................................. 102 TABLE 16. ROOT CAUSES FOR THE LONG LEAD TIME AT EDC GBG. ........................................................................... 104 TABLE 17. THE IDENTIFIED POTENTIALS FOR LEAD TIME REDUCTION. ...................................................................... 106 TABLE 18. THE THREE ROOT CAUSES AND THE SUGGESTED SOLUTION THAT HAVE SUBSTANTIATED THE FIRST

GENERAL SOLUTION. ........................................................................................................................................ 108 TABLE 19. THE THREE ROOT CAUSES AND THE SUGGESTED SOLUTION THAT HAVE SUBSTANTIATED THE SECOND

GENERAL SOLUTION. ........................................................................................................................................ 110 TABLE 20. THE TWO ROOT CAUSES AND THE SUGGESTED SOLUTION THAT HAVE SUBSTANTIATED THE THIRD

GENERAL SOLUTION. ........................................................................................................................................ 111 TABLE 21. THE ROOT CAUSE AND THE TWO SUGGESTED SOLUTIONS THAT HAVE SUBSTANTIATED THE FOURTH

GENERAL SOLUTION. ........................................................................................................................................ 112 TABLE 22. THE TWO ROOT CAUSES AND THE TWO SUGGESTED SOLUTIONS THAT HAVE SUBSTANTIATED THE FIFTH

GENERAL SOLUTION. ........................................................................................................................................ 113 TABLE 23. THE THREE ROOT CAUSES AND THE TWO SUGGESTED SOLUTIONS THAT HAVE SUBSTANTIATED THE

SIXTH GENERAL SOLUTION. .............................................................................................................................. 115 TABLE 24. THE THREE ROOT CAUSES AND THE TWO SUGGESTED SOLUTIONS THAT HAVE SUBSTANTIATED THE

SEVENTH GENERAL SOLUTION. ......................................................................................................................... 117 TABLE 25. THE ROOT CAUSE THAT HAS SUBSTANTIATED THE EIGHT GENERAL SOLUTION. ...................................... 118 TABLE 26. INCOTERMS FOR MULTIMODAL TRANSPORTS. SOURCE: BASED ON COOK (2014) AND INTERNATIONAL

CHAMBER OF COMMERCE (2016) .................................................................................................................... 119 TABLE 27. THE CONNECTION BETWEEN THE GENERAL SOLUTIONS AND THE ERICSSON SPECIFIC SOLUTIONS. ...... 120 TABLE 28. THE ROOT CAUSES THAT ARE SOLVED WITH THE FIRST ERICSSON SPECIFIC SOLUTION. ......................... 121 TABLE 29. THE ROOT CAUSES THAT ARE SOLVED WITH THE SECOND ERICSSON SPECIFIC SOLUTION. ..................... 122 TABLE 30. THE ROOT CAUSE THAT IS SOLVED WITH THE THIRD ERICSSON SPECIFIC SOLUTION. ............................. 123 TABLE 31. THE ROOT CAUSE THAT IS SOLVED WITH THE FOURTH ERICSSON SPECIFIC SOLUTION. .......................... 124 TABLE 32. THE ROOT CAUSE THAT IS SOLVED WITH THE FIFTH ERICSSON SPECIFIC SOLUTION. .............................. 125 TABLE 33. THE ROOT CAUSE THAT IS SOLVED WITH THE SIXTH ERICSSON SPECIFIC SOLUTION. .............................. 126 TABLE 34. THE ROOT CAUSES THAT ARE SOLVED WITH THE SEVENTH ERICSSON SPECIFIC SOLUTION. ................... 127 TABLE 35. THE ROOT CAUSE THAT IS SOLVED WITH THE EIGHTH ERICSSON SPECIFIC SOLUTION. ........................... 128 TABLE 36. THE ROOT CAUSES TOGETHER WITH THEIR SOLUTIONS. .......................................................................... 129 TABLE 37. LEAD TIMES FOR THE REGIONAL SUPPLY CHAIN COMPARED TO THE CURRENT STATE. .......................... 136 TABLE 38. LEAD TIMES FOR THE ALTERNATIVE SUPPLY CHAIN COMPARED TO THE CURRENT STATE. ..................... 138 TABLE 39. LEAD TIMES FOR THE REGIONAL SUPPLY CHAIN AND THE ALTERNATIVE SUPPLY CHAIN IN COMPARISON

WITH THE EXISTING SUPPLY CHAIN. ................................................................................................................. 143

TABLE 40. THE LEAD TIME REDUCTION ACCOMPLISHED WITH THE REGIONAL SUPPLY CHAIN IN THE THREE DIFFERENT CASES. ............................................................................................................................................. 143

TABLE 41. THE EXPECTED EFFECTS ON THE DELIVERY SERVICE AND ITS SERVICE ELEMENTS. .................................. 144 TABLE 42. RESPONDENTS INTERVIEWED DURING THE PLANNING PHASE OF THE STUDY. .......................................... XI TABLE 43. RESPONDENTS INTERVIEWED DURING THE CURRENT STATE MAPPING. ................................................... XII TABLE 44. LITERATURE RESEARCH BASED ON KEY WORDS. ........................................................................................ XV TABLE 45. LITERATURE RESEARCH BASED ON REFERENCES. ..................................................................................... XVII

INTRODUCTION

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1 INTRODUCTION

The introductory chapter aims to create an understanding of the problem that led to the start of this project. The chapter presents the project’s background followed by the purpose, directives and the targeted group. Finally, the academic requirements are described together with the scientific approach and disposition of the report.

INTRODUCTION

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1.1 Background In recent years there have been significant changes in the society regarding how people communicate, work and are entertained. This is partially due to the introduction of the broadband network, increased mobility and the cloud that connects people, places, applications and devices with each other. The connected system is called the Networked Society and is predicted to induce major changes in many industries. Ericsson AB, hereinafter referred to as Ericsson, is a global company that is and has been a pioneer in the high-‐quality telecommunication market contributing to the Networked Society. Innovation is an important part of the company culture and being first to market with new solutions has been a distinct competitive advantage. (Ericsson AB, 2013) A part of Ericsson’s strategy is to lead the radio development by meeting the needs of the network evolution (Ericsson AB, 2013). Recently, the Group Supply of Business Unit Radio has experienced difficulties to fully meet the customer demand. Because of this problem and lost market shares, Group Supply seeks to increase the ability to meet the customer demand. (Johansson, 2016a) Ericsson’s ability to meet the customer demand with their supply chain mainly depends on three factors: inventory, forecast accuracy and responsiveness (Braun, 2016). The inventory level is desired to be as low as possible for economic reasons. The technology-‐intensive market, with new products constantly being introduced and old ones being phased out, contributes to an increased risk of inventory obsolescence and the desire to have low inventory levels. Ericsson’s radio portfolio consists of a numerous variety of products, making it unsustainable to keep enough components and finished products on stock to match the volatile demand without tying up too much capital. Ericsson is a profit-‐driven company, meaning that the tied up capital affects the financial results negatively. (Johansson, 2016a) It is therefore not relevant to increase the total inventory level in order to match the customer demand. The customers generally demand large and varied quantities with an uneven frequency, making the future demand difficult to foresee. The technology-‐intensive market complicates the forecast process further given that new products are constantly being introduced and old ones phased out. The time from when a customer places an order until the goods are delivered is today too long and contributes to additional uncertainty when forecasting. (Johansson, 2016a) Thus, it is difficult to improve the forecast accuracy with today’s lead time and thereby the ability to meet the customer demand. Consequently, the Group Supply has decided to examine the possibility to reduce the lead time, from customer order to delivery, in order to improve the responsiveness and the ability to meet the customer demand. A reduced lead time is in line with Ericsson’s competitive advantage of being first to market with new products and at the same time offer a high service level. A short lead time and a high service level are essential for Ericsson to remain in the forefront of the radio development and are necessary when facing the increasing competitiveness on the market. (Johansson, 2016a)

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1.2 Purpose Give recommendations for improvements that reduce the total lead time in a supply chain perspective in order to improve the customer service level. 1.3 Directives Directive 1 – The study only examines the lead times of the products of Business Unit Radio Ericsson is divided into several different business units that each is responsible for their own type of products. This study only focuses on the product portfolio of the Business Unit Radio. Directive 2 – The study aims to reduce the total lead time by 50 % in a long-‐term perspective Ericsson has a long-‐term objective to reduce the total lead time by 50 %. Therefore, this study will provide solutions in a long-‐term perspective and not consider if the solutions are reasonable to implement in the present situation. Directive 3 – The study only focuses on one of Ericsson’s customers The study focuses on one of Ericsson’s customers because of the limited time period of this project. The customer Algeria Telecom Mobile was selected since it is considered as an important customer in a region with great potential for improvements. The region of Mediterranean has historically experienced difficulties with meeting the customer demand. Directive 4 – The study focuses on the lead time that is perceived by the customer The study aims at reducing the lead time in order to improve the customer service level. Therefore, the lead time that is perceived by the customer will get the attention. 1.4 Target Group The target group for this master thesis is primarily the Group Supply at Ericsson AB and the Institute of Technology at Linköping University. The paper will hopefully provide people with limited knowledge within supply chain management and lead time analysis a deeper insight into the subjected areas. 1.5 Requirements for Academic Assignments An academic assignment is an assignment that is presented at a university or university college and must fulfill certain requirements, considering that it is an academic product through new academic knowledge can be created. (Björklund & Paulsson, 2014) The requirements of an academic assignment are explained below. The authors of an academic study are required to demonstrate awareness of existing theories, models and data within the studied area. Existing knowledge within the studied area must serve as a base or be taken into account in the study and later on act as a comparison to establish the results of the study. These requirements prevent authors from spending time on unnecessary duplication of effort such as doing work that has already been done by someone else, but also relates new knowledge with already existing and thus enhances the knowledge within the field.

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(Björklund & Paulsson, 2014) Given the above assertions, the report will be comprised by existing literature that is considered relevant for this study. Additional requirements of academic assignments are to deal with questions of both general interest and theoretical dimensions in order for it to become an academic product. The method of the academic study is required to be a widely accepted scientific method and fulfill the ideals of being verifiable, repeatable and not dependent on particular individuals. (Björklund & Paulsson, 2014) Some often occurring concepts in scientific contexts are validity and reliability, which will be taken into consideration by using appropriate methods in accordance with Bjöklund and Paulsson (2014), Jakobsen (2002) and also Lekvall and Wahlbin (2001). Throughout the paper, there must be a main thread so that the connection between the various parts of the study is obvious for the reader. It is important to provide the readers with an opportunity to adopt their own conclusions by providing an as accurate and thorough picture as possible of the design, implementation and results of the study. It is also required to clarify for the readers which of the standpoints that belongs to the authors of the study and which belongs to others. (Björklund & Paulsson, 2014) To fulfill these requirements, an objective approach will permeate the study in conformity with Björklund and Paulsson (2014) together with Lekvall and Wahlbin (2001). 1.6 Scientific Approach The purpose of a study can be achieved in various different ways and it is therefore important to show method awareness when choosing approach. Method awareness indicates that the authors have knowledge of potential methods, their advantages and disadvantages, and then motivate the choice of method based on this knowledge. (Björklund & Paulsson, 2014) Gammelgaard (2004), Björklund and Paulsson (2014) as well as Arbnor and Bjerke (1994) describes three scientific approaches that provide a solid basis for academic researchers. The first approach is called the analytical approach and emphasizes the reality as a whole that is made up of different independent parts. The investigator strives to explain the truth as objective and complete as possible and tries to find relations of cause-‐and-‐effect. (Björklund & Paulsson, 2014) Seeing the parts of the supply chain as isolated fragments may cause sub-‐optimization and the scientific approach is therefore not applied in this study. According to the actor approach, the reality is a result of numerous social constructions (Arbnor & Bjerke, 1994). The explanation of the reality is subjective and highly dependent on the investigators experience and actions (Björklund & Paulsson, 2014). This study examines quantitative lead times and a more objective approach is therefore appropriate. The systems approach is the dominant approach for both researchers and practitioners in the fields of supply chain management and logistics (Gammelgaard, 2004). From this perspective, the reality is described objectively similar to the analytical approach but often considers the sum of the parts as a small fragment separated from the whole. The parts themselves and their relations are from this perspective of equal importance. (Björklund & Paulsson, 2014) This master thesis examines a supply chain composed of several activities and processes in different areas and

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functions. The aim is to reduce the total lead time and any changes made within the supply chain may change the relation between different parts. As a result, the system approach is used in this study. 1.7 Disposition of the Report This section provides a brief description of the content in this report in order to give the reader an overview of the structure and to facilitate the search for information. 1 INTRODUCTION The introductory chapter aims to create an understanding of the problem that led to the start of this project. The chapter presents the project’s background followed by the purpose, directives and the targeted group. Finally, the academic requirements are described together with the scientific approach and disposition of the report. 2 BUSINESS INTRODUCTION The business introduction provides a brief presentation of Ericsson as a company, followed by a more detailed description of the considered business unit and its industry. Moreover, the supply chain network for Ericsson is introduced with the including members and finally, the studied customer is presented and the overall system of the study is defined. 3 THEORETICAL FRAMEWORK The theoretical framework presents the literature that the authors intend to use in order to fulfill the purpose of the study. The framework covers the theoretical areas of Supply Chain Management, Customer Service, Supply Chain Integration, Analyzing Supply Chains, Distribution Models, Inventory Handling, Supply Chain Strategies, Supply Chain Time Compression and Transparency in Supply Chains. 4 SPECIFICATION OF TASK The specification of the task means to clarify the purpose of the study, define the studied system and describe the necessary delimitations. The purpose is decomposed into key questions, which are further divided into sub questions that are explained to later be answered. The question formulation will be fundamental for the forthcoming parts of the report. 5 METHODOLOGY The methodology chapter presents the approach of the study, followed by methods for collecting data and literature. The chapter includes reasoning about the reliability and validity of the study. Finally, the methods used to answer the purpose and the question formulation is described. 6 CURRENT STATE MAPPING The chapter presents the current state for the studied supply chain. The current state map includes a description of the supply chain structure, the supply chain performance and perceived problems and suggested solutions from people working within different parts of the supply chain.

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7 IDENTIFICATION OF POTENTIALS FOR LEAD TIME REDUCTION The chapter includes an identification of potentials for lead time reduction based on the current state map. At first, a categorization is made for different parts of the supply chain and the experienced problems. The categorization is fundamental for the following prioritization that determines which parts, problems and suggested solutions that can be considered as potentials and get the further attention. 8 GENERATION OF ALTERNATIVE SOLUTIONS The chapter contains a second literature review that is based on the potentials for lead time reduction. The literature review results in a number of general solutions that are modified and applied to the supply chain described in the current state mapping. 9 EVALUATION, RECOMMENDATION AND IMPLEMENTATION The chapter includes an evaluation of the generated solutions and their interactions. A final recommendation is provided based on the solutions, their interactions and the time perspective of the solutions. Lastly, the requirements for implementing the recommended solutions are clarified. 11 CONCLUSIONS The concluding chapter answers to the purpose of the study and includes recommendations for improvements that reduces the lead time and improves the service level for the studied supply chain. The recommendations consist of solutions that are suitable for different situations and the chapter contains an estimation of the expected lead time reduction for the solutions. 11 DISCUSSION The discussion chapter presents a critical review of the applied research methods and delimitations made to approach the objectives of the study. Potential sources of error are highlighted and their effects on the final result is discussed. The generalizability of the result, the contribution of the study and recommendations for further studies are also considered.

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2 BUSINESS INTRODUCTION

The business introduction provides a brief presentation of Ericsson as a company, followed by a more detailed description of the considered business unit and its industry. Moreover, the supply chain network for Ericsson is introduced with the including members and finally, the studied customer is presented and the overall system of the study is defined.


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2.1 Ericsson AB The history of Ericsson has its start in the year of 1876 when Lars Magnus Ericsson opened up a small telegraph repair shop in central Stockholm. During the same year, Abraham Bell received a patent for the telephone that did not cover the Nordic countries. Ericsson utilized this and started to produce his own telephones, which were on the market just two years later (Meurling & Jeans, 2000). This was the start of today’s company with over 116 000 employees that provides communication networks, telecom services and support solutions for customers in more than 180 countries (Ericsson AB, 2013). The business extends worldwide and can be divided into ten global regions that are listed below and visualized in Figure 1.

• Southeast Asia & Oceania (RASO) • Northern Europe & Central Asia (RECA) • Western & Central Europe (RWCE) • India (RINA) • Latin America (RLAM)

• North America (RNAM) • Mediterranean (RMED) • Middle East & Asia (RMEA) • North East Asia (RNEA) • Sub-‐Saharan Africa (RSSA)

(Johansson, 2016a)

Figure 1. Ericsson’s operating regions. Source: Braun (2016)

Ericsson approximates that 40 % of the world’s total mobile traffic passes through equipment that is supplied by them (Ericsson AB, 2013). The net sales during 2015 amounted to more than 245 billion SEK, where the Business Unit Radio (BURA) accounts for about 40 % (Johansson, 2016a).


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2.2 Business Unit Radio BURA is responsible for the radio operations in terms of performance and customer satisfaction. The organization has over 21 000 employees with sites in more than twelve countries. The characteristics of the radio market are large productions with complex logistics and a constantly increasing competitive pressure. The radio market is technology-‐intensive, meaning that new products are constantly being introduced and old ones phased out. The vision of BURA is a networked society where person-‐to-‐person voice communication and internet connection are enabled at any time and from anywhere, to the extent that everything that benefits from being connected will be connected. (Johansson, 2016a) The mobile network of today is built up by a large amount of radio base stations (RBSs), which is the main product of BURA. In simple terms, the function of a RBS is to enable a two-‐way wireless communication based on radio waves and allow for transmission of data between different devices. (Ersten, 2016) A RBS consists of a number of different modules and site material that together are assembled into a cabinet. A module can refer to either a radio unit, digital unit or a filter. These modules are built up by Surface Mounted Assemblies (SMAs), which in turn are made by printed circuit boards that are combined with small electronic components. Modules that are assembled into a cabinet refers to as a node and becomes a RBS first when the node is consolidated with the site material, such as antennas, cables etc. (Ersten, 2016; Ianev, 2016a) See Figure 2 for an elementary visualization of the main parts that constitute a radio base station.

Figure 2. The main parts of a radio base station. Source: Johansson (2016a)

A RBS is customized after the customer requirements, meaning that the modules are configured differently depending on the context and what purpose it will serve. For example, Ericsson manufactures over 100 different filters that each consist of some unique components. The filters are configured differently and transmit different frequencies, depending on the country they will be used in. (Özelbir, 2016) Furthermore, there are RBSs for both indoor or outdoor use (Ersten, 2016).


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The modules are both manufactured in-‐house as well as purchased from external manufacturing sites. The site material on the other hand, are only purchased from external manufacturers for later being consolidated with the nodes before the final delivery to the customers are performed. (Pettersson, 2016a) As mentioned before, the main product of BURA is the RBS. However, the different modules in the RBSs can also be sold in separate to the customers. This is to make it possible to replace a module with a new one in order to increase the performance, without buying a completely new radio base station. (Ianev, 2016a) The mission of BURA is to lead the transmission of the networked society through mobility and for Ericsson to remain in the forefront of the radio development, short lead times and high service levels are vital. The accountabilities, responsibilities and support for doing so are divided into various operative and staff units, where the operative unit responsible for the supply of radio products is Group Supply. (Johansson, 2016a) 2.3 Group Supply Group Supply is the organization that is responsible for the supply of all hardware products in the product portfolio of BURA. Approximately 1 000 RBSs are provided to different customers every day, meaning one radio unit every 80 seconds for 24 hours per day, 7 days per week. (Johansson, 2016a) In order to give an understanding of how Group Supply is spread globally, the different supply operations are illustrated in Figure 3 and will be described in more detail in the upcoming section.

Figure 3. Operations of Group Supply. Source: Johansson (2016a)

Distribution*Center,*PanamaPanama

Supply*Site,*BrazilSaõ'Jose'dos'Campos

Supply*Site,*MexicoGuadalajara

Distribution*Center,*SingaporeSingapore

Supply*Site,*ChinaNanjing

Distribution*Center,*ChinaShanghai

Distribution*Center,*UAE*Dubai

Supply*Site,*IndiaJaipur

Distribution*Center,*SwedenBorås,'Gothenburg

Supply*Sites,*SwedenBorås,'Kista, Kumla,'Linköping'

Supply*Site,*EstoniaTallinn

Group*Supply,*SwedenKista

Supply*Site,*USPlano

Supply*Site,*UKSouthampton


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The market of radio products is volatile and unpredictable to the extent that Group Supply has recently failed to meet the customer demand and started to lose market shares. Because of this, Group Supply has examined how Ericsson can increase their ability to meet the customer demand. (Johansson, 2016a) There are mainly three factors that affect their ability to accomplish this, which are inventory levels, forecast accuracy and responsiveness. (Braun, 2016). Ericsson is a profit-‐driven company, and tied-‐up capital in form of inventories will thereby affect the financial results negatively. As stated before, the radio market is unpredictable and in combination with today’s lead time makes it difficult to improve the forecast accuracy. Especially since Ericsson offers a vast range of product variants, making the average demand per variant relatively low. Group Supply has concluded that the lead time has to be reduced in order to improve their responsiveness and ability to meet the customer demand, which will be vital for Ericsson to remain in the forefront of the radio development. Providing customer-‐specific products in a global supply chain with several stakeholders often results in a large number of interfaces and handovers that increases the complexity of the supply chains. (Johansson, 2016a) 2.4 The Supply Chain Network Considering that Ericsson supplies customers all over the world with radio products, it places certain requirements on their supply chains. Today, the supply chains may be arranged in a variety of ways and include different kind of members depending on factors such as the customer region or the type of products being distributed. As a result of these conditions, the supply chain network tends to get rather complex and places high demands on efficient material and information flows. (Johansson, 2016a) To give an understanding of how the supply chains of Ericsson can be arranged, some central and often occurring members are introduced in the following sections. The members can be categorized into four main groups: Suppliers, Ericsson, Third-‐Part Logistics Providers and Customers, which can consist of members related to either the focal company or to external parties. After presenting the most common members, the studied customer Algeria Telecom Mobile is introduced and finally can an overall system be defined for this study. 2.4.1 The Role of the Suppliers Ericsson has around 700 different first-‐tier suppliers located worldwide. It refers to suppliers of electro mechanic components, electronic components and site materials. (Johansson, 2016b) In this study, the external manufacturing sites are also defined as suppliers and there are therefore four different type of first-‐tier supplier concepts that are presented during this section. Note that these suppliers in turn have their own providers, for Ericsson defined as second-‐tier suppliers. Component Supplier: is a type of supplier that distributes components and can be categorized into two groups. The first group is the electro mechanics, which consists of suppliers that distribute components such as printed circuit boards, screws, castings etc. There are around 140 electro mechanic suppliers that are spread all over the world. To avoid excessive lead times, Ericsson selects electro mechanic suppliers that are located near the business to the extent possible. For example, electro mechanic components such as castings are mainly supplied from China because of the favorable pricing and they can have extensive lead times. (Neuman, 2016a)


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The other group is the electronics, which contains suppliers of components that are mounted to the printed circuit boards. There are mainly two hubs that distribute the electronic components, which are referred to as Arrow and acts as an intermediator between the roughly 210 electronic component suppliers and Ericsson. One of the electronic component hubs is located in Hong Kong, China, and the other one is placed in Venlo, Netherlands. Arrow stores the electronic components on behalf of Ericsson and secures that the buffers of different components are kept between the preset minimum and maximum levels. The idea with the cooperation with Arrow is to secure short lead times for inbound supply of electronic components, without having to store them at Ericsson. (Carlheimer, 2016a) External Manufacturing Site (EMS): is a manufacturing unit that is owned and managed by an external part. It only produces modules and not any nodes. The finished modules can either be delivered to an Ericsson Supply Site and be put into a node, or delivered to an Ericsson Distribution Center. Today, Ericsson has contracts with eight different EMSs. (Ianev, 2016a) Site Material Supplier: is a member that distributes site material in the supply chain. The site material suppliers deliver either directly to an Ericsson Distribution Center or to a hub specified for site material. There are around 180 site material suppliers that in total distributes around 4 000 different site material products, with new ones being introduced each month. (Pettersson, 2016a) 2.4.2 The Role of Ericsson Ericsson is the focal company and the second main actor in the supply chain. It is important to distinguish between Ericsson and the subsidiaries of Ericsson, considering that the two types are managed in different ways. It is also important to distinguish between subsidiaries at regional level and subsidiaries at local level. During the following section some common units related to both Ericsson and its subsidiaries are described. Ericsson Supply Site (ESS): is a manufacturing site that produces both modules and nodes. The ESSs receive deliveries from both component supplier and from EMSs and supplies the Ericsson Distribution Centers with finished goods. An ESS can be owned and managed by either Ericsson or by its subsidiaries, depending on where it is located. If the ESS is located in Sweden it belongs to Ericsson, otherwise to a subsidiary. There are not any differences between the ownerships in this case, except for the type of order that triggers the production. If the ESS is owned and managed by a subsidiary, Ericsson places a purchase order to the ESS that triggers the production and in the other case, if the ESS is owned by Ericsson, they place a so called stock transfer order since they already have the ownership of the goods. There are in total six ESSs (Ianev, 2016a). Ericsson Distribution Center (EDC): is a consolidation point for finished products that are incoming from both ESSs, EMSs and site material suppliers. The products are consolidated into specific customer orders before delivered to a regional warehouse, a local warehouse or directly to the customer. There are in total five EDCs spread out over the ten regions and they are all owned by Ericsson. Just as for the ESSs, whether they are managed by Ericsson or a subsidiary depends on the location of the EDC. (Ianev, 2016a)


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Order Desk: is a function at Ericsson in Kista, consisting of several people with different responsibilities. The overall responsibility of the order desk is to manage the incoming customer purchase orders and to make sure that the information is complete. Sometimes there are some additional documents that have to be processed. As the orders are complete, the order desk sends out purchase orders and stock transfer orders to ESSs, EMSs and site material suppliers. There is also a distribution order sent to the specific EDC. (Pettersson, 2016a) Control Tower: is located in Kista and managed by Ericsson. Their main objective is to manage forecasts, both long term and short term. The Control Tower is responsible for coordination of the predicted demand with future capacity. (Johansson, 2016b) Local Company: refers to the local subsidiary to Ericsson. The local company usually consists of a local sales team and supply team. Most often, it is the local company that has the direct contact with the customers in each country. (Ur Rehman, 2016a) Regional and Local Warehouse: are warehouses for storing of goods, either covering a regional or local market. These warehouses are managed by subsidiaries to Ericsson. (Johansson, 2016b; Pettersson, 2016a) Site Material Hub: is a unit located in Borås that is owned and managed by Ericsson. The hub only buffers site material for deliveries to the EDC in Gothenburg. Since both the EDC and the site material hub is owned by Ericsson, pick from stock at the hub can be applied when site material is needed and it is not necessary to send any purchase orders. Suppliers of site material deliver into the hub and Vendor Managed Inventory (VMI) is often applied. Around 90 % of the total customer demand of site material that pass the EDC in Gothenburg is covered by the hub. (Pettersson, 2016a) 2.4.3 The Role of the Third-‐Part Logistics Providers The Third-‐Part Logistics (3PL) providers are the third main actor in the supply chain. Ericsson purchase services such as transportation and site installation. (Pettersson, 2016a). Two members classified as 3PL-‐providers are introduced below. Application Service Provider (ASP): is hired as a third part company and manages the installation of the products at the project sites. (Pettersson, 2016a) Distribution Service Provider (DSP): refers to a third part that manages the transportation of goods. Ericsson has contracts with several freight companies, which provides transportations by both truck, boat and flight. (Ur Rehman, 2016a)


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2.4.4 The Role of the Customers The customers are the fourth and final main actor in the supply chain. Ericsson has over 700 customers worldwide. The customer experiences a need, places an order that moves upstream the supply chain and finally gets the order delivered after it has passed the three previous introduced main actors downstream. Three supply chain components connected to the customer are briefly introduced below. Customer Order Desk: is the unit that places the customer purchase orders to Ericsson, but that most often goes via the local company that acts as an intermediate. (Ur Rehman, 2016a) Customer Warehouse: is where the customer stores their received products and Ericsson has little or none insight to these units. (Ur Rehman, 2016a) Project Site: is where the need occurs and where the radio base stations are installed. The goods can either be delivered directly to the project site or to the customer warehouse, depending on the customer requirements. (Ur Rehman, 2016a) 2.5 Algeria Telecom Mobile Algeria Telecom Mobile (ATM) is a customer to Ericsson and the incumbent operator in Algeria with a national geographic presence covering over 15 million subscribers. It is one of the customers that orders the largest volumes in RMED and therefore considered as an important customer to Ericsson. As things stand, Ericsson has a delivery precision of 35-‐40 % to ATM and is desired to be improved. (Benrabah, 2016a) The delivery precision will be improved by reducing the lead times and hence, providing a higher service level towards ATM (Johansson, 2016a). Traditionally, ATM bulk orders the same type of products on mostly quarterly patterns and is a demanding customer in terms of a long bill of material and high forecast deviations. ATM is in a great extent ordering RBSs with standard modules, but it can happen that they order modules that are not classified as standards. Because of an Algerian legislation, Ericsson and ATM are obliged to use Letter of Credit (L/C) as payment method. It acts as an assurance for both the seller and the buyer in the sense that the seller is guaranteed payment and the buyer is guaranteed the delivery that they have agreed upon. With L/C comes a process consisting of much manual paperwork, such as documents concerning invoicing, transportation and other terms and conditions. L/C requires that at least one bank acts as an intermediary and for this case, Ericsson and ATM are using two respective banks that both charges a fee for the provided service. (Benrabah, 2016a) Ericsson has three contractual supply chain models that are used based on the type of contract that is signed with the customer, which are referred to as Ericsson, Local or Split contracts. The contract displays the legal owner of the contract and is determined by factors such as the model that supports the business in the best way, where it is most beneficial to pay taxes etc. (Ur Rehman, 2016a) In this case, the finance department has decided that an Ericsson contract is to be used with ATM, meaning that Ericsson is the formal order taker and the local company only acts an intermediary (Benrabah, 2016a). Carriage Paid To (CPT) is an international commercial


15

term used in the contract between Ericsson and ATM. It implies that Ericsson is paying for the carriage of goods to the port of destination, while ATM is responsible for the insurance of the goods during transportation. (Benrabah, 2016a; Ur Rehman, 2016a) 2.6 The Overall System As mentioned earlier, the supply chain of Ericsson can be arranged in a variety of ways, but there are most often four main actors composing it. These actors are the suppliers, Ericsson, the 3PL-‐providers and the customers. The suppliers in turn have their own suppliers, called the second-‐tier suppliers, and ATM have their project sites where the products are installed. The six members and the material and information flow that connects them are together composing the overall system of this study, illustrated in Figure 4. The solid lines in the figure refer to material flow and is the physical flow of goods. The dashed lines refer to the information flow in terms of orders and information exchange. To get more information about the actors and the flows in the studied supply chain, it requires further investigation.

Figure 4. The overall system.

Second'tiersuppliers

First'tiersuppliers Ericsson ATM Project6 sites

3PL'providers

Information*flowMaterial*flow


16

THEORETICAL FRAMEWORK

17

3 THEORETICAL FRAMEWORK

The theoretical framework presents the literature that the authors intend to use in order to fulfill the purpose of the study. The framework covers the theoretical areas of Supply Chain Management, Customer Service, Supply Chain Integration, Analyzing Supply Chains, Distribution Models, Inventory Handling, Supply Chain Strategies, Supply Chain Time Compression and Transparency in Supply Chains.


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3.1 The Supply Chain Nowadays, companies are in a greater extent competing at a global level which requires more from them to be successful (Christopher, 2011; Sandberg, 2015; Jespersen & Skjott-‐Larsen, 2005). As the technology constantly develops, the demand from customers change more rapidly than it has before. Many large companies often have several segmented markets which also need to be handled in different ways. At the same time, the global competition increases which forces companies to become faster, better and cheaper. A tendency today is a greater cooperation between the focal company and its suppliers, customers and other strategic partners. Because of this, the focus is no longer at competition between individual firms, but at competition between whole supply chains. (Christopher, 2011; Jespersen & Skjott-‐Larsen, 2005) Jonsson and Mattsson (2011) believes that a requirement for efficient logistics is for companies to apply an external approach, i.e. include the direct customers and suppliers in their system boundaries and together achieve efficient material and information flows. To understand the supply chain concept, one must first recognize what Porter (1985) defines as the generic value chain (Christopher, 2011; Mattsson, 2012; Skjott-‐Larsen, Schary, Mikkola & Kotzab, 2007). The value chain illustrated in Figure 5 consists of the following series of activities: inbound logistics, operations, outbound logistics, marketing & sales and services. These are primary activities that all create value for a company and its outputs. Additionally, there are supporting activities that strive to support the primary activities, including human resources, technology development, procurement and management. To gain competitive advantage, a company must perform the value chain activities in a unique way or more efficient than its competitors do. (Porter, 1985)

Figure 5. The generic value chain. Source: Porter, M.E. (p.37, 1985)


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The logistic pipeline described by Christopher (2011) together with Oskarsson, Aronsson & Ekdahl (2013) can be compared to the generic value chain described by Porter (1985), but seen from a logistic perspective. The pipeline consists of three major components: material supply, production and distribution. It is a simplified model of components going in to a company through the material supply, being produced and assembled in the production, and finally being distributed to the customers. These three major components can be further divided into different processes and activities. Order and delivery processes link the different parts in the pipeline together and manage the flow through it. Some physical main activities such as inventory storage, transportation and material handling are often recurring in the whole pipeline. It is vital with a well working information flow, why the pipeline and its parts need clear planning and control. (Christopher, 2011; Oskarsson et al., 2013) There are three essential aspects to take into consideration regarding the pipeline. The first aspect is to dimension the capacity of the pipeline after the customer needs. This is to minimize the risk for under or over capacity, which may lead to additional costs or a shifting service level. The second is to balance the capacity throughout the pipeline in order to create an even flow. This is to avoid bottlenecks, which may lead to queues and inventory buildups, which in turn contribute to a longer pipeline. This bring us in to the final aspect, which is to create an as short pipeline as possible. (Oskarsson et al., 2013) A short pipeline is desirable since the length of it affects both customer service and the costs for the company. The length of the pipeline represents the time it takes a product to pass through it and are determined by a numerous of factors. These are for instance choice of distribution method, how inventories are handled, type of products and how they are produced and also, in what extent companies have worked with trying to make their pipelines more effective. (Christopher, 2011; Oskarsson et al., 2013) As mentioned earlier by Christopher (2011) and Jespersen and Skjott-‐Larsen (2005), there is often a great cooperation between a company and its different suppliers and customers. As well as the focal company has a value chain and a logistic pipeline, its suppliers and customers also have their individual value chains and pipelines. When a supplier delivers input to a customer, which in turn delivers input to its customers, the different companies need to cooperate with each other. This means that their value chains and pipelines get interconnected and the connections between different companies creates a supply chain. (Skjott-‐Larsen et al., 2007) Mentzer, DeWitt, Keebler, Min, Nix and Smith (p.4, 2001) defines a supply chain more precisely as: “…a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances, and/or information from a source to a

customer.”


