Supplier Selection - Issues Facing Manufacturing Startups and How to Deal With Them

Abstract

The phenomenon of manufacturing startups has grown in popularity during recent years. With this increased popularity follows issues that need to be addressed in