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3.2 Supply Chain Management There are no organizations that are strong enough to, on their own, manage to fully meet the markets demand in the environment of intense competition, fast changing technologies and growing requirements from customers (Christopher, 2011; Skjott-‐Larsen et al., 2007). The way relations and business processes across the supply chain are handled to create value for all parts within it, is called supply chain management (Christopher, 2011; Jespersen & Skjott-‐Larsen, 2005). Skjott-‐Larsen et al. (p.21, 2007) presents the Council of Supply Chain Management Professional’s definition of supply chain management:

“SCM encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries,

third-‐party service providers, and customers.” In most markets, companies rarely differentiate themselves from their competitors because of their products that often share the same functional characteristics. Instead, the ability to provide high service level to the end customer is a factor of great value and a central parameter of competition. The ability to offer a high service level is highly dependent on how good companies are at handle the management throughout their supply chains. (Jespersen & Skjott-‐Larsen, 2005) 3.3 Customer Service Customer service is a common expression when talking about supply chains and is determined by the activities that takes place during the interaction with the customer, which can be categorized as before, during and after the delivery. (Christopher, 2011; Mattsson, 2012; Oskarsson et al., 2013) Before the delivery refers to how easy it is to make business with a certain company, while during the delivery implies how well a company lives up to what has been promised and if the information exchange towards the customer is clear. After the delivery can mean the offering of spare parts or the handling of guarantees and return of goods in a good way. A more precise definition of the customer service that is directly related to an actual delivery is referred to as the delivery service. This delivery service consists of a number of elements that constitutes the service level and depends on the specific industry or customer. (Mattsson, 2012; Oskarsson et al., 2013; Storhagen, 2003) The service elements are described briefly in the list below.

• Lead time is the time between ordering and receiving of delivery. • Delivery reliability is the reliability of the promised lead time. • Delivery dependability refers to if it is the right product in the right quantity and quality

that is delivered. • Stock availability is the amount of orders or order lines that can be delivered according to

the customer demand. Is only useable for stock items. • Information exchange refers to how information is shared. • Flexibility refers to the ability to customize.

(Mattsson, 2012; Oskarsson et al., 2013; Storhagen, 2003)


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According to the definitions of the service elements, they are measured at different parts of the supply chain, see Figure 6. The lead time is the time from when the customer places an order until the goods are delivered. Both the delivery reliability and the delivery dependability are service elements that are measured at the customer. The stock availability on the other hand, is measured at the supplying company. Both the information exchange and the flexibility are overall service elements and can be measured at the supplier and all the way to the customer.

Figure 6. Where the different service elements are measured.

Source: Based on Oskarsson et al. (p.37, 2013)

3.4 Supply Chain Integration In order to provide higher customer service level, without incurring any substantial costs, companies are required to develop integrated supply chains driven by the needs of the business. An integrated supply chain is successfully achieved by going through a number of stages described below, see Figure 7. (Stevens, 1989) The first stage, called the baseline, relates to the traditional approach where companies concentrate at the operational and planning levels and make up for the imbalance between activities with excess inventory and capacity. Independent departments with incompatible control systems and procedures characterize this stage. The second stage recognizes the functional integration, meaning that the adjacent activities in the baseline are integrated as discrete business functions, each of which still are buffered by inventory. The third stage is characterized by full system visibility throughout the business. It is not until the final stage that the scope of integration extends outside the company to cover suppliers and customers, achieving full supply chain integration. (Stevens, 1989)

Supplier Customer

Information*exchangeFlexibility

Lead time

Delivery reliabilityDelivery dependability

Stock*availability


22

Figure 7. Achieving an integrated supply chain. Source: Stevens (1989)

When describing, analyzing and managing a supply chain there are three vital dimensions to take into consideration: the horizontal structure, the vertical structure and the horizontal location of the focal company within the supply chain. The horizontal structure describes the number of tiers along the supply chain, while the vertical structure refers to the number of suppliers or customers contained in every tier. The horizontal location of the focal company can be positioned somewhere between the initial source of supply and the end customer. (Lambert & Cooper, 2000) The longer the horizontal structure of the supply chain, the less responsive to volatile demand will the system be (Christopher, 2011). 3.5 Analyzing Supply Chains It exists various different frameworks for analyzing logistic and supply chain cases. Oskarsson et al. (2013), Stock and Lambert (2001) and Taylor (1997) describes three frameworks consisting of key steps that can be used to approach most case studies, see Table 1. In the following paragraph, the different frameworks are compared followed by a more detailed description of the framework made by Taylor (1997).


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Oskarsson et al. (2013) argue that the first step before initiating an analysis should be to clarify the preconditions, e.g. the targeted lead time reduction, available resources etc., and thereafter perform an analysis of the current state as a second step. Stock and Lambert (2001) together with Taylor (1997) differs from Oskarsson (2013) since their first step is to analyze the current state and then identify the problems as a second step. However, the clarification of preconditions is to some extent included in the current state analysis for Stock and Lambert (2001) as well as for Taylor (1997). After completed the description and analysis of the current state, all three frameworks describe the third step as generating and justifying alternative solutions, the fourth step as presenting a recommended solution and the fifth step as implementation. The frameworks of Stock and Lambert (2001) and Taylor (1997) are completed after the five steps, but Oskarsson et al. (2013) present a final step where the result of the implemented solution is followed up. In summary, the presented frameworks have similar overall approaches and the main difference is how the approaches are divided into key steps. The current state description is fundamental for all the frameworks, which is analyzed in order to generate alternative solutions that subsequently result in a recommended solution and implementation.

Table 1. Comparison of frameworks for approaching logistic case studies. Source: Based on Oskarsson et al. (2013), Stock and Lambert (2001) and Taylor (1997)

Overall stages Oskarsson et al. (2013)

Stock & Lambert (2001)

Taylor (1997)

Clarification of preconditions X

Current state analysis X X X

Identification of problems X X

Generation and evaluation of alternative solutions X X X

Recommended solution and justification X X X

Implementation X X X

Follow up X


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Out of the three authors, Taylor (1997) describes the framework in most detail. It is a five-‐step procedure to approach the analysis of logistic and supply chain cases, see Figure 8 below. The first step is to analyze the existing situation or more precisely, the supply chain structure, the supply chain performance and the business context. The three major issues that need to be considered for the supply chain structure are the physical flow of goods, the information management and the organizational and management structures that control the supply chain. It is necessary to assess the performance of the supply chain in order to determine where to target future efforts and when examining the benefits of the improvements. This can be done for the overall performance, the relative performance and the performance of individual logistics functions. The analysis of the business context is done both internally and externally, aiming for logistics to contribute to corporate performance and developing policies in anticipation of changes in the environment. (Taylor, 1997) The second step is to identify major issues and problems in the current situation. A comprehensive and thorough situation analysis will increase the chances of finding the key issues and problems that are crucial for making appropriate recommendations. Therefore, this is seen as the most difficult and critical step of the analysis. It is necessary to differentiate between symptoms and causes and also not to only focus on the problems, but to identify relevant opportunities. All the identified problems and issues are thereafter categorized into meaningful related groups and prioritized in order to reach sensible solutions. (Taylor, 1997) Once the issues and problems have been identified, there is a step of generating and evaluating as many different ideas and solutions as possible. To do so, it can be beneficial to work in brainstorming groups since such discussions often cover different perspectives and result in several solutions. It can also be helpful to divide the solutions into: functional issues, the corporate context and the supply chain context. Probably the most important aspect when evaluating solutions is to consider the realities of implementation. The intention of this step is to produce two or three solutions that can be implemented and evaluated in terms of requirements, benefits, consequences and such. The fourth step is to describe the given recommendation and justify the choice in terms of costs and benefits while the final step is the implementation, where practical questions are addressed such as the required resources, timing, monitoring etc. (Taylor, 1997)


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Figure 8. A framework for case analysis. Source: Taylor (p.4, 1997)

Step%1Situation(analysis

Step%2Identification(of(main(issues(and(problems

Step%3Generation(and(

evalutation(of(alternative(solutions

Step%4Recommended(solution(

and(justification

Step%5Implementation

Supply(chain(structures

The(business(context

Supply(chain(performance

Categorize

Prioritize

Brainstorm(ideas

Select(2B3(alternatives(and(evaluate

Resources

Timing

Monitoring

Description

Justification


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3.6 Distribution Models As mentioned by Oskarsson et al. (2013), one factor determining the length of the logistic pipeline is the choice of distribution method. Picard (1983) also says that one of the hardest challenges for companies is to manage the distribution of goods, while assuring a high customer service and keeping the physical distribution costs low. The distribution cost includes transportation, shipping expenses, warehousing costs etc. It is a great challenge to decide on what is the best way of moving goods from production to customer, mainly due to the need for great coordination between numerous organizational units that sometimes have conflicting interests. For example, if a company wants to increase delivery frequency to customers in order to decrease the costs for inventory holding, it will instead increase the costs for transportation. This coordination is extra hard in multinational companies that have subsidiaries in foreign markets, that handle e.g. manufacturing, procurement or sales. (Picard, 1983) A common issue, regarding sales and distribution, is whether local sales are best handled by local distribution or by a more centralized distribution structure (Skjott-‐Larsen et al., 2007). Picard (1983) means that there are two different solutions: either apply a decentralized distribution handled by the subsidiaries, or use a regional distribution centers where inventory is centralized. He also proposes that there are four basic models over how products can be moved from production to the customer: the classical system, the transit system, the regional distribution system and the direct system. These distribution systems will be described below. 3.6.1 The Classical System The classical distribution to customers is fully managed by the subsidiary, see Figure 9. Even though there might be a supporting regional supply organization, the deliveries and the inventory holding are done by the subsidiary or a local distributor. (Picard, 1983) This system gives control to the local operator, but there might be a problem with phasing in and out products in the product portfolio, due to separation of important supply chain elements. There may occur multiple inventories and a low degree of integration in the supply chain. (Skjott-‐Larsen et al., 2007)

Figure 9. The classical distribution system.

Source: Based on Skjott-‐Larsen et al. (p.133, 2007)


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3.6.2 The Transit System The subsidiary in the transit system has a greater responsibility at a higher level in the organization. The parent company holds inventory and handle orders, but the orders are managed through the subsidiary for local deliveries, see Figure 10. (Picard, 1983) The goods are seen as mobile inventory when they are transported, and the supplier constantly looks for a destination where a customer demand might occur. Then they try to send the goods as close as possible to that destination, before a customer order is received. (Claesson & Hilletofth, 2011) Cross-‐docking, further described in Section 3.7.4, is an occurring practice in this system, and refers to goods being transshipped in a network of terminals (Skjott-‐Larsen et al., 2007). Some advantages with this system are: shorter lead times, possibility to a lower stock volume and a lower tied-‐up capital. The disadvantages in turn are: the need for a good forecast, the risk of unnecessary movement of goods and the need for a well working transparent information system. (Claesson & Hilletofth, 2011)

Figure 10. The transit distribution system.


3.6.3 The Regional Distribution System In the regional distribution system, companies use a central distribution center within a region to provide goods for the customers in the region, see Figure 11. In Europe, companies often have a few distribution centers to be able to reach their whole customer base within just a couple of days. (Skjott-‐Larsen et al., 2007) The advantages with centralize inventories in form of regional distribution centers are e.g. a lower total stock level, a higher flexibility and lower administrative costs. The disadvantages are e.g. higher transportation costs and a risk for lower customer service due to lower inventories close to the customer. (Attwood & Attwood, 1992)


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Figure 11. The regional distribution system.


3.6.4 The Direct System The idea of the direct system is to ship products directly from production to the customer without any intermediaries, shown in Figure 12. This is enabled by the need of efficient and coordinated transportation and transparent information systems, and may lead to both a decrease in inventory costs and delivery times. (Skjott-‐Larsen et al., 2007) A disadvantage is the high transportation costs, which enable a thorough balance between cost and speed. Direct deliveries are common for products with risk for obsolescence, as well as within e-‐commerce and are a growing trend. (Gattorna, 1998)

Figure 12. The direct distribution system.


Skjott-‐Larsen et al. (2007) mean that companies often apply a combination of above described distribution models, depending on the product being distributed. A fast-‐moving product is often preferably kept in inventory close to the customer, while a slow-‐moving product is rather handled with a centralized, inventory kept, distribution system. (Skjott-‐Larsen et al., 2007)


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3.7 Inventory Handling Inventory handling is in practice of the same purpose as of distribution; reduce costs and improve service level. Attwood & Attwood (1992) states that, by managing a good inventory management, over 10 % of the total inventory costs can be saved. It can also prevent stock-‐outs and reduce investments connected to inventories. (Attwood & Attwood, 1992) Though inventory is a factor affecting the length of the logistic pipeline, described by Oskarsson et al. (2013) in Section 3.1, and thus the customer service level, some commonly occurring practices connected to inventory in supply chains will be presented in this section. The inventory handling practices that are presented are: Traditional Inventory Management, Just-‐in-‐Time, Vendor Managed Inventory and Cross-‐Docking. 3.7.1 Traditional Inventory Management The traditional way of handle inventories between parties in a supply chain is when both the supplier and the customer have their own inventories they are responsible for. The customer places an order to the supplier, who in turn sends a confirmation of the order, and then delivers within the order lead time. The customer also gets a notification of when the delivery will arrive, and if any deviations in the order occur. Typically, each party take their own decisions without considering the others and no information, e.g. about when a promotion is planned, is shared between them. (Govindan, 2013) A disadvantage is the need for high inventory buffer levels, to secure the requested service level. (Skjott-‐Larsen et al., 2007) 3.7.2 Just-‐In-‐Time The concept of Just-‐In-‐Time (JIT) originates from lean manufacturing and is about to meet the customer demand by coordinate the flow of material through the production and the supply chain. Goods are only produced when needed and the concept includes elimination of inventory buffers. For this to be possible, from a production perspective, the material has to arrive at a specific station in the right quantity and at the exact point of time when it is needed, in order to match the production schedule. (Skjott-‐Larsen et al., 2007) Orders are placed in fixed time intervals but the quantities may vary from time to time. Due to the need for goods to be JIT, without buffers, smaller quantities, than in the traditional way, are delivered with a higher frequency. (Attwood & Attwood, 1992) By applying JIT, several advantages for the receiving firm can be identified. These are e.g. the need for a reduced inventory and factory space, as well as less material handling and quality controls. The supplier will face either a stable production, a shift of inventory costs from manufacturer to supplier, or a production that is flexible to demand. Further, JIT requires a well working coordination and information sharing between the different parties. And in reality, small buffers of inventories occur to cover up for delays and volatile demand, although in smaller quantities than without JIT. (Skjott-‐Larsen et al., 2007)


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3.7.3 Vendor Managed Inventory Vendor managed inventory (VMI) is a process where the vendor manages and take responsibility for the replenishment of a customer’s inventories (Bjornland, Persson & Virum, 2003; Christopher, 2011; Govindan, 2013). Normally, the two parties have decided on a minimum and a maximum level the inventories shall be kept between. To do so, the customer shares data on sales-‐points and forecasts with the vendor, and keeps it updated with upcoming events. (Govindan, 2013) There are both advantages and disadvantages with VMI, both for vendors and for customers. Commonly, a great advantage is a reduction of inventories, due to the sharing of information, which enables a greater logistics control over shipments and inventory for the vendor. The disadvantages for the vendor, comes when there are unstable order patterns and shipments for individual stores has to be prepared. VMI is most beneficial when there is a stable demand from customers, and when the product portfolio is of limited size. There has been criticism of VMI from retailers, i.e. the customer, about the lack of integration into their own processes. The supplier makes deliveries based on the difference between the actual and the maximum stock levels, which are based on sales-‐data, and they plan their production based on forecasts. Data regarding point-‐of-‐sales is not always available or sometimes hard to read, which cause problems when the retailer needs precise deliveries in time and quantity, due to the holding of no safety stocks. Another criticism is the lack of visibility into suppliers’ systems, which makes it hard to find out problems that might occur. (Skjott-‐Larsen et al., 2007) 3.7.4 Cross-‐Docking Cross-‐docking is the practice for products arriving at a distribution center, being unloaded and then reloaded to a new outgoing destination, without being stored. Deliveries are incoming with goods, with different target destination, from multiple suppliers to the distribution center where the goods are consolidated before send away again. (Bjornland et al., 2003; Gattorna, 1998) The goods may be in form of finished goods that just need to be repacked, or of different parts that are assembled together before consolidated to fill the customer order, e.g. parts for a personal computer. It is quite common to outsource the cross-‐docking function to a third part logistics firm, which coordinates the material flow and makes sure that the incoming deliveries arrive at the same time. By coordinated deliveries, without keeping goods on stock, both time and money can be saved. (Fredholm, 2006) The prerequisites for cross-‐docking to be possible, a well working information system that enables all involved parties to communicate is needed, as well as an advanced IT-‐support for the planning. The suppliers have to send electronic notifications about what a specific delivery consist of and when it will arrive. Furthermore, when it arrives, each package has a bar-‐code that tells its identity, which enables it being connected to a specific customer order. (Fredholm, 2006) 3.8 Supply Chain Strategies Customer satisfaction and marketplace understanding are vital elements when developing a supply chain strategy, since the destiny of supply chains is ultimately determined in the marketplace by the end customers (Mason-‐Jones, Naylor, & Towill, 2000). To meet the ever-‐increasing customer demands for variation and fast deliveries at the same time as keeping costs down, companies are striving for groundbreaking supply chain configurations (Van Hoek, 1998). Postponement and speculation strategies provide an alternative to the conventional logistic and


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manufacturing structure, enabling rapid and cost-‐effective deliveries. Combining the concept of postponement together with a supply chain orientation provides opportunities to improve the performance of both the individual company as well as the entire supply chain. (Pagh & Cooper, 1998) Lean is a well-‐known and popular strategy for companies that strive for improved efficiency and more recently, the concept of agile has been introduced as an alternative to lean when the demand is volatile or even as a further step after leanness (Mason-‐Jones et al., 2000). This is seen as too simplistic a view since the need for leanness and agility depend upon the total supply chain strategy (Naylor, Naim, & Berry, 1999). The use of customer order decoupling points makes it possible for supply chains to exploit the benefits of both lean and agile strategies (Towill & Christopher, 2002). Olhager (2012) concludes that the customer order decoupling point is a vital aspect when developing and managing value chains. The above presented strategies will be described further in the following sections. 3.8.1 Postponement and Speculation Logistics and manufacturing operations can differentiate goods by form, place and time which might generate risk and uncertainty costs if not taken into consideration. The purpose of postponing logistics and manufacturing operations until customer order point is to reduce, or fully eliminate, the risk and uncertainty of those operations. (Pagh & Cooper, 1998) Van Hoek (1998) describes three different types of postponement: form, place and time. Form postponement is a manufacturing postponement implying that the final manufacturing step is delayed until customer orders are received, enabling mass-‐customization strategies (Van Hoek, 1998). Delaying the customization increases the responsiveness to changes in the customer demands. Depending on where the customization is performed, the company can increase the flexibility to orders or reduce the tied up capital in stock. (Lee, Billington, & Carter, 1993) Place postponement aims at having a limited number of finished goods inventories while time postponement implies delivery to order. Both place and time postponements are logistics postponements. (Van Hoek, 1998) Speculation on the other hand, implies that logistics and manufacturing operations are based on inventory forecasts and is a more common strategy in companies compared to postponement. The purpose of speculation is to reduce costs by taking advantage of full logistics and manufacturing economies of scale. By doing so, the speculation strategy constrains the number of stock outs. (Pagh & Cooper, 1998) 3.8.2 Leanness and Agility The general view of lean has developed over time, from being applied on the shop floor of the automotive industry to be spread into many other industry sectors (Hines, Holweg, & Rich, 2004). Naylor et al. (1999) define leanness in a supply chain context as a value stream developed to eliminate waste in all forms and to level out the workload. The lean approach is successfully applicable in a predicable environment where the requirement for variety is low and volume is high (Christopher, 2000). Mason et al. (2000) describes how different supply strategies can be


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used for different type of products and in accordance with the authors, a lean supply strategy is appropriate for products with long life cycles and stable demand where the price is the market winner. Agility is another concept that has developed over time, from being focused on manufacturing flexibility to be serving a wider business context (Christopher, 2000). Naylor et al. (1999) define agility in a supply chain context as the ability to use market knowledge, and in a virtual organization to take advantage of revenue opportunities in a volatile market. In contrast to the lean approach, agility is appropriate where the demand is volatile and unpredictable and the requirement for variety is high (Christopher, 2000). Mason et al. (2000) argue that products with short life cycles and volatile demand, where availability is the market winner, should be handled with an agile supply strategy. Christopher (2000) describes four distinguishing characteristics that a supply chain has to acquire in order to become agile: market sensitiveness, virtuosity, process integration and network based. Market sensitive supply chains are capable of interpret and respond to actual customer demand. This is usually not the case since most organizations have inadequate information regarding customer demand and are therefore forced to keep inventory based on forecasts. Virtual supply chains imply supply chains composed of information rather than inventory. The extensive use of information technology creates virtual supply chains, but also makes it easier for organizations to capture and respond to the actual customer demand and thereby increase the market sensitiveness. Electronic Data Interchange (EDI) have together with the internet made it possible for all partners in the supply chain to act on actual customer demand instead of grounding decisions on corrupted data that has been distorted on its way through the supply chain. Shared information within supply chains can only be fully exploited by integrating the supply chain partners’ processes. Process integration indicates cooperative working between customers and suppliers, e.g. collaborative product development, united systems and information sharing. As stated earlier in Section 3.1, businesses no longer compete at an individual level but rather as partners linked together as supply chains. This calls for network based companies, which is the fourth ingredient of agility. (Christopher, 2000) 3.8.3 The Customer Order Decoupling Point The customer order decoupling point (CODP) is the point where customer orders affect the material flow, i.e. the point in the material flow where the products are linked to specific customer orders. This is where the forecast-‐driven and order-‐driven operations meet. A guideline for the CODP is that it occurs with the strategic stock that supplies the customers. (Mason-‐Jones et al., 2000) Thus, using inventories can create CODPs in the supply chain and facilitate the management of uncertain demand (Christopher & Peck, 2004). The location of the CODP relates to different manufacturing situations, for instance Make-‐To-‐Stock (MTS), Assemble-‐To-‐Order (ATO), Make-‐To-‐Order (MTO) and Engineer-‐To-‐Order (ETO) (Olhager, 2012), as can be seen in Figure 13.


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Figure 13. The CODP in relation to the manufacturing situation.

Source: Based on Sharman (p.73, 1984)

For companies where there is only one manufacturing situation, e.g. a company only providing MTS products, it is possible to apply a common approach for the whole value chain. This is usually not the case, since most companies tends to have a mix of MTO and MTS products and therefore needs to apply different approaches for different parts of the value chain. (Olhager, 2012) Because of the CODP, a hybrid strategy between lean and agile is made possible for the value chain, also known as the leagile strategy. A leagile strategy implies a lean strategy being applied for the upstream flow, from the CODP, to maximize the efficiency through standardization and economies of scale while applying an agile strategy for the downstream flow in order to be flexible and responsive to the actual customer demand. (Towill & Christopher, 2002) 3.9 Supply Chain Time Compression When talking about supply chain reforms the focus has traditionally been on cutting costs, while successful organizations are instead examining their supply chains for opportunities to improve the customer service and satisfaction (Bumstead, 1998). According to Stalk and Webber (1993), lead time compression has become a major order winner and Bumstead (1998) writes that organizations that have managed to compress their supply chain response time noticed that the financial paybacks were greater than the investment. If being able to deliver according to customer demand and still compress time, both cost and quality problems will be reduced in the value-‐delivery process. (Stalk & Hout, 1990) When analyzing material and information flows with purpose to accomplish a lead time reduction, a common first approach is to divide the total lead time into value-‐added and non-‐value-‐added time. Value-‐added time refers to the time when some kind of activity is performed, e.g. transportation, processing of material, assemble, placing into storage or feeding a computer with information. The non-‐value-‐adding time is e.g. the time goods are waiting in buffers interconnected to a machine or are placed in storage. It can also be in form of a customer order

Engineer Fabricate Assemble Deliver

Make4to4stock

Assemble4to4order

Make4to4order

Engineer4to4order

Forecast4driven

Order4drivenCustomer:order:decoupling:point


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waiting to be handled. It is mainly the non-‐value-‐adding time that is tried to be shortened when reducing lead time. (Oskarsson et al., 2013) Companies are generally poor at using time efficiently since the non-‐value adding activities take up most of the time (Stalk & Hout, 1990; Stock & Lambert, 2001). It has been found that the non-‐value adding time often accounts for up to 95 % of the total time (Storhagen, 2003). Both lean and agile strategies call for time compression, since leanness implies elimination of non-‐value adding time and agility indicates responsiveness (Naylor et al., 1999). A survey of time compression literature conducted by Towill (1996) shows that the key drivers for time compression are improved demand forecast accuracy, more rapid defect detection, faster to market and displace the decoupling point towards the end customer. Lead time reduction has a vital role in determining the stability of the supply chain and is seen as the most efficient way to achieve supply chain time compression, since demand forecasting is problematic. (Towill D. R., 1996) 3.9.1 Time Based Performance Indicators When reducing time in supply chains, two main performance indicators are commonly used. The first is lead time, already mentioned but not defined, and the second is throughput time. (Oskarsson et al., 2013) Both of these time based performance indicators will be presented below. Lead time is the time it takes from when a need occurs, i.e. from ordering, until the need is fulfilled and the order delivered. This means that the process of order-‐to-‐delivery can consist of several other order-‐to-‐delivery processes. In other words, one lead time may consist of a number of shorter lead times. For example, the total lead time from customer order to delivery in a supply chain consists of several other lead times, e.g. the picking lead time. The picking lead time then refers to the time it takes from when the packing station sends an order to the picking station, until the goods have been picked and arrive at the packing station. (Oskarsson et al., 2013) A general definition of lead time, formulated by Olhager (p.28, 2013), and roughly translated from Swedish is presented below. “Lead time is the time from when the need of one activity or a group of activities occurs until the

knowledge of that the activity or activities are completed.” Throughput time is the time it takes a product or an errand to pass through a certain part of the flow. A throughput time may consist of several lead times, as well as a lead time may consists of a number of throughput times. It can be measured for both small and bigger parts of a flow, e.g. the time it takes a product to pass a single inventory buffer, or the time it takes a product to pass the whole part of a flow that is handled by one supplier. (Oskarsson et al., 2013) An essential starting point when reducing lead time and throughput time is to construct a supply chain map that highlights the time consumed by processes and activities as well as the time when materials and products are standing still (Christopher, 2011). The total lead time in a supply chain, from customer demand to customer satisfaction, consists of two key components that is crucial for supply chain time compression. These components are the material flow, i.e. the product


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transfer from raw materials to final customer, and the information flow, i.e. the order information transfer from point of sale to raw material supplier. (Mason-‐Jones & Towill, 1998) The following section will describe a method of how to map the material and information flow. 3.9.2 Current State Mapping As mentioned in the previous section, a starting point when reducing the total lead time in a supply chain is to map the current flows of both material and information. This is for instance to make clear how many activities and processes, locations for inventory etc. the flows consist of, what flow paths there are and what members that are involved. The mapping can be done in a numerous of different ways, but often is a quite simple method that gives an overall picture of the flow enough to start with. This is due to that a very detailed mapping may consume a lot of time and will probably include unnecessary parts that do not need improvements. (Oskarsson et al., 2013) The purpose of the first map should be to give an overall picture and measure relevant performance indicators of processes in different parts of the flows. By doing so, the parts in the flows where most time is consumed can be identified and later studied in more detail to identify what consumes the time within them. (Oskarsson et al., 2013) This identification of time consumption in a supply chain is also in line with the classification, suggested by Goldratt (1990), into bottlenecks and non-‐bottlenecks. A bottleneck is defined as the slowest activity in a chain and should be in focus when trying to achieve the lead time reduction (Christopher, 2011). This identification and classification is to be able to focus on the parts that need improvement to accomplish a lead time reduction that makes change for the whole supply chain performance (Oskarsson et al., 2013). After the previous step, the map needs to be redesigned and the time consuming parts more detailed described (Oskarsson et al., 2013). Due to that customer requirements often is the factor in focus, the mapping preferably starts from the shipping-‐to-‐customer end so their needs are in mind while moving upstream in the mapping process. The mapping is preferably done in a few rounds, where the material flow is mapped in the first, the information flow in the second and finally some performance checks are done. The performance checks are mainly about to identify bottlenecks and identify how much of the lead time that is value-‐added, to give a picture of potential improvements. (Erlach & Sheehan, 2016) When doing the mapping and when trying to seek the reason for time consumption, Oskarsson et al. (2013) mean that it is important to talk with different people working with the processes, though they may have knowledge and ideas about the causes. Different people may also have different perspectives of it. Oskarsson et al. (2013) further points at the use of literature, that can be very useful, when seeking for more general causes and alternative solutions to the identified time consuming parts. The authors also mention that the alternative solutions can be generated based on previous experience in the field or by taking inspiration from others. Erlach and Sheehan (2016) argue that having access to data about all processes in the flows is important, which often is substantiated by interviews, measures and calculations. Liker and Meier (2006) points at the importance, when evaluating the processes during the current state mapping, to keep in mind


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that a future state later will be created. It is also important to have in mind what the goal with the mapping is and what is trying to be achieved (Liker & Meier, 2006). 3.9.3 Lead Time Analysis A lead time analysis means to analyze material and information flows in a structured way with purpose to compress time. This approach is based on a current state map, described in the previous section, and focuses to find alternative solutions, which are highly dependent on the specific situation. (Oskarsson et al., 2013) There are several different actions to accomplish lead time reductions in value streams and processes. Oskarsson et al. (2013) highlights a selection of these, which are described in Table 2. Actions 1-‐5 are meant to be performed in chronological order and the subsequent actions are more general.

Table 2. Actions for lead time reduction. Source: Oskarsson et al. (2013)

Order Action Example 1 Eliminate

Remove non-‐value adding activities Eliminate duplication of work

2 Simplify Make activities less complex

Improve user interfaces for computer applications.

3 Integrate Merge activities that do not add value by being performed individually

Perform mount and quality control at the same workstation

4 Parallelize Perform independent processes in parallel and not sequentially

Paint the outside of an airplane at the same time as the inside of the plane is being furnished

5 Synchronize Coordinate the flow so that the non-‐value adding time between two activities can be eliminated or at least reduced.

Synchronize the incoming deliveries of components so that the final assembly can start immediately without having to wait for parts.

-‐ Prepare Prepare all the necessary materials in advance in order for the flow not to be slowed down

Bring out all the necessary tools before the products arrive at the workstation.

-‐ Communicate Improve the efficiency of the communication

Use more rapid, safe and correct or more useful information.


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When performing a lead time analysis, it is desirable to find as many general principles as possible to choose from and then apply them to the specific situation (Oskarsson et al., 2013). Mason-‐Jones and Towill (1998) refer to Evans, Towill and Naim (1995) when describing the more practical ways to achieve lead time reductions presented in Table 3. The latter authors stress the importance of information management and add the Electronic Point of Sales (EPoC) as a technique to the original table.

Table 3. Practical ways for lead time reduction. Source: Mason-‐Jones and Towill (1998) based on Evans, Towill and Naim (1996)

Strategy Technique Example Industrial engineering improvements

Set up reduction Handling methods Product design

Single minute exchange of dies Container design and conveyor use Design for manufacture

Production engineering improvements

Integrate processes Sequence processes

Combine two into one Re-‐sequence to postpone variety

Operations engineering improvements

Kanban JIT supplies Shared call off data

Product control via actual orders Greater frequency and smaller quantities Improved service levels via lower forecast errors

Information technology Quicker and more accurate data capture EDI EPoC

Barcoding on order paper work, materials packaging Orders, funds, transferred instantly Marketplace demand data transferred instantly through the supply chain

Mason-‐Jones and Towill (1998) conclude that in order for supply chains to achieve the main gains of lead time reduction, the members of the supply chain have to be able to provide undistorted order information rapidly. The consequences will be better customer service, reduced total inventory level and reduced risk of product obsolescence. (Mason-‐Jones & Towill, 1998)


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3.10 Supply Chain Transparency Successful companies have proven to be those that are good at generating, sharing and use information in their daily work, and companies that desire to compress time have to be remarkably good at it (Stalk & Hout, 1990). The way information between actors in a supply chain is transferred has historically changed from physical transfers of documents accompanied the actual movement of the goods, to today’s more information and communication technology (ICT) intensive solutions. Information can be sent separately from shipments which in a greater extent allows for necessary preplanning and various kinds of adjustments. However, at the same time as the technology moves forward, the supply chains become more and more complex and include more parties, which set higher demands on a well working end-‐to-‐end transparency throughout the chain. Companies have here faced problems, generally because of a lack in the integration all the way throughout the supply chain. One contributing factor is the use of different systems for communication and sharing of information, where one company and their first-‐tier suppliers may use the same system but suppliers to their suppliers may rely on other systems. (Steinfield, Lynne, & Wigand, 2011) To be able to take the discussion of these problems further, a description of information systems takes place in the following section. 3.10.1 Information Systems Supply chain management includes more than transferring of goods and as mentioned before, managing the flows of information becomes more and more important. Parties in the network of organizations connected to a certain product flow might not be directly involved in the physical flow, but in the information flow. The role of information systems is to act as a spider in the net, for the information flow between parties in the supply chain. (Skjott-‐Larsen et al., 2007) One can distinguish between two different dimensions of information systems: intra-‐firm and inter-‐firm. Easily described, intra-‐firm refers to a network that allows sharing of information within a single organization. The inter-‐firm dimension in turn, integrates an organization with its suppliers and customers into a unified system that can respond to orders, changes on the market, in demand and in direction of the corporate. (Christopher, 2011; Skjott-‐Larsen et al., 2007) An information system consists of three major interrelated components: hardware, connecting links and software. The hardware is in form of computer power, connecting links refers to the organizing system, and software refers to communication within it. A well-‐known software, and the first to manage information in supply chains is the Enterprise Resource Planning (ERP) -‐system. ERP-‐systems only reach within the boundaries of a single firm, where they manage transactions of material, human and financial resources, and trying to match the workflow in the organization. Examples of elements that an ERP-‐system handles are accounting, inventory, human resources, financial payments and order processing. As mentioned earlier, the system is not capable of managing the rest of the supply chain outside the firm and is therefore not dealing well with logistics alone. (Skjott-‐Larsen et al., 2007)


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Different types of information systems are those consisting of software for supply chain management, e.g. supply chain planning, supply chain execution and supply chain coordination systems. These systems give a more holistic view of an organization than ERP does, and the purpose is to create one transaction system that coordinates a company with suppliers and customers. (Skjott-‐Larsen et al., 2007) There are several ways organizations can communicate and send information to each other. Depending on the size of the organization, its information network and its technological limits, different alternatives can be used. These can be in format of not so technology intensive methods e.g. e-‐mail, text messages, or simply information sharing through websites. However, what is maybe most commonly occurring is EDI, or Electronic Data Interchange. That is a way that different ERP-‐systems share standardized electronic transactions with each other. More easily described, a standardized way of file transferring that is done by computers without a human acting as an intermediary. Types of information that can be transferred with EDI are e.g. purchase orders, inventory documents, shipping status documents, payment documents etc. The benefit of EDI is the potential of making administrative routines more effective, by the fact that transactions automatic is created and received. This results in the possibility of decreasing both lead times and administrative time, at the same time as the number of errors being minimized. A problem with EDI though, is that there are several different types and variations of standards being used. When two organizations doing business with each other, they preferably agree on what standards to use when sharing information. If organizations use different standards, which is commonly occurring in large supply chains, there is a solution in form of a type of software that act as a converter between different formats of EDI standards. This enables parties to communicate with different standards. (Fredholm, 2006) 3.10.2 The Bullwhip Effect When organizations, connected to each other, use different types of information systems and standards, delays and sometimes errors occur due to the need for information to be rekeyed as the information is passed sequentially from point to point. As mentioned in Section 3.10, there may be a lack of data and process standards between supply chain members, contributing to the possibility for misunderstandings when supply chains are interconnected and extended. (Steinfield et al., 2011) To minimize these barriers of information problems, there is a need for a great transparency throughout the supply chains (Egels-‐Zandén, Hulthén, & Wulff, 2014). MacLean & Rebernak (2007) states that “there is no better way to build trust among stakeholders than through transparency” but according to Doorey (2011), corporate managers have been doubtful to strive for fully transparent supply chains because they claim that some information about factories etc. is of great value to not share with others. A well-‐known information problem resulting from insufficient transparency or visibility in coordination of supply chains is the “bullwhip effect” (Skjott-‐Larsen et al., 2007) referring to (Forrester, 1961). This phenomenon is connected to forecast errors in demand that occur among supply chain participants when the information flow upstream is distorted and leads to fluctuations in demand downstream, which in turn will lead to larger fluctuations of the ordering upstream. This contributes to large build-‐ups of inventory which may generate great losses. (Ma,


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Wang, Che, Huang, & Xu, 2013) The bullwhip effect is often an effect from long lead times (Steinfield et al., 2011), in combination with a lack of transparency, when companies have to forecast and communicate future demand to their suppliers who in turn have to do the same to their suppliers (Ma et al., 2013).

Specification of Task

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4 Specification of Task

The specification of the task means to clarify the purpose of the study, define the studied system and describe the necessary delimitations. The purpose is decomposed into key questions, which are further divided into sub questions that are explained to later be answered. The question formulation will be fundamental for the forthcoming parts of the report.


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4.1 Clarification of Purpose As described in the introductory chapter, Ericsson has recently experienced problems in meeting the customer demand. As the competitiveness on the market increases, it becomes more important for Ericsson to be able to offer a high service level toward their customers. In order to reiterate the purpose of the study for the reader, it is presented once again below.

“Give recommendations for improvements that reduces the total lead time in a supply chain perspective in order to improve the customer service level.”

For this purpose, a specific customer is selected, namely Algeria Telecom Mobile. Oskarsson et al. (2013) describes in Section 3.3 that customer service is a wide concept and that lead time is a service element that underlies the service level in direct relation to the deliveries. Therefore, a more precise definition of the service level affected by the lead time is delivery service. The lead time can also be specified further as the customer lead time since it refers to the time between customer order to delivery, i.e. the lead time experienced by the customer. Thus, the clarified purpose is to reduce the customer lead time in a supply chain perspective in order to improve the delivery service level. The purpose entails that the lead time is supposed to be reduced in a supply chain perspective, which will be described in more detail in the upcoming section. 4.2 The Studied System The scientific approach applied to this study is the system approach, meaning that parts of the whole reality is studied as a system, see Section 1.6. The purpose of the study states that the total lead time will be reduced in a supply chain perspective and the studied system will therefore consist of the central parts that composes the studied supply chain and their relations. The overall system presented in the business introduction chapter is a simplified picture of the complex reality that needs further delimitations to be able to study. For example, the customer ATM can have a large amount of project sites and if these are taken into consideration, the study will become excessive considering the limited time frame of the study. Furthermore, the first-‐tier suppliers are of a large amount and to include their suppliers would make the study unreasonably extensive, with the same reasoning as for the project sites. To avoid the study from becoming too extensive, the external perspective described by Jonsson and Mattsson (2011) has been applied to this study, meaning that the direct suppliers and the direct customer have been included in the studied system together with Ericsson. The project sites and the second-‐tier suppliers are instead a part of the surrounding system that may be have an impact or be affected by the studied system. As stated by Mentzer (2001) in Section 3.1, a supply chain includes a set of three or more entities directly involved in the flow of products, services, finances and information from a source to a customer. In this project, the system being studied includes the first-‐tier suppliers, Ericsson, ATM and the 3PL-‐providers, and is visualized in Figure 14 below. Since no current state mapping has been done in this phase of the project, the members are not specified further. The studied system will consist of the flows of information and material between the members. The solid lines in the figure refer to material flow and is the physical flow of goods. The dashed lines illustrate the information flow in terms of orders and information exchange. The financial flows will only be examined if it affects the lead time perceived by ATM.


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Figure 14. The studied system.

The supply chain network for Ericsson can have a great complexity and be arranged in different ways and with different members. By only studying the direct suppliers and the customer ATM, the complexity is reduced significantly but still needs some further delimitations. As can be read in the business introduction chapter, the radio market consists of products that are constantly being introduced and later phased out. These flows of products that are introduced and phased out requires special handling and are for this study disregarded. Moreover, no effort is taken in investigate the reverse logistics in the supply chain and therefore are potential return flows of goods not considered. As stated in the business introduction, 3PL-‐providers refers to e.g. transportation firms. The study will consider how transportation is managed between different members in order to provide lead times, but it will not examine whether existing transportation modes are the most appropriate or put effort in suggesting new transportation routes. Further, the cost for implementing the solutions and the potential savings that comes with them are disregarded in the study. Finally, the studied system will only include the material and information flows until the responsibility of the goods is transferred to ATM, and thereby not include any local material handling by the customer. 4.3 Specification of Purpose Björklund and Paulsson (2014) suggest to specify the purpose with objectives, in order to make it easier to assess at the end of the study whether or not it has been reached. The purpose of this study is to give recommendations for improvements that reduce the total lead time in a supply chain perspective in order to improve the service level. A vital starting point for doing so, as stated in Section 3.9.2 by Christopher (2011), is to construct a map that describes the current state and how the lead time is distributed. Liker and Meier (2006) argue in a similar way, that the current state should be the starting point for establishing effective value chains. This is further supported by Oskarsson et al. (2013) which stress the importance of having sufficient knowledge about the

Second'tiersuppliers

First'tiersuppliers Ericsson ATM Project6 sites

3PL'providers

Information*flowMaterial*flow

The*studied*system


44

current state for successful improvements. The first objective will therefore be to create a current state map of the supply chain. Once the current state is mapped, the parts of the material and information flows where most of the time is consumed can be identified and later studied in more detail to determine what consumes time within them, in accordance with Oskarsson et al. (2013). Thus, the second objective of the study is to identify areas with potential for time reduction. When knowing where to target the efforts, knowledge about the critical areas can be gathered in order to utilize the full potential for improvements. Oskarsson (2013) means that using literature when seeking for causes to the identified time consuming parts can be very useful. As described in the introductory chapter, it is an academic requirement to demonstrate awareness of existing theories, models and data within the studied area to avoid spending time on unnecessary duplication of efforts. Therefore, the generation of alternative solutions is assumed to be most efficient if based on existing literature within the target areas. Consequently, the third objective of the study is to generate solutions for the potentials by conducting an additional literature review and adapting the general solutions to the studied supply chain. In order to fulfill the purpose of the study, the final objective is to evaluate the generated solutions and give recommendations based on the lead time in a supply chain perspective. It is also desirable to determine the requirements for implementation. The four objectives can be summarized and listed as the following steps.

1. Create a current state map 2. Identify areas with potential for lead time reduction 3. Generate alternative solutions 4. Evaluate the solutions, give recommendations and determine requirements for

implementation To confirm the objectives as appropriate and to specify the purpose further, the objectives are concretized and supported by existing frameworks for analyzing supply chains. Oskarsson et al. (2013), Stock and Lambert (2001) and Taylor (1997) describe three frameworks consisting of key steps that can be used to approach most logistics case studies, see Section 3.5. The overall approaches are similar and the main difference is how the approaches are divided into key steps. Therefore, the choice of framework is based on its applicability to the objectives of this study and its supportiveness. In this case, the approach presented by Taylor (1997) is used to concretize the objectives further since it is the framework described in most detail and thereby the most supportive approach. Additionally, the approach of Taylor (1997) is selected since it can be modified to fit the objectives of this study without losing the intention of the original framework. Thus, the framework described by Taylor (1997) is applied to this study and needs a minor modification in order to fit the objectives. The first and second objective of this study, creating a current state map and identifying areas with potential for lead time reduction, are comparable to the first two steps of the framework, analysis of the current situation and identification of major issues and problems, except that the objectives are specified for lead time reductions. Considering that the original framework described by Taylor (1997) is of a general nature, it is not necessary to adapt the first two steps to fit this study. The third step described by Taylor (1997)


45

is about generating and evaluating solutions, which can be likened with the third objective of this study except that the generated solutions are adapted to the specific situation and evaluated individually. The final evaluation takes place in the fourth objective, where the generated solutions are evaluated together and the recommended solution is described in accordance with the fourth step of Taylor (1997). Moreover, the fifth step in the framework of Taylor (1997) is requirements for implementation and is for this study included in the fourth objective, together with the final evaluation and recommendation. The four steps and objectives of this study are illustrated in Figure 15.

Figure 15. The four objectives of the study.

Source: Based on Taylor (p.4, 1997)

Step%1%(Objective 1)Current' statemapping

Step%2%(Objective 2)Identification'of'

potentials'for'lead time'reduction

Step%3%(Objective 3)Generation'of alternative'

solutions

Step%4%(Objective 4)Recommended solutions'and'requirements for'implementation


46

4.4 Question Formulation In order to achieve the purpose of this study, questions have been developed based on the four objectives and are successively presented in this section. The aim of the questions is to provide answers that will fulfill the objectives or more precisely to give a holistic view of the studied supply chain, identify problems and possible actions, determine how the lead time can be reduced with these actions and the requirements for these improvements. 4.4.1 Current State Mapping The first objective of this study is to construct a map of the current state and describe how lead time is distributed within the supply chain. According to Mason-‐Jones and Towill (1998), lead time is primarily constructed of material and information flows. Erlach and Sheehan (2016) argue that the current state mapping starts with mapping the material flow, thereafter the information flow and finally the performance indicators. Considering this, it is vital for the current state mapping to start by identifying the material flow, the information flow and determining how the total lead time is distributed in the studied supply chain. The following key question is formulated based on the above reasoning.

Q1. How does material and information flow in the supply chain? Supply chain performance is partly determined by its structure, considering the statement by Christopher (2011) in Section 3.4 that a long horizontal structure of the supply chain will imply a less responsive system. This is further supported by Lambert and Cooper (2000), which describe the horizontal structure, vertical structure and horizontal location of the focal company as significant dimensions to take into consideration when describing, analyzing and managing supply chains. Oskarsson et al. (2013) mentions in Section 3.9.2 that members of the supply chain needs to be identified when creating a current state map. Thus, in order to create a current state map of the studied supply chain, the following question is asked.

1.1 Who are the supply chain members and how are they structured? Porter (1985) describes in Section 3.1 that the future of companies are highly dependent on how well their activities are being performed, i.e. how well their value chains are functioning. The same principle can according to Skjott-‐Larsen (2007) be applied in a broader context to whole supply chains, which are composed of several value chains being connected. As mentioned in Section 3.9.2 by Oskarsson et al. (2013), the number of activities and processes in the supply chain needs to be clarified when creating a current state map. To identify what activities and processes that are being performed in the supply chain and get an impression of the value chain, the following question seeks to be answered.

1.2 What activities and processes can be identified and where are they performed?


47

In accordance with Oskarsson et al. (2013) in Section 3.1, the choice of distribution method is a factor determining the length of the logistic pipeline. Picard (1983) mentions that one of the greatest challenges for companies is to manage the distribution of goods, while assuring high customer service level and physical distribution costs low. There are several ways of how to distribute materials in a supply chain depending on the specific situation, some of them described in Section 3.6. The following question is formulated to give information of what distribution methods that are applied in the studied supply chain and where.

1.3 What distribution methods are applied and where? As mentioned in Section 3.9.2 by Oskarsson et al. (2013), the number of inventory locations in the supply chain needs to be identified when creating a current state map. Having inventories on stock is in practice of the same purpose as of distribution; reduce costs and improve service level (Attwood & Attwood, 1992). The choice of inventory handling is a factor that affects the logistic pipeline and is dependent on the specific situation (Oskarsson et al., 2013). Because of this, the following question is going to give information of how and where inventories are handled in the studied supply chain.

1.4 What inventory practices are applied and where? Stalk and Hout (1990) argue that companies striving for lead time reductions have to be good at generating, sharing and use information in their daily work. In today’s generally complex supply chain structures there is a need for a high transparency throughout the chain, which can be accomplished by a high degree of integration. (Steinfield et al., 2011) One way to manage integration is the use of similar systems for information sharing (Skjott-‐Larsen et al., 2007) and standards for communication between supply chain members (Fredholm, 2006). Information systems can be at both intra-‐firm and inter-‐firm level, where the first refers to information sharing between members in a single firm and the latter allows an organization to be integrated with its suppliers and customers. (Skjott-‐Larsen et al., 2007) Oskarsson et al. (2013) further points at the importance of a well working information flow, and to be able to understand how information is managed in the studied supply chain, the following question seeks to be answered.

1.5 How is information managed? When creating a current state map in order to accomplish a total lead time reduction in a supply chain, two main performance indicators are commonly used (Oskarsson et al., 2013). These are lead time and throughput time, which are defined in Section 3.9.1. To be able to shorten these times, one must identify where time is consumed in the supply chain. This is in line with what Christopher (2011) stated in Section 3.9.1, that the current state map is for highlighting in what activities and processes time is consumed and distributed. Oskarsson et al. (2013) further describes in Section 3.9.2 that the first mapping is to give an overall picture and measure relevant performance indicators of processes in different parts of the flow. By doing so, the parts in the flows where most time is consumed can be identified and later studied in more detail to identify what consumes time within them. In order to not complicate things for the reader and to make it


48

easier to follow the report, lead time and throughput time will not be distinguished in this study. Instead, they will from now on be generalized as just lead time. To be able to identify how the lead time is distributed in the supply chain and where there might be potential to accomplish improvements, the following question seeks to be answered.

1.6 What is the total lead time and how is it distributed? Van Hoek (1998) describes in Section 3.8 that the general customer requests customized products and fast deliveries in a greater extent than before. It is therefore crucial for supply chains to employ a strategy that considers customer satisfaction and marketplace understanding (Mason-‐Jones et al., 2000). Towill and Christopher (2002) argue that it is possible to employ different kind of strategies to the supply chain because of the decoupling point. It is in this reports interest to identify what and where different strategies are applied in the studied supply chain and for this, the following question has been formulated.

1.7 What strategies are applied and where? Oskarsson et al. (2013) stresses the importance of talking to several people in the supply chain when constructing a current state map and seeking for the reasons for time consumption, see Section 3.9.2. This is since people working within the supply chain may have knowledge about the causes and talking to several persons will provide different perspectives of the situation. Taylor (1997) stresses the importance to identify the issues and problems in the current situation and to distinguish between symptoms and causes for making appropriate recommendations. He means that it is necessary not to only focus on the problems, but also to identify relevant opportunities. To gain information about the problems perceived in the studied supply chain together with suggested solutions, the following question is expressed.

1.8 What problems are perceived and what are the suggested solutions?


49

The approach to achieve the first objective, mapping the current state, together with the related sub questions are illustrated in Figure 16.

Figure 16. Approach of the first objective. Source: Based on Taylor (p.4, 1997)

4.4.2 Identification of Potentials for Lead Time Reduction The second objective is to identify where in the supply chain there are potential for lead time reductions and as stated in in the introductory chapter, Ericsson has a long-‐term goal of reducing the total lead time by 50 %. It is therefore in the interest of this report to determine the greatest potentials to approach, or at best achieve, the stated goal. The second key question is formulated below and seeks to find the greatest potentials for lead time reduction in the supply chain.

Q2. What parts of the supply chain have greatest potential for lead time reduction? The current state mapping strives to determine the total lead time and how it is distributed over the studied supply chain. Having these measurements on hand allows for determining how reasonable each lead time is, considering the activities and processes being performed. Thus, the lead times that are considered unreasonably long have the opportunity to be shortened. This method is similar to the common approach for lead time reductions described in Section 3.9.3 by Oskarsson et al. (2013), where the time spent is divided into value-‐added and non-‐value-‐added time. Oskarsson et al. (2013) refers to value-‐added time as the time when an activity is performed and non-‐value-‐added time as the time when goods are standing still or an order is waiting to be handled. In order to reduce the total lead time as much as possible, it is desirable to target the effort to parts that accounts for a significant portion of the total lead time. This is in line with Goldratt (1990) and Oskarsson et al. (2013) that argue to focus the lead time reduction to bottlenecks, i.e. the most time consuming parts of the supply chain, since it will have the most positive impact on the entire supply chain performance. By determining the non-‐value added time for each part and their contribution to the total lead time, the parts can be assessed as having either low or great

Step%1%(Objective 1)Current state)mapping

Supply)chain)structures

The)business)context

Supply)chain)performance

Organizational)structures

Material)and)information)flow

Information)management

Time)basedperformance)indicators

Strategies

Experienced)problems

1.2)1.3)1.4

1.1

1.5

1.6

1.7

1.8


50

potential for lead time reduction. This approach is comparable to the categorization of problems into meaningful groups in accordance with Taylor (1997). The following question has been formulated for the above reasoning.

2.1 For what parts are the lead time not reasonable and represents a significant portion of the total lead time?

Before knowing where to focus the improvements, the perceived problems and suggested solutions notified during the current state mapping need to be further analyzed. Taylor (1997) highlights the importance of finding the key issues and problems for making appropriate recommendations. He also means that it is vital to distinguish between symptoms and causes. Thus, it is vital for this report to focus on the causes and to find the key issues and problems in order to determine where to target the efforts for lead time reduction. To do this, the following question seeks to be answered.

2.2 What are the root causes for the excessive lead time? In accordance with Taylor (1997), the problems that have been categorized also need to be prioritized in order to reach a sensible solution. The prioritization will in this case result in the greatest potentials for lead time reductions. This includes the parts of the supply chain that have a not reasonable lead time, considering the activities and processes being performed, and represent a significant portion of the total lead time. Also the root cause problems causing the excessive lead times and their suggested solutions will be prioritized. Hence, it is the parts and the problems with greatest potential for lead time reduction that are prioritized together with their suggested solutions. The question to determine where to target the efforts is formulated below.

2.3 To what parts, problems and solutions will the effort be targeted? The approach to achieve the second objective, identifying main issues and problems, is illustrated in Figure 17.

Figure 17. Approach of the second objective. Source: Based on Taylor (p.4, 1997)

Step%2%(Objective 2)Identificationof+

potentials+for+lead+time+reduction

Categorize

Prioritize

2.12.2

2.3


51

4.4.3 Generation of Alternative Solutions The third objective of the study is to generate alternative solutions for the excessive lead times in the current supply chain. The greatest potentials for lead time reductions determined in the previous objective will be fundamental for this stage. Taylor (1997) advocates to generate as many alternative solutions as possible in order to later be able to evaluate them. The purpose of the third key question is to generate possible solutions to the excessive lead times and is formulated as follows.

Q3. What alternative solutions will reduce the total lead time? The greatest potentials for lead time reduction need to be studied further together with the connected parts of the material and information flow, in order to find actions for improvements. According to Oskarsson et al. (2013), it is desirable to find as many general principles as possible to choose from when performing a lead time analysis. The authors suggest to seek for alternative solutions in the literature, basing the solutions on previous experience in the field or to find inspiration from other companies. To find alternative solutions to the greatest potentials for lead time reduction, the following questions has been formulated.

3.1. What general alternatives can be found for the greatest potentials for lead time reduction?

As stated in the paragraph above by Oskarsson et al. (2013), it is desirable to find as many general principles as possible during the lead time analysis. The appropriateness of the general theories and methods found in the literature are highly dependent on the specific situation and is therefore important to evaluate (Oskarsson et al., 2013). To be able to fulfill the purpose of the study, more specific solutions for Ericsson need to be generated. In order to proceed which general alternatives that can be applied to the studied supply chain for lead time reduction, the following question is asked.

3.2. How can the general alternatives be applied to the studied supply chain? The approach to achieve the third objective, generating alternative solutions, is illustrated in Figure 18.

Figure 18. Approach of the third objective. Source: Based on Taylor (p.4, 1997)

Step%3%(Objective 3)Generation)of)alternative)

solutions

Literature)review

Adaptation

3.1

3.2


52

4.4.4 Recommended Solutions and Requirements for Implementation To fulfill the purpose of this study, the fourth and final objective is to give recommendations based on how the generated solutions affect the total lead time and thereafter clarify the requirements for implementation. For this, the following key question is formulated.

Q4. What are the recommended solutions and what are the requirements for implementation? As presented in the introductory chapter, Ericsson has a long-‐term goal of reducing the total lead time by 50 %. The goal acts as a guideline for this project, why the most beneficial combination of solutions needs to be determined. To do so, the generated solutions need to be evaluated in relation to each other before making any decisions of what actions that will be implemented. The combination of solutions that contributes to the greatest lead time reduction will need to be evaluated and the total effect on the lead time determined. To do so, the effect of the solutions on the non-‐value added time needs to be considered. This allows to determine what actions that together will contribute to an as great lead time reduction as possible. This results in a recommended supply chain with modified material and information flows. With regard to the above reasoning, the following question is asked.

4.1 What combination of solutions will provide the greatest lead time reduction and how great will it be?

In accordance with Taylor (1997), the requirements for implementing the recommended solutions are desired to be clarified. It has to be clear if anything additional of the supply chain is needed when doing the implementation, and this will be determined by asking the question below.

4.2 What are the requirements for implementation? The approach to achieve the final objective, evaluating solutions followed by a recommendation and implementation, is illustrated in Figure 19.

Figure 19. Approach of the fourth objective. Source: Based on Taylor (p.4, 1997)

Step%4%(Objective%4)Recommended(solutions(and(requirements(for(implementation

Evaluation(and(recommendation

Requirements(for(implementation

4.1

4.2


53

4.5 Summary of the Specification of Task In this section follows a brief summary of the approach for fulfilling the objectives of the study, the question formulation that will give answer to the purpose and the necessary delimitations that has been made. 4.5.1 Approach The approach for fulfilling the objectives of the study is presented in Figure 20, illustrating the objectives and their relations to the determined sub questions.

Figure 20. The approach for fulfilling the objectives of the study. Source: Based on Taylor (p.4,

1997)









Strategies

Step%2%(Objective 2)Identificationof)

potentials)for)lead)time)reduction


solutions

Step%4%(Objective%4)Recommended)solutions)and)requirements)for)implementation


Categorize

Prioritize

Literature)review

Adaptation

Evaluation)and)recommendation

Requirements)for)implementation

1.2)1.3)1.4

1.1

1.5

1.6

1.7

1.8

2.12.2

2.3

3.1

3.2

4.1

4.2


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4.5.2 Question Formulation The question formulation that will achieve the objectives of the study is summarized in Table 4 below.

Table 4. The question formulation.

Key questions Sub questions Q1. How does material and information flow in the supply chain?

1.1 Who are the supply chain members and how are they structured? 1.2 What activities and processes can be identified and where are they performed? 1.3 What distribution methods are applied and where? 1.4 What inventory practices are applied and where? 1.5 How is information managed? 1.6 What is the total lead time and how is it distributed? 1.7 What strategies are applied and where? 1.8 What problems are perceived and what are the suggested solutions?

Q2. What parts of the supply chain have greatest potential for lead time reduction?

2.1 For what parts are the lead time not reasonable and represents a significant portion of the total lead time? 2.2 What are the root causes for the excessive lead time? 2.3 To what parts, problems and solutions will the effort be targeted?

Q3. What alternative solutions will reduce the total lead time?

3.1 What general alternatives can be found for the greatest potentials for lead time reduction? 3.2 How can the general alternatives be applied to the studied supply chain?

Q4. What are the recommended solutions and what are the requirements for implementation?

4.1 What combination of solutions will provide the greatest lead time reduction and how great will it be? 4.2 What are the requirements for implementation?


55

4.5.3 Delimitations The delimitations that has been made during the study are summarized below: Delimitation 1 – The study only takes the first-‐tier suppliers into consideration Delimitation 2 – The introduction of new products and the out phasing of old products Delimitation 3 – The reverse logistics Delimitation 4 – The transportation efficiency Delimitation 5 – The costs or potential economic savings Delimitation 6 – Only examine the flows of material and information until ATM takes over the responsibility of the delivery


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METHODOLOGY

57

5 METHODOLOGY

The methodology chapter presents the approach of the study, followed by methods for collecting data and literature. The chapter includes reasoning about the reliability and validity of the study. Finally, the methods used to answer the purpose and the question formulation is described.

METHODOLOGY

58

5.1 Approach Before conducting a study, it is desirable to gain sufficient knowledge of the steps included, why these steps are necessary and how they fit together into a whole (Lekvall & Wahlbin, 2001). The approach to fulfill the objectives of this study, presented in Figure 20, does not include the steps prior to the execution of the objectives, i.e. it does not include the steps of the planning phase. Therefore, the approach to fulfill the objectives needs to be expanded with additional steps in order to illustrate the entire approach of the study. Lekvall and Wahlbin (2001) together with Patel and Davidsson (2011) describe two approaches for conducting surveys and studies, where the first mentioned is intended for market surveys while the second is of general purpose. As can be seen in Table 5, the two approaches consist of more or less the same overall stages, namely: identification of problem, formulation of purpose, specification of task, selections of approach, method and technique, analysis and reporting. The main difference between the approaches is that Lekvall and Wahlbin (2001) have included a step for further analysis and interpretation. Considering that the frameworks have similar initial steps, the choice of approach will not affect this study. Therefore, the framework described in most detail is selected since it provides the most support, that is the approach of Lekvall and Wahlbin (2001).

Table 5. Comparison of frameworks for approaching surveys. Source: Based on Lekvall and Wahlbin (2001) and Patel and Davidsson (2011)

Overall stages Lekvall & Wahlbin (2001)

Patel & Davidsson (2011)

Identification of problem X X

Formulation of purpose X X

Specification of task X X

Selection of approach, method and technique X X

Preparation and execution X X

Analysis X X

Further analysis X

Reporting X X

METHODOLOGY

59

Lekvall and Wahlbin (2001) argue that the first step of a market survey is to analyze the decision-‐making situation and formulate a description of the problem together with the purpose of the study. The next step is to clarify the task using relevant literature, resulting in a theoretical framework. An outcome of the initial two steps will be the research questions, which in turn require an appropriate method in order to be answered correctly. The method is decided in the third step when selecting approach, method and technique, which will be fundamental for the following step of fieldwork and compilation of data. As a fifth step, all the necessary data is collected and analyzed and thereafter are further analyzes and interpretations made of the data based results, making it possible to draw conclusions and answer the research questions. The preparation of recommendations, where the purpose of the study is achieved and a discussion of the study’s generalizability is provided, is later made and reported in the final step. The modeled approach is shaped in such a way that certain stages are linked to each other to demonstrate a relationship between them, see Figure 21. (Lekvall & Wahlbin, 2001)

Figure 21. The typical approach of a market survey.

Source: Lekvall and Wahlbin (p.183, 2001)

Analysis(of(the(decision0making situation

Clarification(of(task

Selection(of(approach,(method and(technique

Planning(of(field(work(and(analysis

Analysis(of(basic(data

Further(analysisInterpretation

Preparation(ofrecommendations

FieldworkCompilation(of(data

Reporting

Decision(problem

Information( requirements(and(research(purpose

Revised(task

Investigation(plan Basic(database

Data(based(results

Conclusions

Recommendations

METHODOLOGY

60

According to Lekvall and Wahlbin (2001), the approach of their framework is primarily intended for general market surveys, meaning that the framework most often require a modification in order to fit a specific study. To adapt the authors’ model to the approach of this study, the first stage where the problem is described for the current situation is expanded. For this study, the description of the current situation concerns not only the problem, but also a brief introduction to the business in order to provide the reader with some basic knowledge for the context. The planning phase of this study will therefore consist of a description of both the problem and the business for the current state as well as a formulated purpose. The planning phase of this study also consists of the stage that Lekvall and Wahlbin (2001) refers to as clarification of task, where the study is specified further using relevant literature. Furthermore, the planning phase consists of selected literature that is presented in a theoretical framework. Before starting to execute the predetermined objectives, the approach, method and technique needs to be decided since it will be fundamental for later steps in accordance with Lekvall and Wahlbin (2001). The step for selection of approach, method and technique is summarized as methodology in this study. Hence, the planning phase of this study will not only consist of a description of the current situation and a formulated purpose, but also a theoretical framework, specification of task and methodology. The stages after the selection of approach, method and technique in the model of Lekvall and Wahlbin (2001) can be likened with the approach to reach the objectives of this study. The fieldwork and compilation of data is equivalent to the step where data is gathered to the current state mapping, i.e. the first objective. Instead of compiling the collected data in a basic database, it is described in an empirical chapter named Current State Mapping. Thereafter, an analysis of the data is performed in accordance with Lekvall and Wahlbin (2001). This is to achieve the second objective and to determine where further efforts are to be targeted, which corresponds with the data based results. Moreover, a further analysis is conducted based on the second literature review in order to determine alternative solutions and thereby fulfill the third objective. Unlike from Lekvall and Wahlbin (2001), the third objective does not result in final conclusions. Instead, the alternative solutions are analyzed in relation to each other during the fourth objective before any recommendations can be made. Once the recommendations are prepared, the final reporting with conclusions can be provided. This is done in the fifth step of the study, which Lekvall and Wahlbin (2001) refer to as reporting and also consists of a discussion of the study’s generalizability. As described above, the first two steps of the framework by Lekvall and Wahlbin (2001) will be fundamental for the overall approach of this study. The approach to reach the objectives will instead be based on the model presented by Taylor (1997), while the final phase is inspired by Lekvall and Wahlbin (2001). The steps of the overall approach applied to this study are illustrated in Figure 22, together with the corresponding sub questions. The steps are presented in more detail in the following sections.

METHODOLOGY

61

Figure 22. The overall approach of the study. Source: Based on Lekvall and Wahlbin (p.183,

2001) and Taylor (p.4, 1997)









Strategies

Step%2%(Objective 2)Identificationof)

potentials)for)lead)time)reduction


solutions

Step%4%(Objective%4)Recommended)solutions)and)requirements)for)implementation

Step%0%Planning)phase

Current) situation

Theoretical)framework

Research)purpose

Specification)of)task

Selection)of)approach,)method)and)technique


Categorize

Prioritize

Step%5%Final)phase

Conclusion

Discussion

Literature)review

Adaptation

Evaluation)and)recommendation

Requirements)for)implementation

1.2)1.3)1.4

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1.7

1.8

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3.2

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5.2 Planning Phase The initial phase of the study is the planning phase, consisting of the description of the current situation, formulation of the purpose, the theoretical framework, specification of the task and the selection of approach as well as method and technique, see Figure 22. However, the selection of approach, method and technique is not explained in an individual section, but instead continually during the methodology chapter. Validity and reliability are two often occurring terms when determining the quality of an academic report according to Lekvall & Wahlbin (2001) and these will also be discussed for each phase separately. 5.2.1 Current Situation The current situation includes both a description of the background to this study and a brief introduction to the business context. Since the current situation intends to provide basic knowledge about the problem area, it has an explorative orientation in accordance with Lekvall and Wahlbin (2001). Gaining knowledge about the problem area allows to better be able to specify the task for an upcoming study or to give ideas for alternative actions. Hence, determining the orientation of the study will provide a greater understanding for the purpose of the study and therefore have a positive impact on the final outcome of the study. (Lekvall & Wahlbin, 2001) Damelio (2011) proposes a handful of methods that are appropriate for different stages when trying to obtain the knowledge necessary to create a current state map, some of which are used in this study and described further. Initially, information is collected by the method that Damelio (2011) terms as the content review. The content reviewed in this case is internal documents in form of formal and informal training materials, policy documents and work instructions. Contracts are also studied to get information about the obligations and agreements between Ericsson, ATM and other members of the supply chain. This information provided by Ericsson is essential when acquiring a basic understanding for the material and information flow and also fundamental for the upcoming stage, when the studied supply chain is clarified further by interviews. As stated before, the background to the current situation aims to give an understanding for the reasons behind this study while the business introduction is to provide basic knowledge about Ericsson and their global supply chains. Also some basic knowledge about the customer ATM is included in this stage to be able to define an overall system. Given this information, the current state deals with qualitative information that is of more general interest, but also qualitative information that is primarily developed for this study, i.e. it consists of both qualitative primary and qualitative secondary data. Primary data is defined as information that is collected with the same purpose as for the given study, while secondary data is generated for a different purpose (Björklund & Paulsson, 2014). To obtain primary data, Lekvall and Wahlbin (2001) prefers personal interviews because of the flexible hearings and the lack of restrictions. Therefore, the respondents interviewed during this phase are met in person to the extent possible, which are not the case when the respondents are spread across the world and personal meetings are inefficient and time consuming. A more effective and cheaper alternative to personal interviews are the telephone interview (Lekvall & Wahlbin, 2001), which is used in this phase when the personal interview is too inefficient because

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of the geographical distance. The respondents are selected in consultation with the supervisor at Ericsson to ensure that adequate information is gathered. The people being interviewed in this phase of the project and their positions are presented in Appendix B. Due to this phase being explorative, unstructured interviews are to prefer. Unstructured interviews imply that a subject or several subjects are chosen prior to the time of the interview and that there are not any prepared questions asked during the interview. (Lekvall & Wahlbin, 2001) Note that this phase aims to provide basic knowledge about the current state whilst the knowledge about the problem is limited in this part of the study and predefined questions might therefore limit the scope rather than giving an overall view of the current situation. To manage all the data that the interviewing generated, each interview conducted during the study has been recorded and transcribed in accordance with Seidman (2006). The author emphasizes the importance of organizing the gathered material and the primary method for doing so is to record the interviews and later transcribe them into text. The benefit of recording the interviews is that it reduces the risk of misinterpretations, since the words of the respondents are preserved. If something is not clear or if the answers are questioned, the recording can be checked for accuracy. Furthermore, the recordings can be used to evaluate the interview techniques that are used and improve upon them. Recordings also benefit the respondents, considering the assurance that the answers are recorded and gives confidence that the answers will be handled responsibly. The recorder can seem to inhibit the respondents, but the device is forgotten rather quickly during most interviews. (Seidman, 2006) In this study, the recorder has been placed discreetly to be as least intrusive as possible for the respondents. The interviews are most often generating an enormous amount of text, making the transcribing and the analysis time-‐consuming. To be able to analyze the text, it is important to reduce the vast array of words, sentences, paragraphs and pages. But most important is that the reduction of data is made inductively rather than deductively. (Seidman, 2006) The transcripts have therefore been made with an open attitude, seeking what emerges as important from the text and not trying to match hypotheses with the gathered data. To reduce the transcribed text, the important paragraphs are marked with brackets and gets the further attention. 5.2.2 Research Purpose The purpose of the study has been formulated based on the background to the problem and has been developed with the help of the supervisors, both at the university and at Ericsson. The purpose has been relatively wide since the start of the project, in accordance with Lekvall and Wahlbin (2001) which states that a premature and narrow formulation of the purpose may lead to an incorrect or incomplete purpose. This is also due to that the aim of the study has been to study an entire supply chain, consisting of a variety of knowledge areas whilst the initial knowledge of lead time reduction in supply chains is limited. On the other hand, a too wide purpose may lead to ambiguities and to avoid that from happening, the purpose has been discussed with both the supervisors and the opponents during the project. These discussions together with the knowledge gathered during the study allows for the purpose to be clarified in a later stage.

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Together with the purpose are some directives presented, given by the supervisor at Ericsson. Lekvall and Wahlbin (2001) point at the importance of distinguish between directives and delimitations, since the directives given from the company often have been chosen because of their relevance for the specific project. The delimitations made by the investigators are instead made with purpose to foster an increased efficiency of the project. (Lekvall & Wahlbin, 2001) 5.2.3 Theoretical Framework The first step in the planning phase was the generation of a theoretical framework. As stated in the introductory chapter, there are some requirements regarding the use of literature in an academic study. One requirement is that existing literature within the studied area has to serve as a base or be taken into account in the study, and later on act as a comparison to establish the results of the study. (Björklund & Paulsson, 2014) A theoretical framework is a collection of already existing knowledge, theories and models that is widely accepted and chosen to be used in the study. Accepted knowledge refers to the most favorable theories and models that the literature has to offer at the time. (Lekvall & Wahlbin, 2001) The theoretical framework in this report has been constructed of literature within different fields connected to the purpose of this study. The qualitative secondary data that have been used to build the theoretical framework were collected from literature studies, see Appendix E. The method for the literature studies can be divided into a few steps, inspired by the research procedure described by Patel and Davidsson (2011). The first step was to study fundamental books within fields connected to the purpose of the study. For example, books within supply chain management and logistics. Books written by well-‐known authors that often are encountered when searching for literature within supply chain management and logistics have been desirable and used at first hand. Studying the fundamental books have not only given an insight into the fields of study, but also generated input and ideas of areas to dig deeper into. Examples of authors whose books have been studied are: Douglas M. Lambert, Martha C. Cooper, Martin Christopher, James R. Stock and Janus D. Pagh. In addition, literature in form of books and articles from previous courses has been used when searching for literature during this step. The second step is to search for literature in databases, on keywords connected to the relevant areas identified in the first step. The database that mainly has been used is the “Business Source Premier”, that is a broad economic database available at the website of the library at Linköping University. Examples of keywords that have been used are “supply chain strategies”, “distribution methods”, “supply chain transparency” and “supply chain integration”. In accordance with Patel and Davidsson (2011) have further searches on synonyms of the keywords and the names of often cited authors been done. To facilitate the literature review, criteria as “full text” and “references available” have been applied. Both long-‐standing and modern literature have been searched for in order to get different perspectives of the literature from different time periods and to get a mixture of well proven theories with recently introduced ones. Furthermore, the primary sources been used in an as great extent as possible. A way to accomplish this is to use of the snow-‐ball method that always tries to seek for the primary source in order to avoid biased information.

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After collection of the secondary data, the most relevant theories and models for the study were chosen. This is the third step and was based on what literature that best could compose a theoretical framework that gives a holistic picture of supply chain management and logistics, and underlies the specification of task and analysis. Moreover, literature from different authors was chosen in order to get different perspectives and to increase the reliability of the theoretical framework, in accordance with the triangulation method described by Björklund and Paulsson (2014). For example, the collected frameworks for how to analyze supply chains were first compared and since all could be likened with each other, the most detailed model was chosen for this study. Once the composing literature of the theoretical framework was decided, the information was processed and written down to suit the context of this study. 5.2.4 Specification of Task The second step in the planning phase is the specification of task, as can be seen in Figure 22. According to Lekvall and Wahlbin (2001), the orientation and the content of the study are specified during this phase. The background, current state and theoretical framework act as a basis in order to be able to specify the task of the study. As stated before, the purpose of the study is relatively wide and has been so since the start of the project. Based on the theoretical framework and discussions with supervisor and opponents, it allows for the purpose to be clarified further. The overall system that was developed during the planning phase of the project can also be described in more detail, considering the theoretical framework and the delimitations that has been made. Just like the current state, the specification of task has an explorative orientation and by dividing the purpose into four main objectives, a structure of how the study will answer the purpose was enabled. The objectives demonstrate the four main steps that will answer how the total lead time can be reduced in the studied supply chain. The selected model of how to analyze a supply chain by Taylor (1997) supports these objectives but required some modification in order to fit the study, see Figure 15. The objectives were further specified by first breaking them down into four key questions. In order to answer these key questions, they were respectively broken down into more specific questions, or sub questions. By doing so, a clear structure of how the further work is thought to be carried out was enabled. Another reason for divide the purpose in specific questions is that they enable to delimit the study even further. The questions in the specification of task were underpinned and motivated by the theoretical framework. A risk when dividing the purpose into a number of specific questions is that they might not be sufficient in order to answer the purpose though some aspects might be forgotten. In order to minimize this risk, support was taken in the well-‐proven model by Taylor (1997) when the purpose was broken down into the four main objectives that later was further broken down into these questions.

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5.3 Current State Mapping The current state mapping seeks to identify facts about the structure, performance, business context and experienced problems for the studied supply chain. This phase has a descriptive approach since it only describes the current state and does not try to find the reasons behind it. Because the mapping involves an in-‐depth study of an individual customer, it is considered as a case study research. (Lekvall & Wahlbin, 2001) To increase the knowledge about the overall system developed in the planning phase, the method that Damelio (2011) refers to as a content review is applied further in this stage. Initially, internal documents are reviewed to determine the total lead time for the studied supply chain. The lead times in the material flow are presented at a high level and based on historical measurements that are collected in an internal database. The current state mapping is therefore partly based on quantitative primary data. The time period for the studied measurements are for the year of 2015, in order for the measurements to be relevant in the time of the study and to cover the demand for a full year. The lead times in the information flow are also at a high level and based on a number of customer purchase orders during the same year. The customer purchase orders are selected by the Account Supply Responsible at EAL that works directly with ATM to make sure that the data is representative for the ATM demand during 2015. The information gathered during the content review is important as the knowledge of the supply chain increases before any one-‐on-‐one interviews are conducted (Damelio, 2011). Erlach and Sheehan (2016) stress the importance of conducting interviews in order to get access to information about different parts of the supply chain. To construct a draft of the current state, a series of interviews are conducted with key persons working within the studied supply chain, see Appendix C. According to Lekvall and Wahlbin (2001), the reliability of the study can be affected by contingencies such as respondents with inadequate knowledge answering the interview questions at random. To avoid this from happening, the respondents are selected in consultation with the supervisor at Ericsson to ensure that the wanted information is provided. This will also increase the validity of the study in accordance with Björklund and Paulsson (2014). To further ensure that the respondents had sufficient knowledge of their parts of the supply chain, it was asked during the interview for how long they have worked within the supply chain and to what extent. In this way, some diffuse responses could be explained by the lack of knowledge and thereby discarded. Personal interviews are preferably used to collect primary qualitative data in case studies because of the unlimited possibilities that comes with the flexible hearing such as timeframe, number of questions, question formulations (Lekvall & Wahlbin, 2001). Therefore, personal interviews are conducted to the extent possible. Damelio (2011) refers to personal interviews as one-‐on-‐one interviews, which works best for the mapping if the interviewer is well-‐prepared and familiar with the work because of the limited information sought. The basic knowledge gathered from the earlier phases together with the content review serves as a preparation for the interviews and increases the chances for good questionings. As stated before, a more effective and cheaper alternative to personal interviews are the telephone interview (Lekvall & Wahlbin, 2001). Telephone interviews are also used in this phase of the project when the personal interview is

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too inefficient because of the geographical distance. According to Lekvall and Wahlbin (2001), a risk with telephone interviews is that the respondent does not get a picture of how long time the interview will take and therefore might lose the interest as the time goes. This is especially a risk if the time exceeds the specified timeframe set by the interviewer (Lekvall & Wahlbin, 2001). By sending the respondent the interview questions in advance, this risk is avoided since he or she can estimate the duration of the interview on their own. The interviews may also vary depending on the degree of structure (Björklund & Paulsson, 2014). For this phase, a combination of structured and semi-‐structured interviews is conducted since predetermined questions are asked in order, but the opportunity to formulate questions subsequently is possible. The predetermined interview questions, presented in Appendix D, are formulated to not be of leading nature in accordance with Björklund and Paulsson (2014). The interview questions are created to provide answers to the sub questions of the first objective and before the interviews take place, the questions are checked with the supervisor at Ericsson to ensure that the questions are formulated in a suitable manner. During the interviews, several respondents are asked the same questions to make sure that the same answers is obtained. This method is referred to as evaluator-‐triangulation and improves the reliability by providing several perspectives (Björklund & Paulsson, 2014). Even some respondents are asked the same question twice, to see if the responses differ. To further increase the credibility of the study, all the interviews are recorded and if any answers are unclear, the specific respondent is contacted for further clarification. In addition, both authors are present during every interview, which reduces the risk of misinterpretation and that vital information is avoided. If a respondent for some reason is not capable of answering a specific question regarding e.g. any detailed information about activities or lead times, the authors need to find a respondent that can support with the sought information. This is done by asking the interviewees if they can recommend a person that can support with the missing information. In those cases, the person is contacted by either e-‐mail, telephone or through a personal meeting, depending on the geographical distance. To manage all the data that the interviews generated during this phase, the method described by Seidman (2006) in Section 5.2.1 is applied. The approach of the current state aping is illustrated in Figure 23 and the methods that are applied for each sub question are presented in Table 6. Briefly said, the sub questions for the current state mapping is answered with both interviews and internal documents, except for the last question about the perceived problems and suggested solutions that is only answered with interviews. It is because the problems experienced by the supply chain members and their suggested solutions are not documented by Ericsson. Internal documents refer to e.g. information from the internal database at Ericsson and on customer purchase orders. Two or more methods have been used to the extent possible to answer the same sub question and by doing so, it provides several different perspectives and is usually called triangulation, which raise the reliability of the study (Björklund & Paulsson, 2014).

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Figure 23. Approach of the first objective. Source: Taylor (p.4, 1997)

Table 6. Methods to answer the sub questions of the first objective.

Sub questions Interviews Internal documents

1.1 Who are the supply chain members and how are they structured? X X

1.2 What activities and processes can be identified and where are they performed? X X

1.3 What distribution methods are applied and where? X X 1.4 What inventory practices are applied and where? X X 1.5 How is information managed? X X 1.6 What is the total lead time and how is it distributed? X X 1.7 What strategies are applied and where? X X 1.8 What problems are perceived and what are the suggested solutions? X

5.4 Identifications of Potentials for Lead Time Reduction The identification of potentials for lead time reduction seeks to answer where in the supply chain there are great opportunities for lead time improvements. In accordance with Lekvall & Wahlbin (2001), this phase has a descriptive approach since it both tries to identify the supply chain parts with not reasonable lead times and also clarify relations of cause-‐and-‐effect, meaning how various problems relate and affect each other. Furthermore, a prioritization is made of what parts, problems and suggested solutions that will get the further attention in the study. The answers to the sub questions in this phase are based on qualitative and quantitative primary data.









Strategies


1.2)1.3)1.4

1.1

1.5

1.6

1.7

1.8

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The identification of the supply chain parts with potential for lead time reduction started with categorizing the parts as having reasonable or not reasonable lead times, and also as constituting significant portions of the total lead time or not. This was determined by having a discussion seminar with a person working with the general logistics processes at Ericsson and has a good insight into the general supply chains and flows of material and information. This categorization is based on the activities, processes and lead times identified during the current state mapping, but also the knowledge and experience of the person participating in the discussion seminar. A discussion is held whether the lead times are reasonable or not in terms of value added and non-‐value added time, given the activities and processes it contains. The more non-‐value added time a supply chain part contains of, the greater is the potential for improvement. This discussion is also based on previous interviews with people working with the supply chain parts, in order to take into consideration their opinions of how reasonable the lead times are. The problems with great potential for improvement get further attention whilst the others are disregarded. The next step is to analyze the perceived problems from the current state mapping, in order to determine what problems that are connected to what supply chain parts. Since there is a risk of that some of the problems might cause other problems, an investigation is made to find out the problems that can be categorized as root causes. In turn, the root causes are the problems that will get the effort to find solutions to in order to reduce the total lead time. In order to identify the root causes are “Fishbone diagrams” used for each supply chain part categorized as having great potential for improvement. The diagram is a well-‐known method to find out relationships between causes and effects. It is important to always try to find and improve the original source to a problem instead of just mitigate the symptom of the problem. By finding a solution to the root causes, it may prevent the problem to show up again. (Oskarsson et al., 2013) Moreover, the identification of root causes is based on the discussion seminar and on previous interviews made during the current state mapping. Also the suggested solutions, identified during the current state mapping, are being connected to the different root causes. This is to later be able to determine what solutions that might shorten the total lead time. Finally, a prioritization was made of what supply chain parts, problems and suggested solutions that got the further effort and attention in the study. Since the categorization was made into meaningful groups in accordance with Taylor (1997), the prioritization was focusing on the categories with the greatest potential for lead time reduction. The prioritization was based on the same discussion seminar that was described for the categorization. In summary, the question regarding the supply chain parts is based on the discussion seminar and on previous interviews. The second question, regarding the root cause problems, is based on not only the discussion seminar and previous interviews but also the Fishbone diagram. The last question concerning prioritization is based on only the discussion seminar. This results in that three of the sub questions are at least applying two methods, meaning that triangulation is achieved and the reliability of the study is improved (Björklund & Paulsson, 2014). See Figure 24 for the approach of the second objective and Table 7 for a visualization of the methods applied during this phase.

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Figure 24. Approach of the second objective. Source: Based on Taylor (p.4, 1997)

Table 7. Methods to answer the sub questions of the second objective.

Sub questions Previous interviews

Discussion seminar

Fishbone diagram

2.1 For what parts are the lead time not reasonable and represents a significant portion of the total lead time? X X

2.2 What are the root causes for the excessive lead time? X X X

2.3 To what parts, problems and solutions will the effort be targeted? X

5.5 Generation of Alternative Solutions The generation of alternative solutions aims at come up with solutions that will decrease the total lead time in the studied supply chain. Since it seeks to provide ideas for action, this phase has an explorative approach (Lekvall & Wahlbin, 2001). The phase takes start in the supply chain parts, problems and solutions that have been prioritized during the prior stage. First, a second literature review was conducted in order to collect qualitative secondary data regarding theories and methods that may lead to general solutions or validate the prioritized suggested solutions. Note that the additional literature study was done considering that the existing theoretical framework might not contain alternative solutions to the potentials that are identified during the second objective. This is strengthened by Oskarsson et al. (2013), which mean that existing literature should be used when trying to come up with suggestions for solutions. Moreover, Björklund & Paulsson (2014) argue that it is an academic requirement to take existing literature into consideration. Similar to the initial literature review, the second review was based on the search process described by Patel and Davidsson (2011), except from the first step that is disregarded in this phase. The first step of their approach seeks to provide basic knowledge about the fields of the study and generate ideas of areas where to deepen the knowledge. At this stage, the basic knowledge was considered as already achieved due to the first literature review and that a narrower research can be done. The first step of this phase was therefore to search for literature in databases; more precisely search for keywords connected to the identified problems. The databases used were mainly “Business Source Premier”, available at the website of the library at Linköping University. The same criteria were used in this literature research as for the first, more

Step%2%(Objective 2)Identificationof+

potentials+for+lead+time+reduction

Categorize

Prioritize

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precisely full text and references available. The original sources were used to the extent possible in order to avoid biased information. Once the literature review was completed and the general solutions connected to the potentials were collected, solutions specified for Ericsson and the studied supply chain were developed. By adapting the general solutions to the current situation at Ericsson and take inspiration from the suggested solutions, some solutions that can solve the problems with long lead times in the current state were developed and formulated. In summary, the approach of the generation of the alternative solutions are illustrated in Figure 25 and the method used to answer the sub questions are presented in Table 8.

Figure 25. Approach of the third objective. Source: Based on Taylor (p.4, 1997)

Table 8. Methods to answer the sub questions of the third objective.

Sub questions Literature review

Previous interviews

3.1 What general alternatives can be found for the greatest potentials for lead time reduction? X

3.2 How can the general alternatives be applied to the studied supply chain? X X

5.6 Recommended Solutions and Requirements for Implementation This phase consists of two major parts: evaluation and recommendation as the first part and requirements for implementation as the second part. The phase can be related to the predictive study that Lekvall and Wahlbin (2001) mention when the focus is to provide a forecast of what would likely occur if certain specified conditions exist. The evaluation and recommendation part refers to evaluation of which combination of solutions that are most beneficial out of a lead time perspective. It also refers to determination of how great the lead time reduction will be with the recommended solutions. This is done by taking into consideration how the solutions relate and affect each other, and also how much non-‐value added time that can be eliminated, expressed as quantitative data. The impact of the different solutions and the combination of solutions include consideration of qualitative data obtained from a second discussion seminar, with the same person working with logistics at Ericsson, as well as from the literature research and former interviews. Moreover, it is also discussed during the discussion seminar how reasonable each solution is to implement. The combination of


solutions

Literature)review

Adaptation

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3.2

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alternatives with the most beneficial result is the recommended definite solution that is forwarded to Ericsson. Finally, the implementation part seeks to answer what is required to manage an implementation of the recommended solutions. It takes into consideration what is required from e.g. Ericsson, ATM and the suppliers, but also what structural supply chain changes that is needed. Notice, an implementation is not done in this study but it only examines the requirements for one if Ericsson decides to proceed the solutions. It also discusses the time horizon for the implementation. This part was based on qualitative data in form of what the person from the discussion seminar as well as the people from the current state interviews said about requirements for implementing the solutions. It was also based on the information collected from the literature reviews regarding these solutions. The approach of the final objective is visualized in Figure 26 and the methods to answer the sub questions are presented in


Table 9. Methods to answer the sub questions of the final objective.


Previous interviews

Discussion seminar

4.1 What combination of solutions will provide the greatest lead time reduction and how great will it be? X X X

4.2 What are the requirements for implementation? X X X 5.7 Final Phase The final phase consists of two separate parts, namely the conclusions and the discussion. The conclusions are a summarization of the final recommendations and answers to the purpose of the study. Hence, this section only contains material that has been presented previously in the report and no additional information is therefore added. The discussion on the other hand, includes a reasoning concerning the purpose of the study and if it has been fulfilled or not. It also highlights other contributions of the study apart from the purpose. Furthermore, the section comprises a generalization of the result in accordance with Björklund and Paulsson (2014) together with Lekvall and Wahlbin (2001). Bjöklund and Paulsson (2014) stress the importance of raising the level of abstraction during the generalization of the result and it is therefore taken into account for the discussion. Finally, recommendations are made for further studies.. As can be




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4.2

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seen, three methods are used in order to answer both questions. That improves the reliability of the study in accordance with Björklund and Paulsson (2014).


Table 9. Methods to answer the sub questions of the final objective.


Previous interviews

Discussion seminar

4.1 What combination of solutions will provide the greatest lead time reduction and how great will it be? X X X

4.2 What are the requirements for implementation? X X X 5.8 Final Phase The final phase consists of two separate parts, namely the conclusions and the discussion. The conclusions are a summarization of the final recommendations and answers to the purpose of the study. Hence, this section only contains material that has been presented previously in the report and no additional information is therefore added. The discussion on the other hand, includes a reasoning concerning the purpose of the study and if it has been fulfilled or not. It also highlights other contributions of the study apart from the purpose. Furthermore, the section comprises a generalization of the result in accordance with Björklund and Paulsson (2014) together with Lekvall and Wahlbin (2001). Bjöklund and Paulsson (2014) stress the importance of raising the level of abstraction during the generalization of the result and it is therefore taken into account for the discussion. Finally, recommendations are made for further studies.




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6 Current State Mapping

The chapter presents the current state for the studied supply chain. The current state map includes a description of the supply chain structure, the supply chain performance and perceived problems and suggested solutions from people working within different parts of the supply chain.


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6.1 Supply Chain Structure This section describes the supply chain structure, or more precisely the supply chain members, activities and processes, distribution methods, inventory practices and how information is managed. 6.1.1 Members The supply chain that is studied in this project consists of several members, which can be divided into four main groups, namely: Suppliers, Ericsson, 3PL-‐providers and Customers in similarity to the overall system presented in Section 2.6. Starting from the customer side of the supply chain, the first member is the specific customer ATM. ATM has an order desk from where all the contact with Ericsson is managed and a warehouse for storing the incoming deliveries of materials that later are used at the project sites (Ur Rehman, 2016b). The members classified as Ericsson are several. The member closest to ATM in the supply chain is Ericsson Algeria (EAL) and is a local subsidiary to Ericsson. EAL consists of a local sales and supply office, which manages the contact with ATM and works as an intermediary. Furthermore, there is an order desk, a control tower and some additional strategic functions located in Kista, which are referred to as EAB. Moreover, the supply chain contains one Ericsson Supply Site (ESS) in Tallinn and one Ericsson Distribution Center (EDC) in Gothenburg. (Ur Rehman, 2016b) There is also one site material hub included in the studied supply chain, appurtenant to Ericsson, which is located in Borås (Pettersson, 2016b). The members classified as suppliers in this supply chain are two External Manufacturing Sites (EMSs), 140 suppliers for electro mechanic components, 124 suppliers for site material and one Arrow hub. The hub is located in Venlo in the Netherlands and acts as an intermediator between the suppliers of electronic components and Ericsson, i.e. Arrow holds buffers for Ericsson. (Carlheimer, 2016b) The two EMSs are Jabil T-‐Town that is located in Hungary and also Flex Tczew that is located in Poland (Ianev, 2016b). The 3PL-‐providers in the supply chain for ATM are referred to different service providers for e.g. transportation and installation. It is for instance different firms that manages the transportation of goods between different members. That includes transportation by truck, boat and flight. Moreover, the 3PL-‐providers also refer to application service providers, which manages the installation at the projects sites. (Ur Rehman, 2016b) The locations of the main members of the studied supply chain are visualized in Figure 27. Notice that the component suppliers and the 3PL-‐providers are not included in the figure, since they are of a great number and spread out differently.


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Figure 27. The location of the members in the studied supply chain.

6.1.2 Activities and Processes The phase for the initial activities and processes in the studied supply chain is called the pre-‐sales phase and starts with EAL perceiving an opportunity for sales from the customer ATM. The person accountable for the customer relations is the Key Account Manager (KAM) who also has the ultimate responsibility for the contract fulfillment. The approach of the pre-‐sales phase depends if the opportunity can be referred to an already existing contract or if a new contract needs to be established. In the case of ATM, a five-‐year frame contract has already been signed and the terms in the contract cannot be changed, unless there is an amendment. To handle the pre-‐sales phase, the KAM appoints a Sales Team consisting of three key persons, who’s main tasks is to perform a qualification of the opportunity, create an appropriate proposal and negotiate with ATM. The configuration of the proposal is in form of carts, consisting of different price objects and is created in the Ericsson Configuration Portfolio (ECP) tool. The solution is then transferred manually into Verdi by a solution architect, still on a price object level, and sent to ATM by e-‐mail. The tender is then discussed and revised gradually with ATM. During the pre-‐sales phase, the local Account Supply Responsible (ASR) is supporting the KAM and the Sales Team with all the necessary supply inputs, such as material forecasts, order-‐ability (obsolescent material, exemptions, encryptions etc.), lead time verifications, distribution cost and delivery planning, supply risk analysis, trade compliance, suppliers readiness and third party

EDC,%SwedenGothenburg

ESS,%EstoniaTallinn

Ericsson%AB,%SwedenKista

ATM,%AlgeriaAlger

EAL,%Algeria

Arrow%hub,%the%NetherlandsVenlo

EMS%Flex,%PolandTzcew

EMS%Jabil,%HungaryT6Town

Site%material%hub,%SwedenBorås


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products registrations. The pre-‐sales phase results in a signed Customer Purchase Order (CPO) with ATM, which is handled by the Sales Team at EAL. (Benrabah, 2016b) Note that Ericsson is the formal order taker and that EAL handles the pre-‐sales phase on behalf of Ericsson, acting as an intermediary (Magnusson, 2016a). Once the CPO is contracted and received, the local processing phase is initiated. The Sales Team at EAL secures an approved early start because of the L/C deviation and EAB starts to prepare a draft for the L/C. The early start needs to be approved by EAB before the execution phase of the contract can start (Benrabah, 2016b). As mentioned in the business introduction, EAB and ATM are using L/C as a payment term for reducing the risk of the transactions. Once the early start is approved, EAB and ATM starts to negotiate with EAL as an intermediate in order to agree on a L/C that is favorable for both parties. For this is several departments and functions at EAB, EAL and ATM involved. Once EAB and ATM have agreed on the L/C conditions, EAB sends the L/C draft to both the EAB bank and to ATM, see Figure 28 below. ATM must then contact their bank in Algeria and apply for an opening of the L/C. When the ATM bank has approved the application, they send the L/C to the EAB bank, referred to as a SWIFT. The EAB bank makes sure everything looks fine and scan the L/C documents to see if any changes have been made by ATM or their bank. The EAB bank then updates EAB about it and when the documents at all four parties correspond to each other, the L/C is made operative, which means that goods can be shipped from Ericsson to ATM. (Holmqvist, 2016)

Figure 28. The L/C process between EAB and ATM.

1.#CPO

2.#ES

4.#L/C#request

3.#L/C#draft 5.#SWIFT

3.#L/C#draft

EALEricssonATM


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During the local processing phase and the L/C process, the Sales Team validates the assignment specification in a sales tool called CRM360 based on the deal structure. The proposal in form of the ECP carts are refreshed since the bill of material might contain changes and to be able to order the solution, the price objects are manually translated into delivery objects. In other words, the sales objects are expressed as objects that should be ordered and later on delivered to ATM. The prices are also set in Verdi as per the contracted price list. The Project Support Professional prepares the ONE entry form that retraces the deal structure and reflects the billing plan, while the ASR checks the structure and pricing in Verdi. As the CPO is completed with additional information and handed over to the Supply Team at EAL, the local handover phase is fulfilled. (Benrabah, 2016b) As the local handover is closed and the early start is approved, all the documents are uploaded in Order Office. The ASR is then calling for a handover meeting with the Supply Team at both EAL and EAB. During the handover meeting, the main documents are reviewed, discussed and if any adjustments are necessary, it is corrected just after the meeting. After the handover meeting, the Supply Team at EAB creates the project in ONE and sends the value contract to the Supply Team at EAL in order for them to release the Sales Order (SO). The Supply Team at EAL is then transferring the CPO from Verdi into ONE, which is the SAP system used at Ericsson, and notifies EAB when the SOs are created. (Benrabah, 2016b). The SOs that EAB receives from EAL is compared with the CPO in Order Desk to ensure that it matches (Benrabah, 2016b). If the information is consistent, the Purchase Orders (POs) are released by the order desk at EAB to ESS Tallinn, EMS Jabil T-‐town, EMS Flex Tczew and site material suppliers through ONE. If the site material is picked from stock at the hub in Borås, a Stock Transfer Order (STO) is sent instead, since EAB have ownership of the hub. EAB is also sending a Distribution Order to EDC GBG. (Ianev, 2016b). The Distribution Order consists of information about what to pick and pack, which customer the delivery is connected to and when the truck will pick up the goods (Magnusson, 2016a). Once the POs and STOs are released, the order desk at EAB is monitoring the material flow until the goods are issued at EDC GBG. Both ESS Tallinn and the two EMSs have module productions based on forecasts. After the production sites receive the forecasts from the control tower at EAB, they construct individual production plans. The expected delivery dates for the material to arrive at EDC GBG are sent back to EAB and if the order acknowledgements are not satisfactory, a pre-‐escalation is made to improve the dates. If the order acknowledgements still are not satisfactory, a formal escalation is placed by EAB. (Benrabah, 2016; Wilhelmsson, 2016) The information and material flows are illustrated in Figure 29 and will be described further in the following text.


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Figure 29. The information and material flow in the studied supply chain.

ESS Tallinn has an agreement with Arrow that orders have to be placed a certain number of days before Arrow can assure the electronic components being on stock. If the electronic components are on stock as the order arrives at Arrow, the components are prepared for delivery to ESS Tallinn, which is done twice a week. (Carlheimer, 2016b) For the electro-‐mechanic components, the material is sent directly from the suppliers with a frequency that is determined by factors such as the geographical distance (Neuman, 2016b). As soon as the electronic components from Arrow and the electro-‐mechanic components from the suppliers arrive at ESS Tallinn, the incoming goods are first inspected. Thereafter, the electronic components are mounted on blank circuit boards for production of SMAs. The SMAs are then constituting as cornerstones for the radio and digital module production. The filter units are also parts of the radio units, meaning that filters need to be produced before radio units can be produced. The module production at ESS Tallinn has separate lines for the radio, digital and filter units, and is desired to be continuously active and produce fixed volumes. (Zigulin, 2016) The variations in demand are instead covered by the two EMSs: EMS Jabil T-‐Town for radio units and EMS Flex Tczew for digital units. The forecasted modules are held in buffers, which are primarily used when the POs are received. Depending on if the customer orders only modules or complete RBSs, the modules are either sent to EDC GBG with ESS Tallinn as transit point or taken into node production at ESS Tallinn. (Pallase, 2016) When a node is produced, it is loaded with a customer specific software and then inspected to make sure that everything works fine. After the inspection, the goods are ready to be transported to EDC GBG. Hence, the module production is based on forecasts and the node production is based on customer orders. (Zigulin, 2016)

CPO

SO

DO

PO

POPO

PO

STO

PO

EALEricssonSuppliersDSPATM


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The site material that is needed to complete the CPO are delivered to EDC GBG for consolidation. Approximately 90 % of all the site materials are covered by the pick from stock hub in Borås. The supplier base for site material consists of 124 suppliers, where 117 of them deliver to the site material hub. The rest are purchased directly from the initial site material suppliers. It may refer to site material that is not profitable to store in the hub because of size, cost, frequency, etc. (Pettersson, 2016b) As the nodes, modules and site material arrive at EDC GBG according to the agreed time plan, goods received (GR) is made. The goods are unloaded, registered in the system and put on storage in wait to be consolidated with other goods included in the CPO. (Slotte, 2016) An incoterm in the contract with ATM is the Carriage Paid To (CPT), meaning that ATM has the responsibility to insure the goods before it can be delivered from EDC GBG (Ur Rehman, 2016b). Once all the ordered goods have arrived, the L/C is operative and the insurance is guaranteed by ATM, the order is picked, packed and stated ready for delivery in ONE. (Slotte, 2016) However, a requirement from ATM is that the ordered goods are inspected before the transportation is called off, which is performed by an external company (Ur Rehman, 2016b). After the certificate of quality is issued and the goods are ready for shipment, the information of the specific shipment is sent from EAB to the Distribution Service Provider (DSP) and the Supply Team at both EAL and ATM in order to start the customs clearance. Goods issued (GI) is made as the DSP collects the material from the distribution center and transport it to ATM. Time slots are used for the outbound flow, meaning that it is a great level of time control out from EDC Gothenburg. During the transport to ATM, the order must go through the customs where a further inspection is performed to see if the order is complete and can be transported into the country. (Ur Rehman, 2016b) 6.1.3 Distribution Methods For inbound supply, goods are usually incoming to ESS Tallinn from Arrow, component suppliers, EMS Jabil T-‐town and EMS Flex Tczew by truck, but also by boat for long distance transportations e.g. deliveries from China. The transportations from ESS Tallinn to EDC GBG are also managed mostly by truck. (Carlheimer, 2016b; Neuman, 2016b) From the site material suppliers and from the hub in Borås are material sent by truck. Incoming deliveries to the hub are managed by either truck or boat depending on the distance to the supplier (Pettersson, 2016b). For the outbound, the goods are incoming to EDC GBG for consolidation of deliveries from ESS Tallinn and from site material suppliers. When the goods are consolidated and correspond to the CPO, the goods are sent to the customs by multi-‐mode transportation. It means that the transportation may be performed differently depending on factors such as deadlines, but the most common transportation is performed half way by truck and half way by boat. It is also possible to transport by boat all the way from Gothenburg to Algeria, or even by air. That is a question of cost and criticalness. (Ur Rehman, 2016b) The outbound part can be compared to the regional distribution method described in Section 3.6.


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6.1.4 Inventory Practices Inventory handling is managed in different ways in different parts of the supply chain. The Arrow hub holds electronic components for Ericsson in a buffer that is kept between an agreed minimum and maximum level. (Carlheimer, 2016b) The components are owned by the suppliers that supply the hub, until they are delivered to a production site (Kjellander, 2016). There is no VMI-‐agreement between Ericsson and Arrow, since deliveries are performed based on orders from ESS Tallinn and the two EMSs (Carlheimer, 2016b). VMI is instead applied between ESS Tallinn and a significant part of the suppliers for electro mechanic components. Thus, ESS Tallinn holds buffers of electro mechanic components and this is due to the volatile customer demand that often results in inaccurate forecasts. According to Zigulin (2016), it is not possible to practice JIT deliveries as long as the forecasts are not 100 % accurate. Sometimes, the buffers are not even enough to cover up for the fluctuations in the demand, meaning that ESS Tallinn has to buy on order from the suppliers, resulting in longer lead times (Neuman, 2016b). ESS Tallinn also buffers radio and digital units to cover for 95-‐98 % of the total demand. With filter it is more difficult to buffer considering that each filter is customized with different band widths. (Zigulin, 2016) The two EMSs use different methods compared to ESS Tallinn. For instance, EMS Flex Tczew orders the material so it will be available on site two weeks before the planned production will start. By doing so, the goods are placed on stock and will be tied to a specific customer. EMS Jabil T-‐Town on the other hand, applies different kind of buffer strategies depending on the distance to each supplier. (Neuman, 2016b) The basic idea of EDC GBG is to consolidate the incoming goods according to the cross-‐docking method and thus are no buffers supposed to be held. However, due to the incoming goods from several sources that most often are unsynchronized, goods are forced to be put on stock at EDC GBG in wait for being consolidated. (Ur Rehman, 2016b) Regarding the site material, 90 % of the demand is buffered in the pick-‐from-‐stock hub in Borås. VMI is applied with the most common and frequent third-‐part suppliers, otherwise make-‐to-‐order is used. For the third-‐part suppliers that deliver directly to EDC GBG, the goods are delivered on order. There are also agreements with some of the third-‐part suppliers implying them to buffer site-‐material to a certain level in order to minimize the lead times. (Pettersson, 2016b) 6.1.5 Information Management There are several systems used for communication and information sharing in the studied supply chain. Not all of them are relevant to present in this study, but four that are frequently used are ECP, CRM360, Verdi and ONE. The purpose with these systems is described below. Ericsson Configuration Portfolio (ECP): supports the proposal process by giving customers access to product configuration functionality and product information that is used in proposals (Radenholt, 2016).


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CRM360: is the Ericsson opportunity tool that is used by its subsidiaries for managing different business opportunities. All the opportunities received by EAL are added into CRM360, making it possible to follow the status of them. For example, CRM360 can tell if it is a new opportunity or if a contract already has been signed with the customer. (Özdogru, 2016) Verdi: is the Ericsson proposal tool and supports the pre-‐sales process and provides input to the supply process. The purpose of Verdi is to optimize the sales and marketing and the supply processes by:

• Supporting the entire Ericsson product portfolio • Enabling access to correct information (product data, configuration support and prices) in

a user friendly way • Electronic interfaces instead of manual transfer data • Speed up and facilitate the proposal process • Support for workgroups and re-‐use data by storing information for a specific proposal in

a common database

(Benrabah, 2016b; Lindberg, 2016; Özdogru, 2016) ONE: is synonymous with SAP and is the ERP-‐system used at Ericsson. The purpose of ONE is to facilitate all transactions and the order management. Given this, all transactions and orders are registered and handled in ONE. (Aglert, 2016) 6.2 Supply Chain Performance – Lead Times This section presents the lead times that have been identified in the studied supply chain. In some of the supply chain parts is the lead time varying in an interval, depending on different reasons. Because of this, the lead times are in the following text presented both in an interval and also as they are in a normal state. This is to provide a broader basis for the evaluation of the solutions in the end of the report. Since the Proof of Delivery (PoD) from Ericsson to ATM is at the customs and there are not enough data after that point, the lead times from the customs to the project site are not taken into consideration in this study. The lead times for the information flow is illustrated in Figure 30 and described further below.


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Figure 30. The lead times in the information flow.

The duration of the pre-‐sales phase is denoted as T0 and can vary between one month up to more than a year, depending on the complexity of the deal, the customer priorities, the customer budget etc. Once the contract is signed, the time it takes for the Sales Team at EAL to create the additional documents to the CPO until it is handed over to the Supply Team at EAL is 14-‐49 days. This lead time is referred to as T1 and consists of local processing of documents, inputs from several stakeholders and designing the solution, which in average time takes 28 days. The local handover is mainly dependent on the workload, the dexterity of each stakeholder, the complexity of the solution and the time plan of the project. (Benrabah, 2016b) After the Supply Team at EAL receives the CPO, a handover meeting is held with EAB where the scope of the project and some financial aspects are reviewed and discussed. The time it takes for the handover meeting is 1-‐2 days and referred to as T2. The general time it takes for Ericsson to place the orders to the manufacturing units, i.e. ESS Tallinn, EMS Jabil T-‐town and EMS Flex Tczew, and the site material suppliers is 2-‐3 days and referred to as T3. (Benrabah, 2016b) As stated before, ESS Tallinn has to place an order to Arrow a certain number of days before the desired delivery time in order for Arrow to ensure having the electronic components on stock. This lead time is numbered as T4 and is agreed to be 17 days. (Carlheimer, 2016b) The lead times for the material flow is illustrated in Figure 31 and described further below.

CPO

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Figure 31. The lead times in the material flow.

The average storage time in Arrow for the electronic components is referred to as T5 and is 26 days. The time it takes for the components to be taken out from Arrow, transported to ESS Tallinn, EMS Jabil T-‐Town or EMS Flex Tczew and put into production is numbered T6a and takes in average 26 days. Notice that this lead time is also consisting of the waiting time at any of the production sites. The time it takes from the electro mechanic component suppliers until the production starts is referred to T6b and can take as much as up to two weeks, but are for most of the time in buffer at the production sites and therefore not experienced by the customers. The electro mechanic components that are buffered at the production sites are dimensioned based on forecasts and because of forecast deviations, there can sometimes be material and capacity constraints that will be experienced by the customer in form of longer lead times. The delivery precision from the suppliers for electro mechanic components is estimated to be 80-‐85 %. (Pallase, 2016) Next up is the module production, numbered T7a, and refers to the time from when the SMA production starts, until the module is put on stock at ESS Tallinn or taken directly into the node production. This time includes production at ESS Tallinn, EMS Jabil T-‐Town, EMS Flex Tczew and also the transportation from the EMSs to ESS Tallinn. This process takes 4-‐9 days depending on where the production takes place, the tact time etc. (Tomba, 2016). Since ESS Tallinn produces the largest volumes compared to EMS Jabil T-‐Town and EMS Flex Tczew that only cover variations in demand, the lead time in the normal case is 4 days. T7b refers to the average buffer lead time of finished modules at ESS Tallinn and is 20 days. The node production is numbered T7c and takes just one day including the final testing (Josepson, 2016).

T8c

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The transportation from ESS Tallinn to GR at EDC Gothenburg is denoted T8a and takes 3 days (Tamme, 2016). The lead time from the site material suppliers that delivers directly to EDC GBG, i.e. that do not deliver to the site material hub, is in normal cases 7 days and is referred to as T8b. This lead time might in some cases be significantly larger if there is an order on low frequent components, which then can be up to 50 days. It takes in general 3 days for the goods from the site material hub in Borås to be delivered to EDC GBG and this time is denoted as T8c. (Pettersson, 2016b) The lead time from GR to GI at EDC GBG is referred to as T9 and takes in average 32 days. From the data that the lead times are based on could also an interval from 7-‐50 days be identified. Just making the GR and GI take around four hours respectively. The time from GI at EDC Gothenburg until the goods arrive at the customs in Algeria is denoted T10 and takes 15 days. The lead times for the presented activities and processes in the studied supply chain are summarized in Table 10 below.

Table 10. Lead times for different activities and processes in the studied supply chain.

Number Activities & Processes Lead Time (days)

Normal Lead Time (days)

T0 Pre-‐sales 30-‐365 30-‐365 T1 Local processing 14-‐49 28 T2 Handover 2-‐3 3 T3 Ordering 1-‐2 2 T4 Component ordering 17 17 T5 Component Arrow 26 26 T6a Arrow outbound 26 26 T6b Electro mechanic outbound 0-‐14 0 T7a Module production 4-‐9 4 T7b Module buffer 20 20 T7c Node production 1 1 T8a ESS outbound 3 3 T8b Site material outbound 7-‐50 7 T8c Site material hub 3 3 T9 EDC 7-‐50 32 T10 EDC Outbound 15 15

The L/C process illustrated in Figure 28 is performed in parallel to the material and information flow described above, starting from when the CPO is signed and handed over to the Supply Team at EAL. The time it takes for the Supply Team at EAL to get an approval of an early start and for EAB to send the L/C draft to ATM and the EAB bank is between one to two weeks. As ATM receives the L/C draft, it takes one to two months for them to go to their bank and apply for the L/C to be


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opened. Thereafter is the SWIFT performed, i.e. the ATM bank sends the L/C to the EAB bank and the documents corresponds to each other, making the L/C operative and is general taking one to two weeks. As stated in the introduction of the report, a directive in the study is to only examine the lead time perceived by the customer. Therefore, the lead times that are presented below are the ones that are perceived by ATM. As a result, the Pre-‐Sales (T0), Component ordering (T4), Component Arrow (T5), Arrow outbound (T6a) and the Module buffer (T7b) are disregarded. T0 is disregarded since it occurs before ATM places the actual purchase order. T4 and T5 are disregarded since Arrow holds buffers that are great enough to cover the demand and these lead times are therefore not experienced by ATM. The reason for T6a being disregarded is because it mainly constitutes of buffer lead time of components at the production sites that are sent from Arrow. Almost the same reasoning applies for T7b since it refers to a buffer lead time. T6b is not disregarded since ATM may perceive that lead time if the production waits for ingoing electro mechanic components. The total lead time in the studied supply chain is presented for three cases, namely: the best, the normal and the worst case scenario. This is because of the lead times that vary in a great interval, and also since it is considered interesting for the reader to be provided with the total lead times in the different cases. In best case does ATM perceive 14 days of local processing, 2 days for handover, 1 day ordering, 1 day node production, 3 days for inbound to EDC Gothenburg, 7 days at ADC GBG and finally 15 days from EDC GBG to the customs in Algeria. In such cases, it is assumed that the right modules are on stock in the production. That means that the lead time in best case is 43 days. In average does ATM perceive 28 days of local processing, 3 days for handover, 2 days ordering, 1 day node production, 3 days for inbound to EDC GBG, 32 days at EDC GBG and then 15 days to the customs. In this case, it is also assumed that the node production can pick modules from the module buffer. This since the buffers are thought to cover 95-‐98 % of the demand and also because ATM in a great extent orders RBSs with standard modules. That means that the lead time in normal case is 84 days. In worst case scenario, based on the data from 2015, ATM perceives 49 days of local processing, 3 days for handover, 2 days ordering, 14 days in waiting for components in the production, 9 days in module production, 1 day in node production, 3 days for inbound to EDC GBG, 50 days at EDC GBG and finally 15 days to the customs. The reason for the inbound to EDC GBG is set to 3 days, although site material outbound is 50 days in worst case, is because that time is added to the time at EDC GBG instead. The time at EDC GBG starts ticking when the first delivery has arrived, which happens after 3 days. This means that the lead time in worst case is 146 days. The above presented total lead times in the three different cases are presented in Table 11 below.


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Table 11. The customer order lead time in the best, normal and worst case scenario.

Scenario Lead Time (Days) Best case 43 Normal 84

Worst case 146 6.3 Business Context – Strategies This section describes the strategies applied in the supply chain in terms of the Customer Order Decoupling Point (CODP), postponement, speculation, lean and agile. The CODP is today at the node production at ESS Tallinn. From there, make-‐to-‐order is applied for products from the existing product portfolio and engineer-‐to-‐order if the customer has some special request. (Kjellander, 2016) This can be compared with the form-‐postponement concept, described in Section 3.8. Though deliveries from ESS Tallinn to EDC GBG are performed on order, which indicates a time-‐postponement strategy. Also the deliveries out from EDC GBG apply time-‐postponement since deliveries are only performed when the complete CPO is fulfilled. The inbound of site-‐material can be divided into two flows, one passing through the hub and the other going direct from supplier to EDC GBG (Pettersson, 2016b). When components are stored in the hub, it indicates on place-‐speculation and form-‐speculation between suppliers and hub. Since it is a pick-‐from-‐stock hub, time-‐postponement is applied between the hub and EDC GBG. For the second flow, it is time-‐postponement between suppliers and EDC GBG, and either form-‐postponement or form-‐speculation at the suppliers. After the CODP, if not including the site-‐material part, there is no buffering in the studied supply chain and thus no place-‐speculation strategy in that part. At the inbound part, from component suppliers to ESS Tallinn, place-‐speculation is used when buffering at Arrow and at ESS Tallinn. That implies that also form-‐speculation is used. Between Arrow and ESS Tallinn there is a time-‐postponement. The buffering of radio and digital units at ESS Tallinn show on form-‐speculation. Regarding the terms lean and agile, Ericsson has a wanted strategy of being lean before the CODP and agile after it. Today, it is hard to see this separation between lean and agile in the supply chain. (Kjellander, 2016) 6.4 Experienced Problems and Suggested Solutions The interviews held during the current state mapping have resulted in a number of identified problems, perceived by people working with different parts of the supply chain. These problems are described throughout the text below together with some suggested solutions. Notice that there is sometimes more than one problem described under each section. This since the respondents often mentioned more than one problem, that often had a clear relationship. The identified problems are in total of 43 and described in Sections 6.4.1 -‐ 6.4.14 and finally summarized in Section 6.4.15.


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6.4.1 Numerous Manual Handovers The bottleneck in the information flow is the local processing phase, when the CPO is handed over from the Sales Team to the Supply Team at EAL. The main reason for the excessive lead time is perceived to be the big workload and the information that has to be collected from several stakeholders, which often are involved in several projects at the same time. It can mean to wait for approval of the early start, validation of the assignment id, the ONE entry form or for the solution to be ready. Many of the tasks performed during the local processing are managed in different systems that are incompatible with each other and as a consequence, there are a lot of information shared by e-‐mail. (Benrabah, 2016b; Özdogru, 2016) The suggested solution for this problem would be to provide the right information at the right time (Benrabah, 2016b). Another perspective of the local processing phase is that some activities can be performed by EAL before the CPO is sent from ATM. By doing so, the experienced lead time from when ATM places the order until the goods are delivered will be reduced. (Lindberg, 2016; Magnusson, 2016a) Verdi is a system for sending proposals to customers, consisting of price objects that can be updated during the negotiations. The translation of price objects into delivery objects can as well be performed and updated before the CPO has arrived to EAL. (Lindberg, 2016) The problem with manual handovers is supported by Forsberg (2016) that highlights the local processing as the most time consuming part, or to be more precisely the translation from price objects into delivery objects. The price objects need to be manually translated into orderable product packages before the contracted solution can be ordered and delivered, which is a time consuming process that results in high costs and longer lead times for Ericsson. The manual handovers are not only an issue during the local processing, but are a general problem in the supply chain and can be identified during tendering, contracting, forecasting, ordering, delivery and invoice. (Forsberg, 2016) The incompatibility between different processes and systems in the current supply chain is causing many manual translations and handovers. For instance, there is a poor transparency between Ericsson and the region, since there is no support system that let the local company integrate with Ericsson’s processes. It would therefore be desirable to increase the integration between systems and processes throughout the entire supply chain. (Forsberg, 2016; Radenholt, 2016) 6.4.2 CPO Bound to Product Numbers In most cases, Ericsson uses their internal product numbers when doing business with the customers, i.e. the customers place orders on specific product numbers, resulting in CPOs with a high level of detail (Högberg, 2016). This is the case for ATM, which places orders on specific product numbers and the high level of detail increases the complexity of the local processing and the development of the solution (Benrabah, 2016b). Working with internal product numbers towards the customer results in CPOs that are bound to a certain solution, including products that only can be replaced if the form, fit and function are the same. That means, if a product is obsolescence and a revision that is smaller in size is available, it cannot be used in the solution and therefore has to be renewed. It would be desirable for Ericsson to have an identification of the solutions that are not bound to the product numbers and in this way be more flexible. (Högberg, 2016)


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6.4.3 Incomplete Documents There are usually no problems for Ericsson to release the POs to the first-‐tier suppliers, but occasionally information is missing. For example, it can be quotations for site material products that are absent or exemptions for products that are not ready. This is seen as a minor problem since it rarely occurs but once it happens, it contributes to a slower information flow and a longer total lead time. (Benrabah, 2016b) 6.4.4 Several Product Catalogues The material that is needed for a solution is ordered from several product catalogues, e.g. site material in one catalogue, filters in another catalogue etc., and at least five POs are sent to different suppliers. These POs are only related to each other through the CPO and can therefore only be associated by persons with access to the CPO. Today, there are no automated traceability from tender to contract to order, which has resulted in a lot of manually backtracking to get the orders right. It would be favorable to have only one big product catalogue that the material is ordered from. That would give one identity of the solution, which in turn would facilitate the traceability in the supply chain. (Högberg, 2016) 6.4.5 Capacity or Material Constraints at ESS Tallinn In the production at ESS Tallinn there are sometimes problems connected to capacity or material constraints. Material might not be available on time, which lead to that the production cannot start on time. On the other hand, it happens that the material is available earlier than expected, resulting in increased buffer levels and tied up capital. It may also be a question of not having enough capacity available, such as technical competence to produce what is ordered. A reason for the stated problems is perceived to be the long lead times, from when the forecast is made until the material is available in the production. (Tomba, 2016) 6.4.6 Unsynchronized Incoming Deliveries to EDC GBG The incoming deliveries of nodes and site material to EDC GBG are often unsynchronized, meaning that goods are waiting for an unnecessary long time. A reason for this is considered to be that the persons responsible for the nodes and site material have no visibility into each other’s flows, possible shortages etc. (Pettersson, 2016b; Slotte, 2016; Wilhelmsson, 2016) This is further compounded by the diverse flow of modules, nodes and site material from several different suppliers. A solution to the problem would be to manage an improved transparency between the incoming flows and supply chain members. Moreover, this would be a minor problem if it was possible to split the CPO into two CPOs, one for the nodes and one for site material. By doing so, the nodes could be sent to ATM without the site material and vice versa. (Pettersson, 2016b) The latter solution is suspected not to be accepted by the customer since it is preferable to get the whole order at the same time (Benrabah, 2016b).


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6.4.7 Volatile Working Load at EDC GBG The volatile customer demand affects the work load at EDC GBG, which can shift with 1 000 % in one week and costs a lot of money for Ericsson. In best case, EDC GBG knows what day the trucks will arrive, but sometimes only what week the delivery is expected. It can also happen that over a dozen trucks arrive at the same time. At this part of the supply chain, a solution could be to control the incoming flows to EDC GBG and even out the workload. It would help a lot to implement a system that controls the incoming deliveries so that only a limited number of trucks that can deliver at the same time, i.e. during predefined time slots. Then, each truck needs to book one of the time slots when the expected delivery of the goods will take place. This will prevent that too many trucks deliver at the same time and also facilitate the planning significantly. (Slotte, 2016) Also Kristoffersson (2016) mentions the difficulties with planning at EDC GBG. She points at that only 60 % of the incoming trucks to EDC GBG are preannounced, which means that they in those cases has information about the supplier, delivery date, number of packages, shipping ID and carrier. It would facilitate if the deliveries in a greater extent were preannounced, and she also points at the need for time slots that Slotte (2016) mentioned. Another perceived problem connected to EDC GBG is that most deliveries out from EDC GBG occur at the end of the working week. The rest of the week is normally much calmer, meaning that it is an imbalance of the workload. Even though the deliveries might leave the wharf at EDC GBG on Thursday or Friday, the goods are often just transferred to another wharf in Gothenburg. There, the goods can be waiting in several days for containers or trucks to be fully loaded before shipped away. (Slotte, 2016) 6.4.8 CODP Located Early in the Supply Chain A perceived issue in the supply chain is that the material becomes bound to the customer too early in the supply chain, i.e. the CODP is located too far from the customer. This results in several inventories of restricted material and makes the material flow inflexible. Instead, it is desired to bind the material to the customer as late as possible and thereby be able to move the unrestricted material in the supply chain and become more flexible towards shortages etc. An additional problem is that there is no clear division between lean and agile at the CODP, which contradicts Ericsson’s strategy of being lean before the point and agile after it. (Kjellander, 2016) To solve this problem, Ericsson is currently about to introduce supply hubs in each region (Kjellander, 2016). The supply hubs will replace todays EDCs and the basics of the concept is to move the CODP to the hub and closer to the customer in order to become more flexible, tie up less capital and at the same time offer a shorter lead time. The idea is to move the node production from the ESSs to the supply hub, and at the current production sites only produce modules. The production sites will mainly produce standard modules, which replenishes the pick-‐from-‐stock inventory located in the hub.


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Since the CODP will be at the hub, the inventories of modules will be unrestricted and are linked to a customer first when an order income. A prerequisite for this is to agree on a limited product portfolio for each region, since the current portfolio is too extensive to be covered by each supply hub. The regional portfolio refers to all the products that the customers in the specific region purchases, and therefore needs to be updated each quarter with forecasted buffer levels. If the customer wants to go outside the agreed portfolio, there will be a side flow that will have longer lead times. (Forsberg, 2016) The supply hub will also require system changes, since the IT infrastructure of today is configured for module and node production at ESS Tallinn and not at EDC GBG. The ordering operations need to change and some additional support systems for the supply hub are also required for it to work efficiently. Moreover, new competences and some behavioral changes are needed. Since there will be an unrestricted pick from stock inventory, it will require good forecasts made by the region. It is also important to ensure a close collaboration between Ericsson, the local company and the customer in the order and delivery planning processes. Finally, to fully take advantage of the supply hub concept with a reduced lead time, it requires that the goods can be shipped from the hub when it is ready. Meaning that e.g. no insurance or financial operations prevent the delivery to be managed on time. (Forsberg, 2016) 6.4.9 Complex L/C-‐Process The letter of credit (L/C) is also causing some problems for Ericsson and ATM. It is often a long process to first get the L/C opened by the bank and then to make it operative. Since all involved departments at EAB and the customer ATM must agree on the L/C draft, it sometimes requires a long negotiation. (Holmqvist, 2016) The sub process between ATM and the Algerian bank is for the most cases time-‐consuming and EAB has difficulties to accelerate it since it is an external process. (Holmqvist, 2016) One reason is that ATM delays this process on purpose because they do not need the material at the moment and instead uses EAB for storing of the goods. Once the L/C is operative, given that the material is ready at EDC GBG, ATM knows that the goods will arrive within 15 days and thereafter have to store the goods in their warehouse. This is a problem connected to the long customer order lead time and the fact that the customer does not trust that Ericsson can deliver within agreed lead times. As a result, ATM places an order with a margin of lead time and the material may therefore arrive at EDC GBG before the planned installation can be made at the project site. (Ur Rehman, 2016b) Ericsson will only get paid if the goods that are delivered to the customer fully correspond to what is specified in the L/C. Therefore, it is very important to be meticulous during the creation and the opening of the L/C, to make sure that everything is done correctly from the start. Sometimes when the L/C is sent from the ATM bank to the EAB bank, the latter bank notices that some changes have been made in the documents compared to the ones they got at first. It may be very small changes, e.g. a number that someone by mistake has changed. In those cases, the L/C is sent back to ATM that in turn has to get a new approval by their bank, which may take a lot of unnecessary time. Hence, the L/C process includes a lot of demanding paper work. (Holmqvist,


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2016) When the L/C process gets prolonged, goods are often waiting at EDC GBG for the L/C to be operative. In extreme cases, the goods have been waiting for over 100 days. This is because shipments cannot be made until Ericsson is sure to get paid, which is when all the documents at both banks fully correspond to each other. If it takes this much time, then it does not matter how short the lead time is for the material inbound part considering that the material still must wait for the L/C to be operative. (Ur Rehman, 2016b; Özdogru, 2016) A suggested solution to shorten the L/C process is to work with proactivity towards the customer and the banks. As mentioned before, EAL is the one that have the direct contact with the customer. EAB is therefore in need of the local company to establish a close collaboration with ATM, to avoid time waste during the opening process between ATM and the bank. It would also be good if the ATM bank could send a copy of the L/C to EAB, before it is sent to the EAB bank. By doing so, it would be possible for EAB to make changes faster and not involve their bank until later. (Holmqvist, 2016) However, even when the L/C is operative there are sometimes goods waiting at EDC GBG because some products are missing to fulfill the entire CPO. The goods are not allowed to pass the customs if the delivery does not fully correspond to the CPO. It happens that 99 % of an order is ready for shipment at EDC GBG but is put on stock because it has to wait for the remaining 1 %. (Ianev, 2016b) 6.4.10 Diverse Flows A perceived problem in the current supply chain is the diverse flow that is caused by the wide product portfolio of BURA, which becomes more extensive as the customer base grows. The RBSs have different frequencies so that the signals will not collide, meaning that the customers assign a certain frequency and the more users in the world, the more variants there will be of RBSs. (Kjellander, 2016) The product portfolios of electronic components, electro mechanic components and site material are also extensive, contributing to the diverse flows and the excessive lead times. ATM has the possibility to order from a wide product portfolio with some low-‐frequent products that are not buffered and contributes to the excessive lead time. The site material that is ordered rarely can have a lead time of eight to ten weeks, from EAB placing an order until the goods are received at EDC GBG. It is common with duplicates in the site material portfolio, meaning that there are site materials with exactly the same functions, but in different brands or in different colors, that are available and orderable for the customers. (Pettersson, 2016b) A solution for the wide product portfolios would be to reduce the number of product variants as much as possible. This could be done by using standardized product portfolios that Ericsson and the customers agree on (Kjellander, 2016; Pettersson, 2016b). ATM is considered as a demanding customer, partly because of the long bill of material with different products, which could be prevented with a narrower and predetermined product portfolio (Benrabah, 2016b).


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6.4.11 Volatile Customer Demand A major problem for Ericsson is the volatile customer demand (Neuman, 2016b; Ur Rehman, 2016b; Slotte, 2016). Due to filter and nodes being produced on make-‐to-‐order, it is hard to dimension the capacity accurately (Neuman, 2016b). The forecast is not good enough in the current situation and does not correspond to the actual demand (Ianev, 2016b; Neuman, 2016b). This is something common for ATM (Benrabah, 2016b) and a key to handle this problem is to work with market intelligence. This to get as much information as possible in an early stage of the project in order to get material to where it is needed. Also working with standard product portfolios can help solving this problem. (Neuman, 2016b) 6.4.12 Changing Delivery Dates Another problem is connected to the requested delivery dates. Within the supply chain there are several different planning points that each plan their capacity based on when they will get deliveries. For example, a delivery date is requested for the customer and to be able to deliver that date, EDC GBG needs to have all the material a certain number of days before. Since they get deliveries from different locations, there are separate planning works going on for e.g. ESS Tallinn and each site material supplier. In turn, ESS Tallinn gets their material from several suppliers, leading to different planning points there as well. A problem that affects the synchronization of different deliveries is that the first requested delivery date is changed several times during a project, which leads to a continuously change of the planning throughout the supply chain. The dates may change because someone cannot deliver the requested date or because someone can deliver earlier. This complicates the synchronization of different flows, e.g. material flow and capacity flow in terms of ASPs, to both production units, EDC GBG and the project site. For this to be synchronized, the dates have to correspond to each other. (Aglert, 2016) Also Forsberg (2016) states the problem with changing delivery dates and points at the volatile lead times as a reason for bad synchronization between the material and the capacity flows. According to him, the ASPs can in general only trust the predetermined delivery dates in 10 % of the cases. 6.4.13 Rebuild in Regions Ericsson has noticed that there are rebuilds performed in the regions, e.g. at the customer warehouse. This problem causes duplication of efforts and longer lead times. The customers are in some cases unable to order what is needed at the project sites. The problem arises from the packaging regulations at Ericsson, which states that products from different business units cannot be configured or assembled before shipment from the EDCs. It should be possible to configure the wanted functionality and capacity for a whole site and also to decide on what should be kept together in a delivery point of view. (Högberg, 2016) When studying a CPO from ATM, it can be seen that the order contains products of both RBSs and Mini-‐links that are supposed to be assembled together, but belongs to different business units and therefore cannot be configured. Most likely, that means that the actual configuration must instead be performed in the customer warehouse or at the project site. In other words, it takes duplication of efforts as the RBSs needs to be assimilated once again to add the Mini-‐links. (Edwertz, 2016)


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6.4.14 Waiting for Insurance of Goods Before Shipment A recurring problem at EDC GBG is that goods that are ready for shipment, must wait for ATM to insure the goods for transportation. Ericsson and ATM are using the CPT incoterm, which stands for carriage paid to. It means that Ericsson pays for the transport to an agreed point, in this case it is the port of destination, and ATM pays for the insurance of the goods. (Benrabah, 2016b) The reason for ATM being responsible for the insurance of the goods is because they want to support their local Algerian insurance companies. Ericsson has a global insurance that cover transportation of goods and might as well account for the insurance in this case. (Ur Rehman, 2016b) 6.4.15 Summary of experienced problems and suggested solutions The above problems that were perceived by different members in the studied supply chain and their suggestions for solutions are summarized in Table 12. Notice that all problems do not have a suggested solution and that some problems have more than one. Moreover, some of the problems might be caused by each other and will therefore be examined further in the next chapter to identify the root causes.

Table 12. The identified problems and suggested solutions.

Experienced Problem Suggested Solution Stakeholders involved in several projects Many stakeholders involved during local processing

Big workload during local processing Several incompatible systems used Integrate systems and processes Activities concerning both engineering and order flow during the local processing

Activities can be performed by EAL before the CPO is received

Many time consuming handovers Integrate systems and processes

Orders on high level of detail Identification of the solution without detailed product numbers

Complex solution Identification of the solution without detailed product numbers

Incomplete documents Several product catalogues Use one big product catalogue Capacity constraints at ESS Tallinn Material constraints at ESS Tallinn Long lead times between forecast start until material ready in the production

Incoming flows unsynchronized Bad transparency Integrate systems and processes Volatile customer demand Difficult to plan the work load at EDC GBG


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Volatile workload at EDC GBG Time slots Preannounced incoming deliveries

Uncontrolled incoming deliveries to EDC GBG Time slots Preannounced incoming deliveries

CODP located early in the supply chain Supply hub Several restricted inventories Unrestricted stock Inflexible material flow No clear division between lean and agile Supply hub L/C not operative Many parties need to agree on the L/C Long L/C negotiation ATM go to the Algerian bank ATM places order too early ATM does not trust the EAB lead times Closer collaboration between EAL and ATM Mistakes made during the L/C process Work proactive Documents do not correspond Work proactive Demanding paper work during the L/C process Work proactive

Diversified flows Wide product portfolio Standardized product portfolio Low frequent material Standardized product portfolio Duplicate products Standardized product portfolio ATM has a long BoM Standardized product portfolio

Forecast deviations Market intelligence Standardized product portfolio

Changing delivery dates Volatile lead times Rebuild in region Insurance not ready when good are ready for shipment

The division of responsibilities of the insurance

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7 IDENTIFICATION OF POTENTIALS FOR LEAD TIME REDUCTION

The chapter includes an identification of potentials for lead time reduction based on the current state map. At first, a categorization is made for different parts of the supply chain and the experienced problems. The categorization is fundamental for the following prioritization that determines which parts, problems and suggested solutions that can be considered as potentials for lead time reduction and thus get the further attention.


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7.1 Categorization In this section, an evaluation is made regarding whether the supply chain parts presented in the current state mapping have reasonable lead times or not. The lead times for the different parts are also compared to the total lead time in order to determine if they represent a significant portion. As a result, the supply chain parts that get the further attention is determined. Moreover, the perceived problems identified during the current state mapping are analyzed in order to connect them to the supply chain parts that get the further attention. The relations of the problems are also analyzed to find the root causes, i.e. the problems that cause the excessive lead times and need to be solved. 7.1.1 Reasonableness and Portion of Total Lead Time The following evaluation regarding reasonableness and significance is based on the lead times in the worst case scenario that was presented earlier in Section 6.2. The worst case lead times are analyzed since it will include most of the problems presented in Section 6.4, which would not be the case for the normal or best case scenario. In best case and normal case scenario, all the identified problems are not experienced and thus not included in the lead times. Therefore, the worst case lead times are used to be able to solve all problems that cause the long lead times in the supply chain. The lead time for the local processing, which is the time it takes the Sales Team to hand over the CPO to the Supply Team at EAL, takes 49 days in a worst case scenario. It accounts for 34 % of the total lead time and therefore represents a significant portion of the time that ATM experiences. Considering the activities being performed during the local processing and that the part consists of a large amount of non-‐value added time, it is categorized as not reasonable (Magnusson, 2016b). The handover of the SOs from the Supply Team at EAL to the Supply Team at Ericsson takes three days and thus represents 2 % of the total lead time. It is a minor portion of the time ATM experiences and is also reasonable in terms of the activities and processes being performed (Magnusson, 2016a). The lead time for the ordering, which refers to the time it takes Ericsson to release the POs to the first-‐tier suppliers, takes two days and thus accounts for 1 % of the total lead time. Hence, the process does not constitute a significant part of the total lead time and is considered as reasonable since it is assumed to consist of a relatively minor portion of non-‐value adding time (Magnusson, 2016b). The production at ESS Tallinn and the two EMSs takes in worst case 24 days, which represents 17 % of the total lead time ATM experiences. It is considered as a significant portion of the total lead time and is also unreasonable, since it consists of a large amount of non-‐value adding time considering the activities and processes carried out (Magnusson, 2016b). Once the final assembly is performed, the goods are transported to EDC GBG, where it is unloaded and registered. This part is referred to as EDC Inbound and takes three days, which accounts for 2 % of the total lead time experienced by ATM. It is not considered as a significant portion of the total lead time and is also reasonable in terms of the activities being performed (Magnusson, 2016b). Observe that there are incoming flows that have longer lead times than three days, but since the lead time at EDC GBG starts to count when the first material has arrived, these lead times will assign to the measurement for EDC GBG.


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For EDC GBG to put the received goods into storage, consolidate a Delivery Order and then make GI takes 50 days in a worst case scenario. This represents 34 % of the total lead time ATM experiences, which is considered as a significant portion and also not reasonable considering the activities being performed (Magnusson, 2016b). The lead time for EDC Outbound refers to the time from GI to the arrival of the goods at the customs in Algeria, which takes 15 days. It accounts for 10 % of the total lead time ATM experiences, which is not significant and is also considered as reasonable due to the geographical distance of the transport (Magnusson, 2016b). In Table 13 below, the categorization of the lead times for the different supply chain parts is presented. Whether the lead times being reasonable or unreasonable and significant or minor is summarized. Moreover, if the supply chain parts get any further attention in the report is also presented.

Table 13. Categorization of the supply chain parts.

Number Activities & Processes

Lead Time (days)

% Of Total Reasonable Significant Further

Effort T1 Local Processing 49 34 No Yes Yes T2 Handover 3 2 Yes No No T3 Ordering 2 1 Yes No No T7 Production 24 17 No Yes Yes T8 EDC Inbound 3 2 Yes No No T9 EDC GBG 50 34 No Yes Yes T10 EDC Outbound 15 10 Yes No No

7.1.2 Causes and Effects The perceived problems identified during the current state mapping are in this section linked to the parts of the supply chain that get the further effort, i.e. the parts with not reasonable lead times and that constitute significant parts of the total lead time. These parts are the local processing, the production and the EDC GBG. The problems are not only linked to the three supply chain parts, but also to each other in order to identify what problems that are the root causes to the excessive lead times. The root causes are bolded in the following text for the convenience of the reader. Local Processing The first phase in the supply chain with an excessive lead time is the local processing in the information flow. The significant lead time is assumed to be caused by several reasons. One of the reasons is perceived to be the complex solutions that are engineered for ATM, which in turn are partly because of long Bill of Material. The long Bill of Material is made possible because of the wide product portfolios of both RBSs and site materials, which ATM has the ability to order from. The complex solutions are also perceived to be caused by the detailed CPOs, i.e. the orders on a high level of detail. The CPOs contain information of the solutions in terms of product


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numbers, making the administrative work performed detailed and are therefore time consuming. Another root cause for the solution being complex is that several product catalogues are used. Another main reason for the long duration of the local processing phase is experienced to be the large number of time consuming handovers. One reason for the time consuming handovers is the many stakeholders involved. One cause for this in the current situation is that the part where the solution is engineered for ATM, is carried out in this phase. In other words, activities concerning both the engineering and the order flow are performed. The handovers are often performed manually, which takes time, since the Sales Team and Supply Team at EAL work in different systems, both within and between the teams, that are not incompatible with each other. This contributes to them communicating via e-‐mail for most of the time, making the information transfer inefficient, and therefore is a root cause the several incompatible systems used. Another main reason for the long lead times in the local processing phase is perceived to be the big workload. Stakeholders are often involved in several projects and is considered to be the root cause of the heavy workload and the long lead time. Some projects will have to be deprioritized and thereby delay the local processing for the concerned projects. See Figure 32 below for a Fishbone diagram for the local processing phase. The diagram visualizes how the problems are connected to each other. The bolded problems are seen as root causes.

Figure 32. The reasons for long lead times in the local processing phase.

Long%LTLocal%Processing

Complex%solutions

Long%BoM

Many%time%consuming%handovers

Many%stakeholdersinvolved

Activities(concerningboth(engineering(and(order(flow

Wide(productportfolio

Order(on(high(level(of(detail(

Big%workload

Stakeholders(involvedin(several(projects

Several(incompatiblesystems used

Several(products(catalogues


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To summarize, the root causes for the long lead times in the local processing phase are collected in Table 14 below.

Table 14. Root causes for the long lead time in the local processing phase.

Supply Chain Part Root Causes Local Processing

Wide product portfolio Orders on high level of detail Several product catalogues Activities concerning both the engineering and the order flow are performed Several incompatible systems are used Stakeholders are often involved in several projects

Production The second part of the supply chain that contributes to an excessive lead time is the production at ESS Tallinn, EMS Jabil T-‐town and EMS Flex Tczew. A common main reason for the long production lead time is material constraints, meaning that material is not available at the right time. This is in turn caused by several reasons, there one of them is incorrect forecasts. The root causes to the forecast deviations are also several. The first is considered to be the volatile demand from the customers, the second is the long lead times from forecast until the material is available at the production and the third is the wide product portfolio of Ericsson. Material constraints may also refer to situations when production is waiting for some low frequent components that are rarely ordered and thus not buffered. The root cause for this is the wide product portfolio. A further reason for the material constraints is the diversified flows of components, with the root causes being the wide product portfolio and also that there is no clear division between lean and agile in the supply chain. Another main reason for long lead times in the production is capacity constraints, in form of not having the right capacity available when it is needed. Just as for the problem with material constraints, this is mainly related to a lack in the forecast. The root causes for this is therefore also considered to be the volatile demand from customers and the long lead times between forecast until the material is available at the production. Furthermore, an additional main reason for long lead times in the production is the inflexible material flow that is caused by the several restricted inventories in the supply chain. The root cause for this is assumed to be that the CODP is located early in the supply chain.


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See Figure 33 below for a Fishbone diagram of the production phase that visualizes how the problems are connected to each other. The bolded problems are seen as root causes.

Figure 33. The reasons for long lead times in the production.

To summarize, the root causes for the long lead times in the production phase are presented in Table 15.

Table 15. Root causes for the long lead time in the production.

Supply Chain Part Root Causes Production

Volatile customer demand The long lead times from forecast until the material is available at the production Wide product portfolio There is no clear division between lean and agile in the supply chain CODP located early in the supply chain

Long%LTProduction

Material%constraints

Volatile(demand

Capacity%constraints

Forecast%deviations Forecast%deviations

Volatile(demand

Long(lead(times Long(lead(times

Low%frequent%components

Wide(product(portfolio

Diversified%flows


No(clear(division(between(lean/agile


Inflexible%material%flow

Several%restrictedinventories

CODP(locatedearly(in(the

SC


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EDC GBG The third supply chain part with an excessive lead time is EDC GBG, that is caused by several main reasons. One problem perceived by several respondents are that incoming flows to EDC GBG most often are unsynchronized. A root cause for this is the bad transparency between site material suppliers, ESS Tallinn and EDC GBG. Another root cause is the uncontrolled incoming deliveries to EDC GBG. A further root cause is the changing delivery dates in the supply chain, which contributes to volatile lead times and unsynchronized flows. This since the final delivery date may be agreed differently for e.g. ESS Tallinn and different site material suppliers, which leads to them perform the delivery at different times. Another reason for the unsynchronized flows is the diversified flows of site material. The root causes for this are the wide product portfolio of mainly site material, and also that there is no clear division between lean and agile in the supply chain. A further reason for the unsynchronized flows is that some site materials are low frequent and ordered rarely. The root cause for this is also the wide product portfolio. A second main reason for long lead times at the EDC GBG is that it is difficult to plan the working capacity due to the volatile workload. The identified root causes for this is the uncontrolled incoming deliveries to EDC GBG and the volatile demand from customers that contributes to the difficulties with planning the work. A third main reason for the long lead times at the EDC GBG is the waiting for an operative L/C. A reason for this is that there is sometimes a long negotiation while creating the L/C draft, because many parties need to agree before ATM can apply for an opening of the L/C. Another reason is all the documents that have to 100 % correspond to each other. Sometimes a small mistake has been done by someone because of the demanding paper work, which contributes to an extended process. A further reason is that it takes a long time for ATM to go to their bank to get an approval of opening the L/C. They postpone this activity because they do not need the material right away since they have placed the order too early. The root cause for this problem is that ATM does not trust the lead time promised by Ericsson. A fourth main reason for long lead times at the EDC GBG is the waiting for ATM to insure the goods. The root cause for this is considered to be an inappropriate division of responsibilities between Ericsson and ATM. See Figure 34 below for a Fishbone diagram for the EDC GBG phase. The diagram visualizes how the problems are connected to each other. The bolded problems are seen as root causes.


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Figure 34. The reasons for long lead times at EDC GBG.

To summarize, the root causes for the long lead times in the EDC GBG phase are presented in Table 16.

Table 16. Root causes for the long lead time at EDC GBG.

Supply Chain Part Root Causes EDC GBG

Bad transparency Wide product portfolio Changing delivery dates Volatile customer demand Uncontrolled incoming deliveries There is no clear division between lean and agile in the supply chain Many parties need to agree ATM does not trust the lead time promised by Ericsson Demanding paper work Division of responsibilities

Long%LTEDC%GBG

Incoming%flowsunsynchronized

Bad$transparency Diversified%flows

Wide$product$portfolio

Difficult%to%plan%the%work%load

Volatile%work%load

Uncontrolled$incomingdeliveries

L/C%not%operative

Negotiation

Many$parties$need$to$agree

ATM%go%to%bank

Orders%too%early

ATM$does$nottrust$EAB$LT$

Documents%do%not%correspond

Mistakes%made

Volatile$demand

Low%frequentSite%material

Wide$product$portfolio

Changing$delivery$dates

No$clear$division$between$lean/agile

Uncontrolled$incomingdeliveries

Demandingpaper$work

Insurance%not%ready

Division$of$responsibilities

Volatile%lead%times


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7.2 Prioritization In this section are the supply chain parts, the perceived problems and the suggested solutions that will get the further attention presented. As presented in Table 13, the supply chain parts that will get the further effort are the local processing, the production and EDC GBG. This is since the parts have not reasonable lead times and that all of them, in a worst case scenario, constitute significant portions of the total lead time. As mentioned before, the lead time for the production is in normal cases reasonable and are then not constituting a significant portion of the total lead time. However, when there are some material or capacity constraints, the production may show up as a great bottleneck in the supply chain. The local processing and EDC GBG are in the average case being not reasonable and constitute significant portions of the total lead time. By shortening the lead times for these three supply chain parts, it is assumed to have a great effect on the total lead time and are therefore prioritized in this study. Moreover, the root causes for the long lead times in the prioritized supply chain parts are also prioritized for further studies. These were presented in the previous section and are summarized in Table 17 below. Efforts will be taken to find solutions to the root causes, both inspired from the literature and from the suggested solutions mentioned by the respondents during the current state mapping. Therefore, the solutions that have been suggested for the root causes are also prioritized for further studies in the upcoming section. These solutions are included in Table 17. To summarize the prioritization, three supply chain parts, 17 root causes and ten suggested solutions will get the further attention of the study.


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Table 17. The identified potentials for lead time reduction.

Supply Chain Part Root Causes Suggested Solution Local Processing

Wide product portfolio Standardized product portfolio Orders on high level of detail Identification of the solution

without detailed product numbers Several product catalogues Use one product catalogue Activities concerning both the engineering and the order flow are performed


Several incompatible systems are used

Integrate systems and processes

Stakeholders are often involved in several projects

Production

Volatile customer demand Long lead times from forecast until the material is available at the production

Wide product portfolio Standardized product portfolio There is no clear division between lean and agile in the supply chain

Supply hub

CODP located early in the Supply Chain

Supply hub

EDC Bad transparency Integrate systems and processes Wide product portfolio Standardized product portfolio Changing delivery dates Volatile customer demand Uncontrolled incoming deliveries Time slots

Preannounced incoming deliveries

There is no clear division between lean and agile in the supply chain

Supply hub

Many parties need to agree ATM does not trust the lead time promised by Ericsson

Closer collaboration between EAL and ATM

Demanding paper work Work proactive Division of responsibilities

GENERATION OF ALTERNATIVE SOLUTIONS

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8 GENERATION OF ALTERNATIVE SOLUTIONS

The chapter contains a second literature review that is based on the potentials for lead time reduction. The literature review results in a number of general solutions that are modified and applied to the supply chain described in the current state mapping.


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8.1 General Solutions In this section, a number of general solutions are presented and discussed. The general solutions are gathered from the literature and are inspired from the prioritized root causes and suggested solutions that were presented in Section 7.2 and Table 17. There are in total eight different general solutions presented during this chapter. 8.1.1 CODP Strategy The first general solution is referred to as the CODP strategy and the three root causes together with the suggested solution that have substantiated it are presented in Table 18 below. Afterwards, the CODP strategy is described in more detail.

Table 18. The three root causes and the suggested solution that have substantiated the first general solution.

General Solution Root Cause Suggested Solution CODP Strategy No clear division between

lean and agile in the supply chain

Supply hub

CODP located early in the Supply Chain

Supply hub

Long lead times from forecast until the material is available at the production

Despite the continuing trend to globalize products, Christopher (2011) means that there still exist significant local differences in the customer demands that should be recognized. Even in compact markets like western Europe there are substantial differences in the customer requirements, where some global products would not be longstanding because of the high degree of standardization. A strategy that is increasingly being adopted in order to achieve the benefits of standardization whilst meeting the local demand is the concept of postponement. (Christopher, 2011) In this context, the idea of postponement is to design products using standardized components and modules. By doing so, the customization can be performed close to the customer and/or when the customer demand is known. The customization is usually performed in the local market, in a distribution center or by a 3PL-‐service provider. (Christopher, 2011) This type of postponement can be likened with form postponement, mentioned by Van Hoek (1998) in Section 3.8, as where the final manufacturing step is delayed until the customer orders are received. The point of which the customization is postponed can be compared with the CODP described in Section 3.8.3, i.e. the point where products are linked to specific customer orders and where the strategic stock that supplies the customers is located. Activities before the CODP are forecast driven and activities after the CODP are order driven. (Mason-‐Jones et al., 2000) Since customers increasingly demand short lead times in combination with customized products, it implies


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performing fewer and faster activities at the same time as performing some activities according to the individual requirements (Wang, Lin, & Liu, 2010). Wang et al. (2010) argues that in order to reduce lead time, companies require to put efforts on optimizing the product flow as well as working with positioning and minimization of buffers. As mentioned in Section 3.8.3 by Towill & Christopher (2002), a leagile strategy is made possible because of the CODP. That means that a lean strategy is applied for the upstream flow, from the CODP, to maximize the efficiency through standardization and economies of scale. In turn, an agile strategy is applied for the downstream flow in order to be flexible and responsive to the actual customer demand. (Towill & Christopher, 2002) This can be likened with applying a Make-‐to-‐Stock (MTS) approach upstream and a Make-‐to-‐Order (MTO) approach downstream from the CODP, explained by Hallgren & Olhager (2006). The authors refer to MTS as replenishment of semi-‐finished goods or modules at the CODP, and MTO as the final configuration to a customer order. Hallgren & Olhager (2006) highlight that MTS focuses on productivity, reduce cost and maintaining stock availability at the CODP, while MTO focuses on flexibility, reliability and short lead times. To be able to provide a great responsiveness with short lead times, it requires that the right material is available at the CODP (Hallgren & Olhager, 2006). The postponement of the CODP allows for inventory to be held at a generic level, resulting in fewer stock keeping variants and a smaller total inventory level. Because the inventory is generic and therefore unrestricted, the ability to be flexible will be greater. (Christopher, 2011; Lee, et al., 1993) The forecasts will also be more accurate since it is easier to forecast at a generic level than for finished products, which is especially relevant for global markets where local forecast deviations will be greater than for the worldwide volume. To fully exploit the advantages of postponement it often requires that products and processes are designed and engineered in a way that as few standard components and modules as possible can be combined to solutions that satisfies the customers’ requirements for variety. (Christopher, 2011) Christopher (2000) stresses the importance of distinguish between the material and information decoupling point. The material decoupling point is described by Christopher (2000) as the point where the strategic inventory is held and can be compared to the CODP that Mason-‐Jones et al. (2000) defines. The material decoupling point should be located as far downstream the supply chain as possible, i.e. as close to the final customer as possible. The information decoupling point is the furthest point to which information on actual demand penetrates and should be located as far upstream the supply chain as possible, i.e. as close to the supplier as possible. (Christopher, 2000) In practice, the material and information decoupling points usually coincide (Olhager, 2012).


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8.1.2 Reduce the Complexity of the Product Portfolio The second general solution is to reduce the complexity of the product portfolio and the three root causes and the suggested solution that have substantiated it are listed in Table 19 below. Thereafter is the general solution described in more detail.

Table 19. The three root causes and the suggested solution that have substantiated the second general solution.

General Solution Root Causes Suggested Solutions Reduce the complexity of the product portfolio

The wide product portfolio Standard product portfolio Volatile customer demand Long lead times from forecast until the material is available at the production

The extent of the offered product portfolio has a significant impact on the complexity of a supply chain. In most cases, the range of products and services that companies offer the market has a tendency to grow rather than decrease. The excessive product portfolios seem to be caused by the rate at which new products and variants are introduced that outpace the rate at which existing products and variants are phased out. A general conclusion is that the more variants that are added to the product portfolio, the lower the demand will be per variant. As a result, it affects the forecasting, which becomes more difficult at the individual variant level and the increased forecast deviations will typically result in large inventory levels. (Christopher, 2011) Also, as the product variety increases, the more complex will the product configuration activities be. This in turn, results in an intense information exchange among company departments that is time and resource consuming, affecting the order acquisition and fulfillment process negatively. (Forza & Salvador, 2006) The complexity of individual products can also affect the supply chain in a great extent. As early as at the drawing board, when deciding between choices of material and components, the performance of the supply chain will be determined by the design of the product. For example, the ability to respond to changes in demand can be impeded if components are specified that has long replenishment lead times. The complexity of a product is driven by the number of components and subassemblies as well as the commonality across the bills of materials for different products. Bills of materials with poor commonality are in general causing less flexibility to vary volumes and product mixes. (Christopher, 2011) The subsequent complexity can be avoided to some extent by involving logistics and supply chain planners early in the design process. For example, Motorola is a multinational tele-‐communications company that often had poor commonality across the bills of materials and for a single mobile phone, there could be over 100 variants. Because of the large number of variants there were forecasts deviations of 97 % in all of their cases. (Christopher, 2011) To resolve this problem, Motorola started to screen their products for complexity. The company generated a


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complexity index based on complexity-‐associated factors such as the number of components, degree of commonality, lead time for supply etc. The products that were considered as complex according to the index will have more of an impact on the entire supply chain and is not proceed with. A result of the complexity index and the attempt to use as many industry standard components as possible, were that some products decreased the number of possible components by three times. (Whyte, 2003) Another example is the food process company Heinz, which analyzed their product portfolio and discovered several products that hardly were consumed and did not attract any customers. Heinz decided to reduce their stock-‐keeping units from 30 000 to 20 000, which resulted in cut costs for manufacturing, packaging, raw materials and procurement. Similar, the industrial equipment manufacturer Navistar International went from offering thousands of components to only offer 16 pre-‐engineered modules. The ordering process shortened from days to hours and the customers placed 120 % more orders than initially forecasted. The reason that profitability often stagnate as companies increases the pace of product innovation is because of the complexity it brings. It is required to find the appropriate balance between innovation and complexity in order to create more efficient operations and profitable relationships with customers. (Gottfredson & Aspinall, 2005) 8.1.3 Reduce the Non-‐Value Adding Time and the Number of Handovers The third general solution is to reduce the non-‐value adding time and the number of handovers. The two root causes and the suggested solution that have substantiated the general solution are listed in Table 20 below. Furthermore, the solution will be described during the section.

Table 20. The two root causes and the suggested solution that have substantiated the third general solution.

General Solution Root Causes Suggested Solutions Reduce the non-‐value added time and the number of handovers

Activities concerning both the engineering and the order flow are performed


Stakeholders are often involved in several projects

An often occurring reason for organizations being slow to respond to market and business changes is because of a great amount of handovers. When things get passed from function to function, it results in a lengthened process that impairs the responsiveness. Moreover, the longer a process and the more steps and handovers it contains, the more complexity it will bring. In turn, the complexity increases the likelihood of getting an outcome that mismatches the planned outcome. Making things more simple is the obvious remedy for complexity problems, and solutions may be found by questioning why things are done the way they are. (Christopher, 2011)


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In similar to Christopher (2011), Oskarsson et al. (2013) describe in Section 3.9.2 that non-‐value adding time should be targeted when trying to reduce lead time. Non-‐value adding time refers to the time that does not contribute with any value for the customer, e.g. the time when an order is waiting to be handled. The authors present a number of actions for lead time reduction and one of them is to prepare as much as possible in order to not slow down the flows in the supply chain. Liker and Meier (2006) argue in a similar way, that it may require some non-‐value adding preparation in order to avoid distractions in the value-‐added work. It could mean to bring the necessary tools to the place where the value-‐added work is later to be performed. (Liker & Meier, 2006) 8.1.4 Improve Synchronization The fourth general solution is to improve the synchronization and the root cause and the two suggested solutions that have substantiated it are listed in Table 21 below. How the synchronization can be improved in general is described in the following text.

Table 21. The root cause and the two suggested solutions that have substantiated the fourth general solution.

General Solution Root Causes Suggested Solutions Improve synchronization

Uncontrolled incoming deliveries

Time slots Preannounced incoming deliveries

As mentioned in Section 3.7.4 by Gattorna (1998), cross-‐docking is the practice when goods are incoming from several destinations and then reloaded, at the point of cross-‐docking, to new outgoing trucks without being stored. Cross-‐docking can eliminate activities from the order picking and storage operations at the main warehouse, resulting in reduced material handling and storage costs and at the same time realize transport efficiencies (Buijs, Vis, & Carlo, 2014). Buijs et al. (2014) highlights the importance of synchronization in cross-‐docking networks, stating that the lack of storage buffer inside a cross-‐dock requires that related operations need to be carefully synchronized. This is further supported by Oskarsson et al. (2013), that argue for improved synchronization when trying to shorten the lead time in supply chains. By managing a high degree of synchronization, the authors mean that the non-‐value adding time between two activities can be reduced or fully eliminated and thereby improve the efficiency. A distribution center is often designed with several strip doors and stack doors. Strip doors refer to the doors where any incoming fully loaded truck parks and gets unloaded, and stack doors to where empty trucks collect goods for any specific destination. An occurring problem with cross-‐docking is that the number of trucks waiting to be served exceeds the number of available dock doors. By scheduling the cross-‐docking activities with timing and sequencing in mind, the waiting


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times of shipments and trucks can be minimized. Sometimes when cross-‐docking, some incoming trucks are not assigned to a specific outgoing truck. By scheduling the assignment of goods to outgoing trucks, the workload will be facilitated. Also the workforce managing the cross-‐docking activities must be scheduled in order to align inbound and outbound flows. (Buijs et al., 2014) Luo & Noble (2012) suggest to assign strip doors to the origins and stack doors to the destinations. The shipments are assigned to the outgoing trucks and the departure times are determined. A prerequisite is though that the arrival times for the incoming trucks are known and that the incoming trucks are served right when they arrive. Chmielewski, Naujoks, Janas & Clausen (2009) also propose to assign the stock doors to destinations and also scheduling the incoming trucks in order to minimize the waiting time in the inbound flow. Stephan & Boysen (2011) argue that pre-‐determination of strip and stack doors often lead to a lack in operational performance and may only be required when information regarding inbound deliveries is poor. Unlike the authors above, Miao, Lim & Ma (2009) assume that the dock doors at a distribution center may be used as both strip and stack doors. It is the availability and the predetermined arrival and departure times for all trucks that determines it. Fredholm (2006) states in Section 3.7.4 that the prerequisites for cross-‐docking are an IT-‐system that connects the involved parties and a transparency of what deliveries consists of and when they will arrive. It also requires that each package has a bar-‐code connecting it to the right customer order (Christopher, 2011; Fredholm, 2006). 8.1.5 Product Configurator The fifth general solution is a product configurator, and the two root causes and the two suggested solutions that have substantiated it are listed in Table 22 below. Thereafter is the concept of a product configurator described.

Table 22. The two root causes and the two suggested solutions that have substantiated the fifth general solution.

General Solution Root Causes Suggested Solutions Product configurator

The orders on high level of detail

Identification of the solution without detailed product numbers

Several product catalogues Use one product catalogue Forza and Salvador (2006) describes efficient customization in terms of product configurations. The authors describe the product configuration process and highlights the importance of translating the customer demand efficiently and correctly. It is not an easy task, given that the language used by the customer to describe the product most often differs from the language used by the company. However, sometimes it happens that the customer speaks the same language as the company and can place orders on a high level of detail. In turn, this results in limited configuration options for the company and reduces the flexibility. The authors suggest that the


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first fundamental step towards product configuration is to interpret the customer need in terms of functionality, technical parameters and expectancies and translate the measures into a commercial product description. The commercial description describes the product that the customer is willing to buy with characteristics as materials, prices, delivery terms, packaging etc. These characteristics are then used by the company to determine a specific product variant from the company’s product catalogue. (Forza & Salvador, 2006) The idea is that the customer bases the acquisition order on the commercial description and after completing the order entry, the commercial descriptions must be translated by the company into a technical description. Most often, the commercial descriptions of the products are not enough for producing the variant and therefore a technical description for manufacturing is necessary. In cases where there is a great product variety, the translation becomes difficult since the parameters in the technical description depend on the parameters in the commercial description. This difficulty increases the time and resources consumed during the order acquisition and fulfilment process. When the complexity of the tasks increases, traditional approaches for product configurations show serious deficiencies. A suggested solution is to rationalize the product families in order to offer a product that allows for configuration and also implement a product configurator. (Forza & Salvador, 2006) Haug, Hvam and Mortensen (2011) mention product configurators as the most successful applications of artificial intelligence principles, supporting products that require engineering work for each customer order. The product configurators can come with a large number of software packages, which in turn consists of several general and special functions. It is therefore important for companies to select a software that supports their customization strategy. (Forza & Salvador, 2006) Generally, the configurators cause fewer handovers and automate much of the work in terms of the human expertise in the sales and design process, resulting in significant lead time reductions and saved man-‐hours. There are several case studies in where the lead time have been reduced by implementing a product configurator. For example, Hong, Xue, Tu and Xiong (2008) that observed a customer lead time be reduced from eight to three weeks and also Hvam, Malis, Hansen and Riis (2004) together with Hvam, Pape and Nielsen (2006) that experienced an overall delivery time for a complete system be reduced from 400 to 16 days. However, to create a product configurator is often a time-‐consuming project that can be risky. Even though there can be major lead time reductions, it might not be profitable if the costs of achieving this are too high. (Haug et al., 2011) The costs of a configurator increases with product complexity, the number of product families, the degree of customization per product and the number of product parts to be customized (Forza & Salvador, 2006).


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8.1.6 Improve Visibility and Transparency The sixth general solution is to improve visibility and transparency, and the three root causes and the two suggested solutions that have substantiated it are listed in Table 23 below. Thereafter, the general solution is described in more detail.

Table 23. The three root causes and the two suggested solutions that have substantiated the sixth general solution.

General Solution Root Causes Suggested Solutions Improve visibility and transparency

Several incompatible systems are used

Integrate systems and processes

Bad transparency Integrate systems and processes

Changing delivery dates As stated by Stevens (1989), companies strive to integrate their supply chains and a full system visibility is an important characteristic to do so. Steinfield et al. (2011) also state the importance of having an end-‐to-‐end transparency, but mention a general barrier to be the use of different communication and information sharing systems within the supply chain. Companies that strive to reduce lead time have often been very successful with generating, sharing and use information (Stalk & Hout, 1990). MacLean & Rebernak (2007) states in Section 3.10.2 that “there is no better way to build trust among stakeholders than through transparency”. Also Oskarsson et al. (2013) highlights the importance of managing an efficient communication and also focus on improving it when trying to reduce lead time. Mentioned in Section 3.10.1 by Skjott-‐Larsen et al. (2007), information systems can generally be of two different types: intra-‐firm and inter-‐firm. Intra-‐firm is within the company and inter-‐firm allows the company to integrate with its suppliers and customers. Maybe the most well-‐known intra-‐firm system is the ERP-‐system that manages for instance inventory, order processing and financial payments. Since intra-‐firm systems do not give a holistic view of the supply chain, inter-‐firm systems may be more successful to use when dealing with logistics in supply chains. These systems are more capable of managing supply chain management since they enable coordination with suppliers and customers in one system. Christopher (2011) argues that internal operations become much more efficient as a result from supply chain IT-‐solutions. They enable a company to identify customer demand earlier and thus being able to plan and schedule better and more efficient utilize the production and transport capacity. Moreover, it was described in Section 3.10.1 by Fredholm (2006) that companies can share information with each other in different ways, e.g. by e-‐mail or by EDI transmissions. EDI refers to standardized electronic file transferring of e.g. purchase orders, inventory documents, shipping documents and payment documents. This is an effective way of handle administrative activities that makes it possible to decrease lead time, but a problem is the high degree of variations of EDI-‐standards being used. Companies doing business together preferably agree on common


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standards (Fredholm, 2006), otherwise it will often be errors and delays in the information exchange. This is also a problem when companies only use individual intra-‐firm systems, since the information has to be rekeyed when passing from point to point. (Steinfield et al., 2011) Skjott-‐Larsen et al. (2007) highlights in Section 3.10.2 the bullwhip effect as a visibility and coordination problem by referring to Forrester (1961). Steinfield et al. (2011) discusses some possible solutions that may lead to a better transparent and coordinated chain. One is the use of vertical industry data and process standards, which may lead to a greater understanding and a reduction of barriers between different parties in the supply chain. However, Steinfield et al. (2011) highlights that the implementation of these standards may not be sufficient if they are made on a point-‐to-‐point basis, meaning that the flow of information will not be seamless if some parties stop using the standards. A consequence to this is the need for implementation of separate connections between different partners, which might lead to problems such as the bullwhip effect because of delays and errors in the sequential information transmissions. (Steinfield et al., 2011) Instead of having these point-‐to-‐point connections in the supply chain, Steinfield et al. (2011) proposes the use of coordination hub-‐systems, also referred to as supply chain software by Skjott-‐Larsen et al. (2007). The purpose of coordination hubs is to make information simultaneously available, instead of sequential, to all parties, which will support a higher degree of transparency (Steinfield et al., 2011). Coordination hubs are standard based IT platforms that are available to use for business-‐to-‐business transactions by organizations that collaborate with each other in some way and they can support the collaboration, communication and coordination between them. (Lynne & Quang, 2012) Steinfield et al. (2011) distinguish between two different types of coordination hubs: private and shared. Private coordination hubs are developed by larger and dominant companies in supply chains who then invite business partners to take use of them. The idea of these private coordination hubs is to use an IT-‐architecture that increases data and process standards without using point-‐to-‐point communication. If a company introduce new standards in its IT-‐architecture and different ERP-‐systems are used in different parts of the business, it may be costly in terms of time and money to get these systems to conform with the new standards. The private coordination hub can then work as a platform that coordinates the transfer of standardized messages between the systems. It may also be possible to connect to the platform in different ways, depending on a company’s current technology. The downside with this kind of coordination hub is that it is limited to the partners that the company invites, because they want to control that their competitors not will take advantage of information that can be sensitive. This means that some suppliers might still face high costs when they are forced to use different technologies depending on if they do business that is connected to the dominant company or not. As a result, there will be a lower degree of adoption to the new set standards by smaller companies. (Steinfield et al., 2011) The problem with information transparency in the whole supply chain will therefore not be fully fixed, though coordination hubs are most beneficial when they are used by all business partners. (Lynne & Quang, 2012)


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Shared coordination hubs instead appear to provide a greater information transparency than private coordination hubs, because they can be used by any supplier to any other party using the hub. This will reduce some barriers that before have prevented the use of standards and there will be a higher degree of adoption by smaller members in the supply chain. The idea of shared coordination hubs is basically to generate simplifications in trades and at the same time secure a greater control and security. This can for instance be made through redesigning processes and use open standards when transporting goods, and use innovative IT when transmission information between partners. An example is the use of Electronic Product Code Information System data standards which enables each partner in the supply chain, each with their own conforming system, to make information available for its partners on a need-‐to-‐know basis. A unifying component then handles the transmission between each partners conforming system. A freight company can for example share logistical data with its partners in a transparent way. (Steinfield et al., 2011) However, Fredholm (2006) means that there is a great challenge to integrate all parties’ systems, in the extent that is needed to really be able to share information throughout the supply chain. This due to many systems are not prepared to be integrated and companies therefore will face high costs when redesigning them. Another challenge, and a prerequisite for fully integration, is that information continuously must be updated within each system and that a high quality standard of the information has to be secured. (Fredholm, 2006) Lynne & Quang (2012) argue that, for coordination hubs to be possible, there should be a cooperation between all business partners to develop the data and process standards. 8.1.7 Proactive L/C and Alternative Payment Methods The seventh general solution is to work proactive with the L/C and consider alternative payment methods. The three root causes and the two suggested solutions that have substantiated it are listed in Table 24 below. The general solution is thereafter explained in more detail.

Table 24. The three root causes and the two suggested solutions that have substantiated the seventh general solution.

General Solution Root Causes Suggested Solutions Proactive L/C and alternative payment methods

Demanding paper work Work proactive Many parties need to agree ATM does not trust the lead time promised by Ericsson

Closer collaboration between EAL and ATM

Susmus and Baslangic (2015) describes a number of different payment methods that are used in the international trade. One of the payment methods is L/C, which is a conditional bank guarantee that protects both the seller and the buyer against all risks and is therefore the most used method in foreign trade applications (Susmus & Baslangic, 2015). To ensure a faultless L/C process, it is necessary for companies to develop the skills to proactively manage situations that causes discrepancies (Mehta, 2005).


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There are mainly four situations that usually causes discrepancies in L/Cs. The first situation is when the L/C itself is defective. Secondly, it can be caused by lack of knowledge or mis-‐interpretations of the Uniform Customs and Practices for Documentary Credits (UCP). The third situation is when the internal procedures are inefficient or absent. Finally, the discrepancies can be caused by the absence of necessary resources, e.g. funds, technology and skills. These critical situations can be handled by mastering discrepancy rectification and grow knowledge of UCP management, L/C terms negotiation management, shipment management and documentation management. (Mehta, 2005) A relatively new payment method is the Bank Payment Obligation (BPO) and is predicted to change the way companies manage their global supply chains, at least in high risk markets (Green, 2012). After having conducted a study of the import and export terms in Turkey, Susmus and Baslangic (2015) conclude that BPO will replace payment methods as L/C in the upcoming future. BPO has more or less the same function as L/C, except that the process is automated. In other words, the time consuming document management and exchange process will be avoided and BPO will therefore be a more rapid and simpler alternative to L/C. (Green, 2012) Although, BPO has its downsides. Susmus and Baslangic (2015) refer to Göleç (2015) when highlighting the weaknesses and threats for BPOs. The first weakness is that BPO is a new method in the market and therefore has a limited use. Secondly, the method requires system integration between the company, the banks and the customer. The threat is that the method may cause potential legal concerns in some countries because of the electronic form. (Göleç, 2015) The payment term BPO is expected to be adopted more widely over the world as the international trade and communications increases and as the technology and banking develops (Susmus & Baslangic, 2015). Green (2012) argues that standardized rules released by the International Chamber of Commerce (ICC) would help to boost the use of BPO, since acceptance takes time. Recently, ICC released guidelines for banks to help them with their BPO-‐related business. The guidelines are expected to increase the number of local and international banks using BPO as a payment method. (Torquato, 2016) 8.1.8 Selection of Incoterms The eighth general solution is the selection of incoterm and the root cause that has substantiated it is listed in Table 25 below. Furthermore, different types of incoterms are described in the following text.

Table 25. The root cause that has substantiated the eight general solution.

General Solution Root Causes Suggested Solutions Selection of incoterms Division of responsibilities


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To facilitate commercial transactions for companies doing business in global trade, International Chamber of Commerce (ICC) has created a set of terms referred to as International Commercial Terms or Incoterms (Cook, 2014). The Incoterms are often included in supply contracts and are international standards that allocates the responsibilities for freight costs and risk undertakings between the seller and the buyer (Jonsson, 2008). Using the appropriate Incoterm can benefit both sellers and buyers worldwide. However, the terms are often misunderstood or overlooked by the companies. The buyer and seller must recognize the risks and costs associated for both of them, and the key is to use Incoterms that work best for the supply chain and that meets the intentions of both parties. The newest version of Incoterms consists of eleven rules that can be categorized based on the method of delivery. The following four rules can be used regardless of the type of transport. (Cook, 2014) Carriage and Insurance Paid to (CIP) indicates that the seller accounts for the costs of the transport and insurance of the goods to the agreed place. The risk is transferred to the buyer as the goods is handed over to the first carrier. Carriage Paid To (CPT) implies that the seller accounts for the costs of the transportation to the named place of destination and the risk is passed on to the seller as the goods is handed over to the first carrier. Notice that the buyer is responsible for the insurance of the goods. Delivered at Place (DAP) is used when the seller accounts for the costs of the transportation to the named place and undertakes all risks until the buyer is ready to unload the goods. Delivered at Terminal (DAT) means that the seller accounts for the costs of the transportation to the terminal at port or place of destination. The seller undertakes all risks until the goods are unloaded at the terminal. (Cook, 2014; International Chamber of Commerce, 2016) The terms described above and their meanings are summarized in Table 26.

Table 26. Incoterms for multimodal transports. Source: Based on Cook (2014) and International Chamber of Commerce (2016)

Incoterm Carriage Insurance Transfer of Risk CIP Paid by the seller to the

named place Paid by the seller to the named place

When the goods are handed over to the first carrier

CPT Paid by the seller to the named place

Paid by the buyer When the goods are handed over to the first carrier

DAP Paid by the seller to the named place

Paid by the seller to the named place

When the goods are ready for unloading by the buyer

DAT Paid by the seller to the named terminal

Paid by seller to the named terminal

When the goods are unloaded by the seller


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8.2 Ericsson Specific Solutions In this section are the general solutions applicability for the current situation discussed and adapted to fit the studied supply chain. The adapted solutions are referred to as Ericsson specific solutions and are listed in Table 27 below, together with the general solution that has substantiated each of them. Moreover, the root causes that can be solved with each Ericsson specific solution are summarized in the end of the section that the solution is described in.

Table 27. The connection between the general solutions and the Ericsson specific solutions.

Ericsson Specific Solution General Solution Regional Supply Hub CODP Strategy Regional Product Portfolio Reduce the Complexity of the Product

Portfolio Prepare for Activities During Pre-‐Sales Reduce the Non-‐Value Adding Time and the

Number of Handovers Time Slots Improve Synchronization Product Configurator Product Configurator End-‐to-‐End Integration Improve Visibility and Transparency Proactive Management and Future Bank Payment Methods

Proactive L/C and Alternative Payment Methods

Changing Incoterm to CIP, DAP or DAT Selection of Incoterms 8.2.1 Regional Supply Hub A perceived problem explained by Kjellander (2016) is that the material becomes bound to the customer too early in the supply chain, i.e. the CODP is located too early. This results in restricted inventories at many locations, which inhibits Ericsson to be flexible with their material flows. A solution that was introduced by Kjellander (2016) and explained by Forsberg (2016) is the supply hub. The concept refers to locate a hub in each region, RMED for this study, that will supply the whole region with products. Christopher (2011) states that it generally exist significant local differences in customer requirements, which makes it difficult to meet demands on customization. Therefore, it will be favorable with a predefined product portfolio within RMED. The whole region needs to agree on the products and components composing it and it will be updated each quarter (Forsberg, 2016). This is in line with Christopher (2011) that highlights the possibility of satisfy the customer requirements for variety with the combination of as few standard components and modules as possible. The supply hub concept means to move the node production from ESS Tallinn to the supply hub, which will be made to order. The ESSs and EMSs will instead mainly produce standard modules, i.e. RUs, DUs and FUs, and be based on forecasts. The standard modules will continuously replenish a pick from stock inventory at the supply hub. (Forsberg, 2016) This means that the CODP is postponed to the hub, which is in line with Christopher (2011) that argues that the CODP should be located as close to the customer as possible. The pick from stock inventory will be


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unrestricted, meaning that the material is not bound to a specific customer and thereby foster a greater flexibility in accordance with Christopher (2011) and Lee et al. (1993). By moving the CODP to the supply hub and apply an unrestricted stock, it allows Ericsson to be responsive and to customize products with less tied up capital in the supply chain. This is supported by Mason-‐Jones et al. (2000) who mean that activities before the CODP should be forecast driven and the ones after the CODP order driven. Another benefit with the supply hub is that it results in a clearer division between lean and agile in the supply chain, which is in line with Towill & Christopher (2002). By having standardized flows before the hub, it leads to a greater efficiency and economies of scale. In turn, by being more agile and flexible after the hub, it allows Ericsson to be more responsive to ATMs demand. The customer can still order products that is not included in the portfolio, but in those cases it requires a separate material flow that will have longer lead times (Forsberg, 2016). As stated by Hallgren & Olhager (2006), being able to be responsive with short lead times requires that the right material is available in the hub. This will be managed by the predefined regional product portfolios, but also sets demand on great forecasts in order to have the right quantities on stock. The forecasts will however be easier to manage since unrestricted stocks are applied, which is in line with Christopher (2011). Other prerequisites to implement the supply hub is to make sure to have the right IT infrastructure to manage all activities connected to the hub. It is important to ensure a closer collaboration between Ericsson, the local company and the customer in the order and delivery planning processes. It also requires that the goods can be shipped when they are ready, meaning that no insurance or financial aspects prevent it. (Forsberg, 2016) To summarize, three root causes are expected to be solved by implementing a regional supply hub in the studied supply chain and they are all listed in Table 28 below.

Table 28. The root causes that are solved with the first Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Regional Supply Hub No clear division between lean and agile in the

supply chain CODP located early in the Supply Chain Long lead times between forecast start until material is available in the production

8.2.2 Regional Product Portfolio A common root cause for several of the identified problems in the supply chain is the fact that Ericsson has a wide product portfolio. This is in line with Christopher (2011) that argues that the size of the product portfolio has a significant impact on the complexity of a supply chain. Since ATM has the possibility to order from a wide portfolio with many duplicates or similar products, it contributes to some products being low frequent and the diversified flows of material. Some site materials might even have an order to delivery lead time of eight to ten weeks.


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A solution to this, that is desired by e.g. Pettersson (2016b), Kjellander (2016) and Benrabah (2016), would be to limit the portfolio with as few variants as possible. Since each customer demand different types and variants of products, mainly due to the different frequency bands, it would not be possible to agree on a portfolio for the entire customer base. Instead should each region agree on a product portfolio that is common for all customers within that region. The portfolio should contain both radio and site material, but with as few unique product numbers and variants as possible to meet the customer demand. Generally, a poor commonality between different components in a portfolio lead to a lower degree of flexibility, why it is important to consider the portfolio carefully to make sure that the components can be combined in a flexible way. This is in line with Christopher (2011), that to foster a high degree of customization close to the customer, products should be designed and engineered so as few standard components and modules can be combined in a varied way that satisfies the demands. Furthermore, the regional product portfolio should be created in association with logistics and supply chain planners in order to reduce the amount of components with long lead times. This can be likened with the situation of Motorola, presented by Whyte (2003) in Section 8.1.2. A narrower product portfolio would also facilitate the forecasting for Ericsson towards ATM. This is in line with Christopher (2011) that states that the forecasting becomes more difficult as the variance of products increases, which also may lead to larger inventory levels. Phasing out products from the portfolio will also reduce the BoM that ATM demands, which will facilitate the local processing phase in form of a less complex process when designing the solution. It has already been proved by companies that reduced variations and usage of standard modules in product portfolios are successful, which was described by Whyte (2003) together with Gottfredson and Aspinall (2005) in Section 8.1.2. To summarize, three root causes can be solved by implementing a regional product portfolio for RMED and they are listed in Table 29 below.

Table 29. The root causes that are solved with the second Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Regional Product portfolio Wide product portfolio

Volatile customer demand Long lead times between forecast start until material is available in the production

8.2.3 Prepare for Activities During Pre-‐Sales According to Benrabah (2016b), Forsberg (2016) and Özdogru (2016), the local processing phase is perceived as the bottleneck in the information flow due to the great amount of manual handovers. This is supported by Christopher (2011) that mentions large number of handovers as a common cause for organizations being slow to market. Benrabah (2016b) believes that the right information provided at the right time would reduce the time spent on the local processing phase, which might be easier said than done considering the complexity that comes with many


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handovers in accordance with Christopher (2011). Forsberg (2016) and Radenholt (2016) mean that integrated systems and processes would facilitate the complexity of the handovers and is therefore an interesting solution to this problem, but is provided as an individual solution in Section 8.2.6. However, Lindberg (2016) and Magnusson (2016) describe a solution that will decrease the number of handovers during the local processing phase and by doing so, shorten the customer order lead time. Instead of translating the price objects into delivery objects after the CPO is received by EAL, it should be done prior to the local processing phase, i.e. during pre-‐sales. According to Christopher (2011), it will make Ericsson more responsive to the market as the local processing will consist of fewer handovers and be less complex. Both Liker and Meier (2006) together with Oskarsson et al. (2013) argue for preparations in terms of preparing as much as possible before the value-‐adding work is being performed. The translation from price objects into delivery objects can for ATM be considered as a non-‐value adding activity as the order is waiting to be handled. In obedience with Liker and Meier (2006) together with Oskarsson et al. (2013), the translation should instead be performed before the CPO is received by EAL and thereby make the Verdi solution ready for ordering as the CPO arrives. To summarize, one root cause can be solved by preparing the Verdi solution before the CPO arrives and it is presented in Table 30 below.

Table 30. The root cause that is solved with the third Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Prepare for Activities During Pre-‐Sales Activities concerning both the engineering and

the order flow are performed 8.2.4 Time Slots The problem with uncontrolled incoming deliveries to EDC GBG would preferably be solved with a system that can manage a greater level of control. Since EDC GBG works as a cross-‐docking facility and thus have no buffers, it is particularly important with synchronization, which is supported by Buijs et al. (2014) and Oskarsson et al. (2013). Today, there is a lack in the transparency since the people at EDC GBG often only get the information of what week, or in best case what day a delivery will occur. This contradicts to what Fredholm (2006) states, that a prerequisite for cross-‐docking is to know when a truck will deliver and what the delivery consists of. Also Luo & Noble (2012) and Chmielewski et al. (2009) stresses the importance of scheduling the incoming trucks.


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It is desired by both Kristoffersson (2016) and Slotte (2016) to have an IT-‐system where each truck can be booked to manage their delivery during one of a number of predefined time slots, i.e. time windows. By controlling the inflows, it would even out the number of incoming trucks over time and also facilitate the planning. This is in line with Buijs et al. (2014) that argue that cross-‐docking activities should be scheduled with timing and sequencing in mind. Since time slots are already used for the outbound flow from EDC GBG, the method is proved to work although the inbound part is more complex. If using time slots for both sides of the EDC, a greater synchronization between the trucks for inbound and the ones for outbound will also be managed. An inbound delivery can beforehand be assigned to an outgoing truck, which will also facilitate the workforce planning at EDC GBG in accordance with Buijs et al. (2014). To summarize, one root cause can be solved by implementing time slots and it is presented in Table 31 below.

Table 31. The root cause that is solved with the fourth Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Time Slots Uncontrolled incoming deliveries 8.2.5 Product Configurator The problem of Ericsson using their internal product numbers in the business with ATM would most likely be solved by working towards a more efficient product customization. Instead of placing orders on specific product numbers, ATM should base the acquisition order on the commercial description, i.e. materials, prices, packaging etc., that in turn can be matched with products in the Ericsson catalogue, in accordance with Forza and Salvador (2006). As a result, Ericsson can determine the product variants with a greater flexibility and will not be limited in their choice of components. The solution will also be more flexible considering that the solution can be created per site, customer etc. instead of per product catalogue as for today. It would mean that ATM could place orders on the solution identification rather than on specific component numbers, which is the case of today according to Benrabah (2016) and thereby meet the expressed desire by Högberg (2016). Since Ericsson has a considerable number of customers with various requirements in addition to ATM, the complexity of the order acquisition and fulfilment process will be great in consistent with Haug et al. (2011). To manage the complexity, Forza and Salvador (2006) suggest companies to rationalize their product families and implement a product configurator. In the current situation, the local processing consists of several manual handovers and accounts for a significant part of the total lead time. In accordance with Haug et al. (2011), the implementation of a product configurator would cause fewer handovers and automate much of the work in terms of the required human expertise when generating solutions. It would not only make the fulfilment process more effective, it would also facilitate the order acquisition. Hence, resulting in saved man-‐hours and a reduced lead time for the local processing as well as for the entire supply chain.


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To summarize, two root causes can be solved by implementing a product configurator based on a catalogue consisting of the whole assortment of Ericsson. The root causes are listed in Table 32 below.

Table 32. The root cause that is solved with the fifth Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Product Configurator

Orders on high level of detail Several product catalogues

8.2.6 End-‐to-‐End Integration It is made clear that there is a need for a greater transparency and visibility within the supply chain. As mentioned by Benrabah (2016) and Özdogru (2016), there are several manual handovers during the local handover process because things are handled in different systems that are not incompatible and integrated to each other. Also Forsberg (2016) pointed at the bad transparency as a problem, which according to him is caused by a lot of manual work and numerous manual handovers between different systems and processes. This is in line with Steinfield et al. (2011) that mean that a general barrier for transparency in supply chains is the usage of different systems for communication and information sharing. This causes long lead times since the information needs to be manually translated from system to system (Radenholt, 2016), which is supported by Steinfield et al. (2011). Forsberg (2016) highlighted the translation from price objects to delivery objects as the most time consuming, but also stated that there are a lot of manual handovers during tendering, contracting, forecasting, ordering, delivery and invoicing. Both Forsberg (2016) and Radenholt (2016) points at the need of an integration between systems and processes throughout the entire supply chain. This is in line with Stevens (1989) and Steinfield et al. (2011) that state the importance of having an End-‐to-‐End transparency in the supply chain. This is further supported by Stalk & Hout (1990), MacLean & Rebernak (2007) and Oskarsson et al. (2013). To manage a great transparency in the supply chain, there is a need for an inter-‐firm IT-‐system that enables a company to manage coordination with its suppliers and customers (Skjott-‐Larsen et al., 2007). One type are the ones referred to as coordination hubs by Steinfield et al. (2011), which are IT platforms for business-‐to-‐business transactions that make information simultaneously available to involved parties. A coordination hub can support the collaboration, communication and the coordination between the parties (Lynne & Quang, 2012). Two different types of coordination hubs have been presented: private and shared. The difference is that with the shared, a company can decide which business partners to invite for using the hub, while with the shared can all business partners use it. If Ericsson implements a coordination hub, it could reduce the many manual handovers and thus shorten the lead time.


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Another problem that is connected to transparency is, mentioned by Kristoffersson (2016) and Slotte (2016), that there is a low degree of preannounced deliveries to EDC GBG. If they do not know when a truck will deliver or what it will deliver, it is difficult to plan the work at EDC GBG, why they see a demand for a higher degree of preannounced deliveries. This is also expected to be improved by implementing a coordination hub. Steinfield et al. (2011) states that a freight company can share information of the delivery in a transparent way with its partners, when using a coordination hub. Aglert (2016) stated a problem being the often changing delivery dates within the supply chain. This is supported by Forsberg (2016) that points at an effect being a bad synchronization between different material flows and the ASP flow. The bad synchronization is also mentioned by Pettersson (2016b), Slotte (2016) and Wilhelmsson (2016) that all point at a need for an improved transparency between different members in the supply chain. By implement a supply chain IT-‐solution, preferably a coordination hub, the planning work can also be facilitated in the supply chain since it enables to identify the customer demand earlier, which is in line with Christopher (2011). To summarize, three root causes can be solved by improving the integration throughout the supply chain and are presented in Table 33 below.

Table 33. The root cause that is solved with the sixth Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved End-‐to-‐End Integration Several incompatible systems are used

Bad transparency Changing delivery dates

8.2.7 Proactive Management and Future Bank Payment Obligation The L/C process of today is regarded as time consuming for several reasons. First, the negotiation before the creation of the L/C draft can take much time. Secondly, the part of the process where ATM and their bank open the L/C is often representing a major part of the total time. A reason for this is perceived by Ur Rehman (2016b) to be that ATM places orders with a margin of lead time to secure for the offered customer lead time that is excessive. A suggested solution by Holmqvist (2016) is to work proactive by having closer collaboration between Ericsson, EAL and ATM after the CPO is received, in order to exchange the right information that can prevent that it takes too long time for ATM to go to their bank. Although, it could also be caused by inefficient or absent internal processes in obedience to Mehta (2005). Since Algeria requires that L/C is used by Algerian companies, ATM is considered to be an experienced user of the payment method and therefore assumed to have efficient internal processes. Furthermore, Ericsson has personnel that are committed to work only with L/C and the internal processes are therefore assumed to be sufficient as well.


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It happens that the L/C itself is defective when it is received by the Ericsson bank, i.e. the documents does not correspond to each other. This results in duplication of effort and is according to Mehta (2005) one of the most common situations that causes discrepancies. Because both parties are accustomed to the L/C term makes it difficult to determine what the excessive lead time is caused by. It can be that the Algerian bank is making changes to the L/C and in those cases, Holmqvist (2016) suggests that the Algerian bank sends a copy of the changes directly to Ericsson for approval. By doing so, the process will be more rapid considering that the Ericsson bank will not be involved until later. The suggested solution is in line with Oskarsson et al. (2013) that argue for elimination of duplication of work, i.e. elimination of non-‐value adding activities. The critical situations that have been addressed so far can be handled by Ericsson and ATM by ensuring that both parties master discrepancy rectification and acquire knowledge of UCP management, L/C terms negotiation management, shipment management and documentation management, in accordance with Mehta (2005). Note that EAL acts as an intermediary in the L/C process and it is therefore important that they meet the above criteria as well (Holmqvist, 2016). Susmus and Baslangic (2015), Green (2012) and Torquato (2016) all expect that the usage of the payment method BPO will increase in the near future. Green (2012) consider it as a more rapid and simple alternative to L/C since it is an automated process that does not involve any time consuming document management or exchange processes. BPO would therefore be a highly interesting alternative to L/C in this case, apart from that L/C is an Algerian legislation. A weakness of BPO is according to Göleç (2015) that the payment method is relatively new, which may explain why it is not used for this case in the current situation. As it becomes a more accepted and employed method by companies and banks globally, it may become a relevant payment method for Ericsson and ATM considering that acceptance takes time in obedience to Green (2012). To summarize, two root causes can be solved with this Ericsson specific solution and they are presented in Table 34 below.

Table 34. The root causes that are solved with the seventh Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Proactive Management and Future Bank Payment Obligation

Demanding paper work ATM does not trust the lead time promised by Ericsson

8.2.8 Changing Incoterm to CIP, DAP or DAT As things stand, Ericsson sometimes waits for ATM to insure the goods before it can be transported from EDC GBG (Benrabah, 2016b). Cook (2014) stresses the importance of using Incoterms that work best for the entire supply chain and that meet the intentions of both parties. This is not the case today, since the CPT Incoterm contributes to a longer total lead time and higher inventory costs for Ericsson. A more appropriate Incoterm would be one that confers the responsibility for paying the insurance of the goods to Ericsson, considering the existing global


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insurance agreement. By doing so, the goods can be sent from EDC GBG without having to wait for the insurance from ATM. A common solution to this problem would be to change the present CPT Incoterm to a more suitable type, e.g. CIP, DAP or DAT, in accordance with Cook (2014). However, as mentioned by Ur Rehman (2016b), ATM desires to pay for the insurance of the goods by using local insurance companies. This demand complicates the situation and there will most likely be a matter of negotiation between Ericsson and ATM. To summarize, one root cause can be solved by changing Incoterm and it is presented in Table 35 below.

Table 35. The root cause that is solved with the eighth Ericsson specific solution.

Ericsson Specific Solution Root Causes Solved Changing Incoterm to CIP, DAP or DAT Division of responsibilities 8.2.9 Summary of the Generated Solutions In order to clarify for the reader what prioritized root causes that can be solved with the above Ericsson specific solutions, they are summarized in Table 36 below. In total, 15 of the 17 prioritized root causes can be solved by the presented solutions. The ones that are not solved directly be these solutions are “Stakeholders are often involved in several projects” and “Many parties need to agree”. It has been difficult to find a direct solution to the number of projects each stakeholder is involved in, or to the fact that parties need to agree regardless what payment method that is used. Solutions can instead be found for the ways of working, which can facilitate and fasten the work, i.e. work proactive or use an electronic payment method as BPO instead of the manually handled L/C. Moreover, all ten suggested solutions have been used and together with the literature resulted in the generated solutions.


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Table 36. The root causes together with their solutions.

Root Cause Solved by Solution Wide product portfolio Regional product portfolio Orders on high level of detail Product configurator Several product catalogues Product configurator Activities concerning both the engineering and the order flow are performed Prepare for activities during pre-‐sales

Several incompatible systems are used End-‐to-‐End integration Stakeholders are often involved in several projects

Volatile customer demand Regional product portfolio

Long lead times between forecast start until material is available in the production

Regional supply hub Regional product portfolio

There is no clear division between lean and agile in the supply chain

Regional supply hub

CODP located early in the Supply Chain Regional supply hub Bad transparency End-‐to-‐End integration Changing delivery dates End-‐to-‐End integration Uncontrolled incoming deliveries Time Slots Many parties need to agree ATM does not trust the lead time promised by Ericsson

Proactive Management and Future Bank Payment Obligation

Demanding paper work Proactive Management and Future Bank Payment Obligation

Division of responsibilities Changing Incoterm to CIP, DAP or DAT


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RECOMMENDED SOLUTIONS AND REQUIREMENTS FOR IMPLEMENTATION

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9 RECOMMENDED SOLUTIONS AND REQUIREMENTS FOR IMPLEMENTATION

The chapter includes an evaluation of the generated solutions and their interactions. A final recommendation is provided based on the solutions, their interactions and the time perspective of the solutions. Lastly, the requirements for implementing the recommended solutions are clarified.


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9.1 Evaluation and Recommendation In this section, the combination of solutions that provides the greatest lead time reduction is determined and presented. This is done by evaluation of the Ericsson specific solutions and discussions of how the solutions can work together. The combination of solutions forms the final recommendation that is forwarded to Ericsson, and is also the result of the study. 9.1.1 Evaluation of the Generated Solutions The regional supply hub will have a fundamental role in the recommendation, since it is assumed to have a great effect on the lead time and the service level towards ATM in accordance with Magnusson (2016c). The idea is to locate it as close to the customer as possible, considering that the CODP will be at the supply hub. This to apply a lean strategy to an as great part of the supply chain as possible, and thereby increase the efficiency into the supply hub and reduce the lead times. A lean strategy will require a standardized material flow and a stable demand, which can be achieved by implementing a replenishment flow of standard modules and site material into the buffer at the supply hub. To avoid the problem with volatile and uncontrolled incoming deliveries that was experienced at EDC GBG, the supply hub needs to even out the number of deliveries. A recommendation is to implement time slots that control the incoming deliveries and facilitate the planning as well as even out the workload. However, Ericsson needs to be flexible and responsive towards ATM. In other words, they must apply an agile strategy after the supply hub. This can be done by implementing an unrestricted stock of standard modules and site material at the supply hub, where also the node assembly takes place. The supply hub will not be able to store the global assortment, but should instead be suited for the regional demand (Magnusson, 2016c). Since the supply hub is thought to have an unrestricted pick-‐from-‐stock inventory, Ericsson is recommended to limit their current product portfolio in collaboration with the region. A narrower product portfolio is assumed to affect the lead time positively in form of better forecasts and reduced complexity of the solutions that are designed during the local processing phase. The focus should be to eliminate unnecessary duplicate products and low frequent products. Considering that the study aims to improve the service level, it is important that the regional product portfolio still satisfies the demand of ATM. The portfolio should therefore consist of as few standard modules and site materials as possible that together can be combined so that the demand still can be fulfilled. A regional product portfolio for RMED is expected to have a positive effect on the lead time and is considered to be feasible (Magnusson, 2016c). In the current state, it happens that goods that are ready for shipment have to wait for ATM to secure insurance. To avoid this non-‐value added time at the supply hub, Ericsson is recommended to negotiate with ATM in order to change the CPT Incoterm to either CIP, DAP or DAT. Considering that Ericsson has a global insurance agreement, it would not result in any additional costs for either parties. In fact, it means that ATM will save the money put on insurance. A CIP, DAP or DAT Incoterm will ensure that Ericsson can ship the goods from the supply hub without having to wait for ATM to insure it (Magnusson, 2016c).


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Another reason for that goods have to wait for shipment from EDC GBG is because of the absence of an operative L/C. In order for goods to not have to wait in the supply hub for the L/C to be made operative, Ericsson is recommended at firsthand to ensure that all parties work proactive with the L/C by mastering discrepancy rectification and acquire knowledge of UCP management, L/C terms negotiation management, shipment management and documentary management. By having a close collaboration between EAB, EAL, ATM, EAB Bank and ATM Bank, a greater information exchange and transparency between the parties can be maintained. It is important that ATM can trust the lead times promised by Ericsson, in order for them to be sure of when to place an order. If ATM can trust the lead time promised by Ericsson, the L/C can be opened before the CPO is sent to EAL and thereby eliminate the non-‐value added time. If Ericsson can assure a better delivery precision, ATM is expected to go to their bank for an opening of the L/C in time (Magnusson, 2016c). However, the L/C process is time consuming and more efficient payment methods exists. A relatively new payment method is the Bank Payment Obligation (BPO), which has more or less the same function as L/C but is automated and therefore more rapid. By using BPO, it is expected that the time consuming document handling that is performed manually in the current situation can be eliminated. It will be difficult to implement in short term, given that it is a new and not well proven method and the fact that L/C is a country legislation in Algeria. Therefore, BPO is considered as a relevant substitute to L/C in a longer perspective as it becomes more widely accepted (Magnusson, 2016c). Despite the regional product portfolio that is determined in collaboration with the region, there will be situations when ATM needs to place orders not referring to this portfolio (Magnusson, 2016c). Therefore, Ericsson must have an alternative solution for distribution of these goods. The recommendation for Ericsson to handle these situations is to establish two supply chains, named as the Regional supply chain, for the regional product portfolio, and the Alternative supply chain. The manufacturing activities will be at the same places for both of them, besides that the modules will not be part of the replenishment flow for the Alternative supply chain. The local processing phase of today contains of a large amount of handovers, which are perceived as a cause for the excessive lead time. The major time consumer during this phase has been identified as the translation from price objects into delivery objects. This activity is performed after the CPO is received, but can be accomplished before. Considering that this project is to reduce the lead time from order to delivery, the recommendation to Ericsson in a short term perspective will be to perform the translation before the CPO is received by EAL. By doing so, the final solution in Verdi will be ready as the CPO arrives and the lead time that ATM experiences will be reduced (Magnusson, 2016c). A recommendation to Ericsson in a longer perspective is to establish a more efficient product customization by doing business with ATM based on commercial descriptions. It would allow ATM to place orders on dynamic solution numbers rather than firm product numbers. By doing so, Ericsson can update the solution during the fulfillment process and be more flexible. The complexity it brings can be handled by implementing a product configurator, saving time in form


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of less manual handovers and a reduced dependency of human expertise. The product configurator would also facilitate the local processing when the solution is designed, e.g. the translation from sales objects into delivery objects. The configurator will be able to create solutions from the global product portfolio of Ericsson and can therefore serve customers in both the Regional supply chain and the Alternative supply chain. In other words, if ATM places an order that are not based on the regional portfolio, the product configurator will create a solution from the global portfolio. Notice that the regional portfolio is a part of the global portfolio. The recommended product customization is assumed to have a positive impact on the lead time and is therefore recommended in a longer perspective (Magnusson, 2016c). As already stated, a more reasonable solution in the short term perspective is to perform the translation from price objects to delivery objects earlier, since it will only require a change of the ways of working without any system changes. It has been made clear that there is a lack of integration between both processes and systems in the current situation. For example, there are several different systems used within the supply chain that are not compatible, which leads to manual translations of information between systems. A recommendation for Ericsson is therefore to establish an integrated supply chain that will foster a greater transparency and control within it. This could be done by implementing an End-‐to-‐End system or a coordination hub that allows different systems to integrate with each other, which would shorten the lead time because of the reduction of manual handovers. In the current situation, there is also a need of a higher level of transparency in form of preannounced deliveries into EDC GBG. By implementing a coordination hub, it would be easier to share information between freight companies and Ericsson, which would facilitate the work at the recommended supply hub. A coordination hub is reasonable to implement in a longer perspective since it requires that the different systems are mature enough to connect to the coordination hub (Magnusson, 2016c). Given the above reasoning, the greatest lead time reduction is expected to be achieved by combining all of the generated solutions, with the supply hub acting as a basis. However, the final recommendations will be in form of two solutions depending on the specific situation. The following section will describe the two recommended solutions and their impact on the lead time and service level in the studied supply chain. 9.1.2 Recommended Solutions As described above, the recommendation to Ericsson will be in form of two solutions that are used in different situations. Solution A: The Regional Supply Chain, is used when ATM orders products from the regional product portfolio. Solution B: The Alternative Supply Chain and is used when ATM places orders on products that are not included in the regional portfolio. The two solutions are summarized and described separately in the two following sections. Solution A: The Regional Supply Chain In the Regional supply chain, ATM places the CPO directly to the supply hub, see Figure 35. Unlike today, the CPO is for this setup sent directly from ATM to the supply hub without EAL as an intermediate. In the supply hub, the production of nodes takes place and is based on standard


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modules and components that are picked from the unrestricted stock. This is made possible because of the regional product portfolio that is agreed within the region. Replenishment flows of standard components from the manufacturing units and of site material from the site material suppliers are applied to the supply hub and will be based on forecasts. The manufacturing units in turn, manage their own supply and place the POs to their suppliers in similar to the current situation. See Figure 35 for a visualization of the Regional supply chain.

Figure 35. The Regional supply chain.

This arrangement of the supply chain means that the lead time perceived by ATM will be reduced compared to the existing supply chain. Since ATM will place the order directly to the supply hub, the lead times for the local processing, the handover and the ordering will be eliminated. The production lead time in the current situation includes the production of modules, which in the Regional supply chain instead will be stored in the unrestricted pick from stock inventory in the supply hub and thus not be perceived by ATM. Therefore, both the production lead time and the EDC inbound lead times will also be eliminated. Instead, the lead time that ATM will experience is the time it takes to pick the material, produce the nodes and pack the goods at the supply hub together with the time for transportation. The node production lead time will be the same as for the current situation, i.e. one day, and the picking and packing is assumed to take less than one day (Magnusson, 2016c). Since the supply hub is expected to be located where EDC GBG is located today, the transportation lead time will be the same as for the current situation, i.e. 15 days. This means that the total lead time perceived by ATM with the Regional supply chain is 17 days. See Table 37 below for a summary of the lead times in the Regional supply chain compared to the current situation in best, normal and worst case.

CPO

SO

PO

PO



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Table 37. Lead times for the Regional supply chain compared to the current state.


Current Lead Time (days) Lead Time for RSC (days) Best Case Normal Case Worst Case

T1 Local processing 14 28 49 0 T2 Handover 2 3 3 0 T3 Ordering 1 2 2 0 T7 Production 1 1 24 0 T8 EDC inbound 3 3 3 0

T9 EDC GBG (Supply hub) 7 32 50 2

T10 EDC outbound 15 15 15 15 43 84 146 17

To achieve a customer order lead time of 17 days, some requirements in form of Ericsson specific solutions are necessary. These requirements are not described again, but are instead listed below:

• Regional product portfolio • Short term: An operative L/C as the goods are ready for shipment

Long term: BPO as payment method • CIP, DAP or DAT incoterm • Short term: Verdi solution ready before CPO

Long term: CPO on commercial descriptions and product configurator • Time slots • A greater information exchange

Since the purpose of the study not only aimed at reducing the lead time, but also to improve the service level, it is necessary to evaluate the result out from a service level perspective as well. Mattsson (2012), Oskarsson et al. (2013) and Storhagen (2003) describes in Section 3.3 a number of service elements: lead time, delivery reliability, delivery dependability, stock availability, information exchange and flexibility. With the Regional supply chain together with above listed Ericsson specific solutions, ATM will experience a substantial shorter lead time compared to the current situation, which implies a higher service level. If ATM does their forecast correctly, Ericsson will also be more reliable with their lead times and dependable with their deliveries by having the needed material available in the supply hub. Also the stock availability will be greater if ATM forecasts correctly. A greater information exchange with a higher degree of transparency between Ericsson, the region and ATM will also impact the service level positive. The risk that may impact the service level negatively is the limitation of the product portfolio, since ATM will experience a lower degree of flexibility when the product offering decreases. To manage this risk, the product portfolio should be composed by standard modules and site material that together can be compounded in a flexible way by the product configurator and that fulfill the customer demand. ATM will also have the opportunity to order products outside the agreed portfolio, with a longer lead time, which will be managed by the Alternative supply chain described in the


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upcoming section. To summarize, ATM will with the Regional supply chain experience an increased service level compared to the current situation. Solution B: The Alternative Supply Chain In the Alternative supply chain illustrated in Figure 36, the order flow can be likened with the existing supply chain. Thus, ATM places a CPO to EAL which in turn processes the order and prepares for the handover meeting with EAB. Notice that an approval for early start is not required since the L/C is operative during this phase. Once the CPO is processed, EAL and EAB have the handover meeting where the main documents are reviewed and discussed in similarity to the current state. After the handover meeting, EAL releases the Sales Order to EAB which compares it to the CPO. The Sales Order is then transformed into POs by EAB that releases the orders to the module productions at ESS Tallinn, EMS Jabil T-‐town, EMS Flex Tczew and to the site material suppliers. A Delivery Order is also sent to the Supply hub in Gothenburg with inputs to the node production and information about the customer and when the delivery will take place. As the POs arrive, the customized modules are produced according to the requirements of ATM. The module production at the manufacturing sites is the same as for the current situation, except from that the EMSs can send the modules directly to the supply hub and does not have to go through ESS Tallinn. Once the ordered modules and site material arrive at the Supply hub, they are unloaded and put into the node production. The RBSs are thereafter packed and made ready for shipment. The finished goods are picked up by the distribution service provider and transported to ATM in accordance with the agreed incoterm.

Figure 36. The Alternative supply chain.

PO

PO


CPO

SO

PO

PO

PO

DO


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The lead times for the Alternative supply chain can to a great extent be likened with the existing supply chain. The main differences can be seen during the local processing phase and at the supply hub, which can be compared to the current EDC GBG. During the local processing phase for the Alternative supply chain, the Verdi solution will be made ready for ordering before the CPO is received by EAL. Furthermore, The ECP carts that has to be refreshed and manually translated from sales objects into delivery objects will be handled automatically by the product configurator. The approval of an early start is not required for this solution, considering that the L/C is made operative before the CPO is handled. The lead time of the local processing phase is therefore assumed to be shorter compared to the current supply chain. Since there are no measurements of how long time it takes to create the Verdi solution, to refresh the ECP carts and translate the sales object into delivery objects or to wait for the approval of the early start, it is difficult to give an accurate estimation of the lead time reduction. However, considering that the number of activities and the waiting times can be reduced, the lead time for the local processing phase will be reduced as well. The lead time for the supply hub in the Alternative supply chain will include the node production, unlike the existing supply chain where the node production takes place at the manufacturing sites. The node production for the supply chains is considered to be the same, but the time that goods have to wait for the L/C to be made operative or for the insurance to be ready is eliminated. The time slots that controls the incoming deliveries to the supply hub is also considered to have a positive impact on the lead time, considering that the workload will be leveled out and the planning work will be simplified. Since there are no precise measurements of how long time the goods have to wait for an operative L/C or the insurance to be ready, it is difficult to give an accurate estimation of the lead time reduction. Likewise, it is difficult to estimate the lead time reduction that the time slots would bring. Considering that the waiting time can be expected to be eliminated and the workload reduced, the lead time for the supply hub will be reduced as well. As a result, the customer order lead time will be shorter for the Alternative supply chain compared to the best, normal and worst case scenarios in the existing supply chain. The comparison of the lead times for the Alternative supply chain and the current supply chain is presented in Table 38.

Table 38. Lead times for the Alternative supply chain compared to the current state.


Current Lead Time (days) Lead Time for ASC (days) Best Case Normal Case Worst Case

T1 Local processing 14 28 49 Reduced T2 Handover 2 3 3 Unchanged T3 Ordering 1 2 2 Unchanged T7 Production 1 1 24 Unchanged T8 EDC inbound 3 3 3 Unchanged

T9 EDC GBG (Supply hub) 7 32 50 Reduced

T10 EDC outbound 15 15 15 Unchanged 43 84 146 Reduced


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The requirements for managing the Alternative supply chain and achieve a reduced lead time are as follows:

• Short term: An operative L/C as the goods are ready for shipment Long term: BPO as payment method

• CIP, DAP or DAT incoterm • Short term: Verdi solution ready before CPO


As for the first solution, it is not only desirable to reduce the customer order lead time, but also to improve the delivery service with the Alternative supply chain. Delivery service consist of a number of service elements described by Mattsson (2012), Oskarsson et al. (2013) and Storhagen (2003) in Section 3.3. For this solution, the lead time service element will be improved since the time between ordering and delivery will be reduced, see Table 38. Moreover, the information exchange is expected to be greater with integrated systems within the Alternative supply chain and affect the delivery service positively. Considering that the recommended solution will reduce or in best case eliminate uncertainties as L/C deviations, heavy workloads and a lack of insurance, the delivery reliability is assumed to be improved. With the product configurator, the use of one product catalogue and that ATM places orders on commercial descriptions will result in a greater flexibility for Ericsson to deliver the goods according to ATM requirements, e.g. the delivery can be in form of several packages of sites instead of per product area. The stock availability and the delivery dependability is assumed to be unaffected by the Alternative supply chain. Given this, the delivery service is expected to be improved with the Alternative supply chain. 9.2 Requirements for Implementation In order to implement the suggested combination of solutions in the supply chain for Ericsson and ATM, some requirements are needed. These are briefly presented throughout the text below. To implement the supply hub, it will require a restructuring of the supply chain. Firstly, the node production needs to be moved from ESS Tallinn to the supply hub. The supply hub also requires that the order activities can be handled directly from the hub, in order for ATM to be able to place orders without involvement of EAB and EAL. In other words, to transform EDC GBG into a supply hub will require new systems, competences and new ways of working.

For Ericsson to agree on a regional product portfolio that will cover the demands for the entire region, continuous meetings with the region are required. This does not only include EAL and ATM, but all local companies and customers in the same region. All members of the region need to participate and agree on the products that should constitute the regional portfolio. Further, to take advantage of the regional product portfolio it also puts high demand on correct forecasts, since the buffer levels in the supply hub are dimensioned based on forecasts. Given the final


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recommendations and the reduced lead times, the forecast will be improved in comparison with the current situation. New IT-‐systems will be required in order to manage the control of the time slots, to use BPO as payment method and to implement the product configurator. Implementing a coordination hub will require that the different systems in the supply chain are compatible to be integrated. To take fully advantage of the coordination hub, it also requires that the information within each system is continuously updated in order to provide the most relevant information. In order to work proactive and fasten the L/C process, a closer collaboration between EAB, EAL and ATM is needed. In a longer perspective, a negotiation with ATM is needed to be able to replace the L/C with BPO. Also the change from CPT incoterm to CIP, DAP or DAT is expected to require a longer negotiation. Finally, to create the Verdi solution before the CPO is received will require new routines at EAL of how to work.

CONCLUSIONS

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10 CONCLUSIONS

The concluding chapter answers to the purpose of the study and includes recommendations for improvements that reduces the lead time and improves the service level for the studied supply chain. The recommendations consist of solutions that are suitable for different situations and the chapter contains an estimation of the expected lead time reduction for the solutions.

CONCLUSIONS

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The purpose with the study was to give recommendations for improvements that reduce the total lead time in a supply chain perspective in order to improve the customer service level. To be able to fulfill the purpose, four objectives or main steps were distinguished and supported with existing frameworks for analyzing supply chains. The first step was to map the current state to give a picture of the existing supply chain and to identify the problems that were perceived within it. This was done by having 24 interviews with different people at relevant positions within the studied supply chain and in total could 43 problems be identified, which according to the respondents affected the supply chain performance negatively. The interviews also generated ten suggested solutions that were assumed to solve some of these problems. The second step was to identify potentials for lead time reduction by categorizing the supply chain parts as having reasonable or not reasonable lead times and as constituting significant or minor portions of the total lead time. Also the problems were categorized as being root causes or not. Thereafter, there were a prioritization made for determining where to target the efforts. Three supply chain parts were categorized as parts with not reasonable lead times and that constituted significant portions of the total lead time. Out of the 43 identified problems, there were 17 that could be classified as root causes using fishbone diagrams. The three supply chain parts, the 17 root causes and all ten suggested solutions were prioritized in this step and decided to get the further attention. The third step was to generate solutions by conducting a second literature review based on the prioritized supply chain parts, root causes and suggested solutions that was determined during the prior step. First, general solutions were generated from the literature that later were adapted to fit the current situation and resulted in eight Ericsson specific solutions. The fourth step was to evaluate these solutions in combination, which led to a recommended combination of solutions that provided the greatest lead time reduction. Also the requirements for implementing these solutions were presented in this step. The four steps resulted in two arrangements of the supply chain: the Regional supply chain and the Alternative supply chain, both described in detail in Section 9.1.2. The main difference between the two supply chains and the existing supply chain is the replacement of EDC GBG with a supply hub. This included a rearrangement of the production in terms of moving the node production and the CODP to the supply hub and thus closer to the customer. The Regional supply chain is used when ATM orders products from the agreed regional product portfolio and the Alternative supply chain is used when the orders refer to products outside this portfolio. Notice that the Regional supply chain is intended to cover the main flow and the Alternative supply chain will act more as a complement to it. As can be seen in Table 39, the lead time for the Regional supply chain is expected to be 17 days, since several steps in the current supply chain will not be experienced by ATM with this arrangement. It is more difficult to estimate the lead time reduction for the Alternative supply chain given that there are no measurements for the eliminated activities. However, since the number of activities and the waiting time is reduced, the lead time that ATM experiences will be reduced as well.

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Table 39. Lead times for the Regional supply chain and the Alternative supply chain in comparison with the existing supply chain.


Current Lead Time (days)

Expected Lead Time (days)

Best Case Normal Case Worst Case RSC ASC T1 Local processing 14 28 49 0 Reduced T2 Handover 2 3 3 0 Unchanged T3 Ordering 1 2 2 0 Unchanged T7 Production 1 1 24 0 Unchanged T8 EDC inbound 3 3 3 0 Unchanged

T9 EDC (Supply hub) 7 32 50 2 Reduced

T10 EDC outbound 15 15 15 15 Unchanged 43 84 146 17 Reduced

As stated in the introductory chapter of the report, Ericsson has a long term goal of reducing the total lead time with 50 %. By being able to offer a lead time of 17 days with the Regional supply chain, this goal will be reached for both the best, the normal and the worst case scenarios in the current supply chain. In fact, the reduction will be 60, 80 and 88 % respectively for the three cases, which can be seen in Table 40 below.

Table 40. The lead time reduction accomplished with the Regional supply chain in the three different cases.

Scenario of Today Current Lead Time (Days)

RSC Lead Time (Days)

Lead Time Reduction (%)

Best Case 43 17 60 Normal Case 84 17 80 Worst Case 146 17 88

To achieve the lead time of 17 days for the Regional supply chain, there are some requirements that must be met. The requirements have been described per Ericsson specific solution in Section 8.2 and for the solutions combined in Section 9.1.1. The requirements for the recommended solutions are listed below. Notice that it is the same requirements for Regional supply chain as for the Alternative supply chain, despite that the regional product portfolio is not relevant for the latter arrangement.

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• Regional product portfolio • Short term: An operative L/C as the goods are ready for shipment

Long term: BPO as payment method • CIP, DAP or DAT incoterm • Short term: Verdi solution ready before CPO


Since the purpose of the study not only aimed at reducing the lead time, but also to improve the customer service level, it is important that the solutions will increase the current service level. Notice that the service level refers to delivery service in this study. As can be seen in Table 41, the delivery service will be improved with both the Regional supply chain and the Alternative supply chain given that the service elements will either be improved or unchanged, and not deteriorated. An explanation to whether the service elements are improved or unchanged can be found in Section 9.1.2.

Table 41. The expected effects on the delivery service and its service elements.

Delivery Service Element Service Level RSC ASC

Lead time Improved Improved Delivery reliability Improved Improved

Delivery dependability Improved Unchanged Stock availability Improved Unchanged

Information exchange Improved Improved Flexibility Unchanged Improved

Improved Improved To summarize, the conclusions that can be made is that Ericsson will be able to offer a significantly shorter lead time to ATM, provided that the recommended solutions are implemented and the existing supply chain is rearranged into the Regional supply chain and the Alternative supply chain. Moreover, the customer will also experience an improved service level in both cases. Therefore, the purpose of the study is considered to be fulfilled.

DISCUSSION

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11 DISCUSSION

The discussion chapter presents a critical review of the applied research methods and delimitations made to approach the objectives of the study. Potential sources of error are highlighted and their effects on the final result is discussed. The generalizability of the result, the contribution of the study and recommendations for further studies are also considered.

DISCUSSION

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11.1 Critical Review of the Result The purpose of the study is to give recommendations for improvements that reduces the lead time and improves the service level, which has resulted in two different supply chains that are both based on the supply hub concept. The Regional supply chain is for situations when ATM is ordering from the regional product portfolio, which is created in collaboration with the customers and the local companies in RMED. The estimated customer lead time for the regional supply chain is 17 days. The Alternative supply chain is for situations when ATM places orders that does not refer to the regional portfolio. By doing so, the modules need to be manufactured after the requirements of ATM, which can be likened with the current situation. However, the Alternative supply chain will have a shorter lead time than the current state since there will be a reduced number of activities and waiting times. Both supply chains will result in an improved service level. The choice of delimitation that most likely had the largest influence on the final recommendation is that the respondents were limited to merely Ericsson employees. The area of investigation is rather wide and it would have been desirable to include respondents from all members of the supply chain in order to provide a precise reflection of the current state or to give firm recommendations. However, that would have been difficult considering that the relations between Ericsson and their partners were not to be affected. It can be sensitive for external parties to highlight their shortcomings and make them visible to others. Instead, this study includes Ericsson employees that work directly with the external companies and therefore have a moderately view of their perspectives and can determine if the recommended solutions are feasible or not. Using the same reasoning as above, it would have been preferable to interview all individuals working within the supply chain. A larger number of respondents could have highlighted issues that are not of this reports known and contributed to different perspectives. Considering the limited time frame of the project, a delimitation was made to interview a restricted number of individuals that gave an as accurate picture of the current state as possible. This was made sure by selecting the respondents in collaboration with the supervisor at Ericsson. Hence, the problems addressed in this work were for most of the cases highlighted by several members in the supply chain and can therefore be assumed to be the main issues. Most of the interviews were performed in person with the respondents on the premises of Ericsson located in Kista. It is assumed to not have affected the result significantly given that the respondents are working on core positions. The cases when interviews were conducted over telephone are also assumed to not have affected the result noticeably because when ambiguities arose, the respondents were asked to illuminate the answer until the matter was clarified. Another delimitation made is to not investigate the costs for Ericsson and other supply chain members to implement the recommended solutions. Yet, the reasonableness in terms of costs for the implementation has been assessed in consultation with Ericsson employees and thereby have an estimate been obtained.

DISCUSSION

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Finally, it has been difficult to provide a precise result given that the area of investigation is great and it would have required more resources and time. Instead, this report highlights the potentials for lead time reductions and recommend preferable actions. The actions and their impact on the customer order lead time has been agreed with Ericsson and is considered to be reasonable. Thus, the purpose of the study is considered to be fulfilled despite the disadvantages of the selected methods and delimitations. 11.2 Generalization of the Result Because the final result is specific for Ericsson and the studied supply chain, the result is regarded as generalizable in cases when similar set of supply chains exist. It could be the case for Ericsson, for similar customers to ATM or for supply chains in comparable regions. However, the result is based on general solutions that can be adapted and applied to other companies and supply chains with comparable problems highlighted in this report. For example, it can be relevant for companies and supply chains that experience excessive lead times in the fulfilment process or caused by the L/C process. 11.3 Research Ethics Ethical principles have been necessary to take into consideration during this study to ensure good quality and that morally acceptable methods are used. As described in the methodology chapter, a number of interviews have been conducted which comes with the risks that the respondents can be harmed or put in a position of discomfort. This has been avoided by inviting the respondents to participate on a voluntary basis. Furthermore, it was clarified for the respondents that they will be a part of this study and were offered to be anonymous, which turned out to not be desired in any case. The respondents have also been let known that it is possible to withdraw from the study at any time. Moreover, the literature of the referred sources has been studied carefully to avoid mis-‐interpretations and distorted information in the report. The literature review has been made inductively rather than deductively, meaning that it has been made with an open attitude and not tried to distort the gathered information to fit the study. 11.4 Contributions of the Study The academic contribution is considered to be the identified potentials for improvements, since most of them are general and important to consider whether it is the case of another supply chain, individual company or another industry than the telecom business. Thus, the potentials can act as a basis to ensure efficiency or for improvements. Additionally, the report consists of a compilation of the literature about supply chains and lead time reduction and can therefore function as a source for gathering of fundamental knowledge. From the Ericsson point of view, this study has presented a result that will reduce the customer lead time and increase the service level for the studied case. Besides from that, it has contributed with an overall map for the current state and highlighted the main problems. Several of the identified problems are issues that are not specific for this case, but are general for Ericsson and

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their supply chains. This study is therefore interesting for other Ericsson employees that are not a part of the studied supply chain. 11.5 Recommendations for Further Studies With foundation in the critical review of the result, it would be interesting from the company perspective to examine the lead time reduction more precisely for the two different supply chains. Furthermore, the recommendations are not specifying the type of product configurator, coordination hub or end-‐to-‐end system and how the regional product portfolio should be designed. It would therefore be recommended to perform further studies to determine the most appropriate characteristic. From the academic perspective, it would be interesting to investigate the payment method BPO further and study how well it has worked in practice considering the new technology.

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Picard, J. (1983). Physical Distribution Organization in Multinationals: the Position of Authority. International Journal of Physical Distribution & Logistics Management , 20-‐32. Porter, M. E. (1985). The Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press. Sandberg, E. (2015). Logistik och strategi. Lund: Studentlitteratur. Seidman, I. (2006). Interviewing as Qualitative Research: A Guide for Researchers in Education and the Social Sciences (Third Edition uppl.). Teachers College, Columbia University. Sharman, G. (1984). The Rediscovery of Logistics. Harvard Business Review , ss. 71-‐80. Skjott-‐Larsen, T., Schary, P. B., Mikkola, J. H., & Kotzab, H. (2007). Managing the Global Supply Chain (3rd uppl.). Copenhagen: Copenhagen Business School Press. Stalk, G., & Hout, T. (1990). Competing Against Time: How Time-‐based Competition Is Reshaping Global Markets. New York: The Free Press. Stalk, G., & Webber, A. M. (July-‐ August 1993). Japan's Dark Side of Time. Harvard Business Review , ss. 93-‐104. Steinfield, C., Lynne, M., & Wigand, R. (den 01 03 2011). Through a Glass Clearly: Standards, Architecture, and Process Transparency in Global Supply Chains. Journal of Management Information Systems , ss. 75-‐108. Stephan, K., & Boysen, N. (den 1 December 2011). Vis-‐à-‐vis vs. mixed dock door assignment: A comparison of different cross dock layouts. Operations Management Research , ss. 150-‐163. Stevens, G. C. (1989). Integrating the Supply Chain. International Journal of Physical Distribution & Materials , 19 (8), 3-‐8. Stock, J. R., & Lambert, D. M. (2001). Strategic Logistics Management. McGraw-‐Hill. Storhagen, N. G. (2003). Logistik -‐ grunder och möjligheter. Nils G Storhagen and Liber AB. Susmus, T., & Baslangic, S. O. (May 2015). The New Payment Term BRO and its Effects on Turkish International Business. Procedia Economics and Finance , ss. 321-‐330. Taylor, D. H. (1997). Global Cases in Logistics and Supply Chain Management (1st uppl.). Thomson Learning. Torquato, J. (den 18 April 2016). ICC Releases BPO Guidelines for Banks. Trade Finance , s. 126.

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Towill, D. R. (1996). Time Compression and Supply Chain Management -‐ A Guided Tour. Supply Chain Management: An International Journal , 1 (1), 15-‐27. Towill, D., & Christopher, M. (2002). The Supply Chain Strategy Conundrum: To be Lean Or Agile or To be Lean And Agile? International Journal of Logistics Research and Applications , 5 (3), ss. 299-‐309. Van Hoek, R. I. (1998). Reconfiguring the Supply Chain to Implement Postponed Manufacturing. The International Journal of Logistics Management , 9 (1), ss. 95-‐110. Wang, F., Lin, J., & Liu, X. (den 1 May 2010). Three-‐dimensional model of customer order decoupling point position in mass customisation. International Journal of Production Research , 48, ss. 3741-‐3757. Whyte, C. (April/May 2003). Motorola's Battle with Supply and Demand Chain Complexity. Supply and Demand Chain Executive and iSource Business .

Oral Aglert, R. (den 19 April 2016). Global Supply Chain Architect, BURA. (J. Larsson, & M. Stenberg, Interviewer) Benrabah, M. (den 1 Mars 2016a). Account Supply Responsible, Ericsson Algeria. (J. Larsson, & M. Stenberg, Interviewer) Benrabah, M. (den 11 April 2016b). Account Supply Responsible, Ericsson Algeria. (J. Larsson, & M. Stenberg, Interviewer) Braun, S. (den 15 February 2016). Cross Process Driver Planning, BURA. (J. Larsson, & M. Stenberg, Interviewer) Carlheimer, Y. (den 2 Mars 2016a). Head of Inbound Electronics, BURA. (J. Larsson, & M. Stenberg, Interviewer) Carlheimer, Y. (den 12 April 2016b). Head of Inbound Electronics, BURA. (J. Larsson, & M. Stenberg, Interviewer) Edwertz, D. (den 22 April 2016). Special Projects, BURA. (J. Larsson, & M. Stenberg, Interviewer) Ersten, J. (den 23 February 2016). Manager Production & Test, BURA. (J. Larsson, & M. Stenberg, Interviewer) Forsberg, H. (den 21 April 2016). Program Manager Regional Supply Hubs, BURA. (J. Larsson, & M. Stenberg, Interviewer)

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Holmqvist, L. (den 21 April 2016). LC Coordinator ATM, BURA. (J. Larsson, & M. Stenberg, Interviewer) Högberg, M. (den 19 April 2016). Strategic Product Manager, BURA. (J. Larsson, & M. Stenberg, Interviewer) Ianev, I. (den 17 February 2016a). Strategic Supply Manager Global Supply, BURA. (J. Larsson, & M. Stenberg, Interviewer) Ianev, I. (den 18 April 2016b). Strategic Supply Manager Global Supply, BURA. (J. Larsson, & M. Stenberg, Interviewer) Johansson, C. (den 08 February 2016a). Head of Operational Efficiency, BURA. (J. Larsson, & M. Stenberg, Interviewer) Johansson, C. (den 1 Mars 2016b). Head of Operational Efficiency, BURA. (J. Larsson, & M. Stenberg, Interviewer) Josepson, J. (den 20 April 2016). Project Manager, Ericsson Tallinn. (J. Larsson, & M. Stenberg, Interviewer) Kjellander, A. (den 18 April 2016). Head of Radio Supply, BURA. (J. Larsson, & M. Stenberg, Interviewer) Kristoffersson, M. (den 20 April 2016). Performance Manager EDC GBG, BURA. (J. Larsson, & M. Stenberg, Interviewer) Lindberg, P. (den 25 April 2016). Senior Trade Compliance Advisor. (J. Larsson, & M. Stenberg, Interviewer) Magnusson, L. (den 25 April 2016a). Cross Process Driver Logistics, BURA. (J. Larsson, & M. Stenberg, Interviewer) Magnusson, L. (den 3 May 2016b). Cross Process Driver Logistics, BURA. (J. Larsson, & M. Stenberg, Interviewer) Magnusson, L. (den 18 May 2016c). Cross Process Driver Logistics, BURA. (J. Larsson, Interviewer) Neuman, J. (den 2 Mars 2016a). Head of Inbound Electromechanics, BURA. (J. Larsson, & M. Stenberg, Interviewer) Neuman, J. (den 12 April 2016b). Head of Inbound Electromechanics, BURA. (J. Larsson, & M. Stenberg, Interviewer)

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Pallase, V. (den 20 April 2016). Head of Supply Chain Management, Ericsson Tallinn. (J. Larsson, & M. Stenberg, Interviewer) Pettersson, K. (den 23 February 2016a). Strategic Supply Manager Site Material, BURA. (J. Larsson, & M. Stenberg, Interviewer) Pettersson, K. (den 14 April 2016b). Strategic Supply Manager Site Material, BURA. (J. Larsson, & M. Stenberg, Interviewer) Radenholt, D. (den 22 April 2016). R&D Manager e-‐Commerce, BURA. (J. Larsson, & M. Stenberg, Interviewer) Slotte, C. (den 15 April 2016). Operational Efficiency EDC GBG, BURA. (J. Larsson, & M. Stenberg, Interviewer) Tamme, K. (den 21 April 2016). Manager of Production and Demand Planning, Ericsson Tallinn. (J. Larsson, & M. Stenberg, Interviewer) Tomba, A. (den 19 April 2016). Short Term Planner, Ericsson Tallinn. (J. Larsson, & M. Stenberg, Interviewer) Ur Rehman, S. F. (den 25 February 2016a). Supply Chain Manager RMED, BURA. (J. Larsson, & M. Stenberg, Interviewer) Ur Rehman, S. F. (den 11 April 2016b). Supply Chain Manager RMED, BURA. (J. Larsson, & M. Stenberg, Interviewer) Wilhelmsson, J. (den 18 April 2016). Order & Delivery Manager, BURA. (J. Larsson, & M. Stenberg, Interviewer) Zigulin, A. (den 18 April 2016). FMR Production Planner, Ericsson Tallinn. (J. Larsson, & M. Stenberg, Interviewer) Özdogru, D. (den 11 April 2016). Contract Execution Manager RMED, BURA. (J. Larsson, & M. Stenberg, Interviewer) Özelbir, Ö. (den 11 February 2016). Head of Supply Chain Management Filter & Digital, BURA. (J. Larsson, & M. Stenberg, Interviewer)

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Websites Ericsson AB. (2013). This is Ericsson. Hämtat från http://www.ericsson.com den 12 February 2016 International Chamber of Commerce. (2016). The Incoterms Rules. Gathered from International Chamber of Commerce: http://www.iccwbo.org/products-‐and-‐services/trade-‐facilitation/incoterms-‐2010/the-‐incoterms-‐rules/ den 21 May 2016

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APPENDIX A. COLLECTION OF ABBREVIATIONS 3PL Third Part Logistics ASP Application Service Provider ASR Account Supply Responsible ATM Algeria Telecom Mobile BPO Bank Payment Obligation BURA Business Unit Radio CIP Carriage and Insurance Paid To CPO Customer Purchase Order CPT Carried Paid To CRM360 A sales tool CTP Customer Takeover Point DAP Delivery at Place DAT Delivery at Terminal DO Delivery Order DSP Distribution Service Provider EAL Ericsson Algeria ECP Ericsson Configuration Portfolio EDC Ericsson Distribution Center EMS External Manufacturing Site ESS Ericsson Supply Site GBG Gothenburg GI Goods Issued GR Goods Received JIT Just-‐In-‐Time KAM Key Account Manager ONE Ericsson’s SAP system PO Purchase Order PoD Proof of Delivery SMA Surface Mounted Assembly STO Stock Transfer Order RFS Ready for Shipment RMED Region Mediterranean Verdi A tendering system

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APPENDIX B. RESPONDENTS – PLANNING PHASE The people interviewed during the planning phase of the project is presented in Table 42. The interviews were unconstructed and the aim was to create an understanding of the current problem.

Table 42. Respondents interviewed during the planning phase of the study.

Respondent Position, Organization Benrabah, Myra Account Supply Responsible, Ericsson Algeria Braun, Sven Cross Process Driver Planning, BURA Carlheimer, Ylva Head of Inbound Electronics, BURA Ersten, Jörgen Manager Production & Test, BURA Ianev, Ilia Strategic Supply Manager Global Supply, BURA Johansson, Christer Head of Operational Efficiency, BURA Neuman, Jesper Head of Inbound Electromechanics, BURA Pettersson, Katarina Strategic Supply Manager Site Material, BURA Ur Rehman, Sheikh Faisal Supply Chain Manager RMED, BURA Özelbir, Özay Head of Supply Chain Management Filter & Digital, BURA

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APPENDIX C. RESPONDENTS – CURRENT STATE MAPPING The people interviewed during the current state mapping is presented in Table 43. The interviews were a combination between structured and unconstructed and the aim was to map the current state of a specific supply chain.

Table 43. Respondents interviewed during the current state mapping.

Respondent Position, Organization Aglert, Roland Global Supply Chain Architect, BURA Benrabah, Myra Account Supply Responsible, Ericsson Algeria Carlheimer, Ylva Head of Inbound Electronics, BURA Edwertz, David Special Projects, BURA Forsberg, Henrik Program Manager Regional Supply Hubs, BURA Holmqvist, Liis LC Coordinator ATM, BURA Högberg, Martin Strategic Product Manager, BURA Ianev, Ilia Strategic Supply Manager Global Supply, BURA Josepson, Jüri Project Manager, Ericsson Tallinn Kjellander, Anders Head of Radio Supply, BURA Kristoffersson, Marie Performance Manager EDC GBG, BURA Lindberg, Per Senior Trade Compliance Advisor, BURA Magnusson, Lars Cross Process Driver Logistics, BURA Neuman, Jesper Head of Inbound Electromechanics, BURA Pallase, Valentin Head of Supply Chain Management, Ericsson Tallinn Pettersson, Katarina Strategic Supply Manager Site Material, BURA Radenholt, Dennis R&D Manager e-‐Commerce, BURA Slotte, Carl Operational Efficiency EDC GBG, BURA Tamme, Kairi Manager of Production and Demand Planning,

Ericsson Tallinn Tomba, Andrei Short Term Planner, Ericsson Tallinn Ur Rehman, Sheikh Faisal Supply Chain Manager RMED, BURA Wilhelmsson, Johan Order & Delivery Manager, BURA Zigulin, Aleksei FMR Production Planner, Ericsson Tallinn Özdogru, Defne Contract Execution Manager RMED, BURA

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APPENDIX D. GENERIC INTERVIEW QUESTIONS INFORMATION ABOUT THE RESPONDENT Name: Position: What are your responsibilities? How long have you worked at the current position and at the company? CURRENT STATE MAPPING How is the supply chain structured from your point of view in terms of:

• Members? • Activities and processes?

How are goods distributed in your part of the supply chain in terms of:

• Between which members? • Mode of transportation? • Frequencies?

How is inventory handled in you part of the supply chain in terms of:

• Location of buffers? • Type of buffers? • Buffer levels? • Responsibility of buffers?

Do you have any pronounced strategies for the material and information flow in your part of the supply chain in terms of:

• Lean and agile? • Postponement and speculation? • Customer order decoupling point? • Other strategies?

How is information managed in your part of the supply chain in terms of:

• Ways of communication and information sharing? • Between which members? • To what purpose? • Type of information? • Frequency of exchange?

What are the lead times for the activities and processes?

• What is this number based on? • Do you consider it to be reasonable?

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Do you experience any problems in your part of the supply chain? • Can these problems be connected to excessive lead times? • Do you have any suggested solutions? • What are the requirements for implementing the suggested solutions?

ADDITIONAL QUESTIONS Do you have any additional information that you think this study would benefit from? Do you have any suggestions for people who you think might be useful for this study to meet?

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APPENDIX E. LITERATURE RESEARCH

Table 44. Literature research based on key words.

Key word Number of results/ relevant results

Title Reference

Crossdocking synchronization

2006/1 Synchronization in Cross-‐Docking Networks: A Research Classification and Framework

Buijs, P., Vis, I. F., & Carlo, H. J. (2014)

Crossdock 924/3 An integrated model for crossdock operations including staging

Luo, G., & Noble, J. S. (2012)

Truck dock assignment problem with operational time constraint within crossdocks

Miao, Z., Lim, A., & Ma, H. (2009)

Vis-‐à-‐vis vs. mixed dock door assignment: A comparison of different cross dock layouts

Stephan, K., & Boysen, N. (2011)

Transit distribution system supply chain

55148/1 In-‐transit distribution as a strategy in a global distribution system

Claesson, F., & Hilletofth, P. (2011)

Incoterms 3067/1 Mastering the Business of Global Trade: Negotiating Competitive Advantage Contractual Best Practices, Incoterms, and Leveragaging Supply Chain Options

Cook, T. A. (2014)

Transparent supply chain implementation

43426/1 The transparent supply chain: from resistance to implementation at Nike and Levi-‐Strauss

Doorey, D. J. (2011)

Transparency Supply chain

101102/2 Trade-‐offs in supply chain transparency: the case of Nudie Jeans Co

Egels-‐Zandén, N., Hulthén, K., & Wulff, G. (2014)

Through a Glass Clearly: Standards, Architecture, and Process Transparency in Global Supply Chains.

Steinfield, C., Lynne, M., & Wigand, R. (2011)

Value stream mapping 281344/1 VALUE STREAM DESIGNING A FACTORY

Erlach, K., & Sheehan, E. (2016)

Vendor managed inventory

11323/1 Vendor-‐managed inventory: a review based on dimensions

Govindan, K. (2013)

CODP manufacturing strategy

274/1 Differentiated manufacturing focus

Hallgren, M., & Olhager, J. (2006)

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Product configurator lead time

2366/1 he Impact of Product Configurators on Lead Times in Engineering-‐Oriented Companies

Haug, A., Hvam, L., & Mortensen, N. H. (2011)

Coordination hub 56768/1 Going Concerns: The Governance of Interorganizational Coordination Hubs

Lynne, M., & Quang, B. (2012

The bullwhip effect 9774/1 The bullwhip effect under different information-‐sharing settings: a perspective on price sensitive demand that incorporates price dynamics

Ma, Y., Wang, N., Che, A., Huang, Y., & Xu, J. (2013)

Letter of Credit proactive 27118/1 Expert Outlines Checklist of Remedies for Common Letter of Credit Discrepancies

Mehta, R. (2005)

Leagile supply chain 938/1 Leagility: Integrating the Lean and Agile Manufacturing Paradigms in the Total Supply Chain

Naylor, B. J., Naim, M. M., & Berry, D. (1999)

Decoupling point supply chain management

9308/1 The Role of Decoupling Points in Value Chain Management

Olhager, J. (2012)

Customer order decoupling point

25685/1 Three-‐dimensional model of customer order decoupling point position in mass customisation

Wang, F., Lin, J., & Liu, X. (2010)

Distribution supply chain management

528152/1 Physical Distribution Organization in Multinationals: the Position of Authority

Picard, J. (1983)

Letter of credit slow 151728/1 The New Payment Term BRO and its Effects on Turkish International Business

Susmus, T., & Baslangic, S. O. (2015)

BPO payment 7658/1 ICC Releases BPO Guidelines for Banks

Torquato, J. (2016)

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Table 45. Literature research based on references.

Source Title Reference Found from other article The Basics of Process Mapping Damelio, R. (2011). Found from other article Business process re-‐engineering

the supply chain Evans, G., Towill, D., & Naim, M. (1995)

Found from other article Product Information Management for Mass Customization: Connecting Customer, Front-‐office and Back-‐office for Fast and Efficient Customization

Forza, C., & Salvador, F. (2006)

Found from other article As an Example of Innovation in International Finance: Bank Payment Obligation (BPO)

Göleç, N. (2015)

Recommended by supervisor Schools in logistics research? Gammelgaard, B. (2004) Found from other article Innovation Versus Complexity:

What Is Too Much of a Good Thing? Gottfredson, M., & Aspinall, K. (2005)

Found from other article Banking On BPOs Green, P. L. (2012) Literature from course TMQU12 Learning to Evolve: A Review of

Contemporary Lean Thinking Hines, P., Holweg, M., & Rich, N. (2004)

Found from other article Improving the Quotation Process With Product Configuration

Hvam, L., Pape, S., & Nielsen, M. (2006)

Found from other article Reengineering of the Quotation Process -‐ Application of Knowledge Based Systems

Hvam, L., Malis, M., Hansen, B., & Riis, J. (2004)

Found from other source Issues in Supply Chain Management

Lambert, D. M., & Cooper, M. C. (2000)

Found from other source Hewlett-‐Packard Gains Control of Inventory and Service thruogh Design for Localization

Lee, H. L., Billington, C., & Carter, B. (1993)

Literature from course TMQU12 The Toyota Way Fieldbook: A Practical Guide for Implementing Toyota's 4Ps

Liker, J. K., & Meier, D. (2006)

Found from other source Closing the credibility gap: The challenges of corporate responsibility reporting

MacLean, R., & Rebernak, K. (2007)

Found from other source Time compression in the supply chain: information management is the vital ingredient

Mason-‐Jones, R., & Towill, D. R. (1998)

Literature from course TETS31 Lean, Agile or Leagile? Matching Your Supply Chain to the Marketplace

Mason-‐Jones, R., Naylor, B., & Towill, D. R. (2000)

Literature from course TETS31 Supply Chain Postponement and Speculation Strategies: How To Choose the Right Strategy

Pagh, J. D., & Cooper, M. C. (1998)

Literature from course TETS31 The Competitive Advantage: Creating and Sustaining Superior Performance

Porter, M. E. (1985)

Found from other source The Rediscovery of Logistics Sharman, G. (1984) Found from other source Japan's Dark Side of Time Stalk, G., & Webber, A. M. (1993) Found from other source Integrating the Supply Chain Stevens, G. C. (1989)

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Found from other source Time Compression and Supply Chain Management -‐ A Guided Tour

Towill, D. R. (1996)

Literature from course TMQU12 The Supply Chain Strategy Conundrum: To be Lean Or Agile or To be Lean And Agile?

Towill, D., & Christopher, M. (2002)

Literature from course TETS31 Reconfiguring the Supply Chain to Implement Postponed Manufacturing

Van Hoek, R. I. (1998)

Found from other source Motorola's Battle with Supply and Demand Chain Complexity

Whyte, C. (2003)

Found from other source Optimizing the door assignment in LTL-‐terminals

Chmielewski, A., Naujoks, B., Janas, M., & Clausen, U. (2009)

Found from other source The Agile Supply Chain: Competing in Volatile Markets

Christopher, M. (2000)

Literature from course TETS31 Building the Resilient Supply Chain Christopher, M., & Peck, H. (2004)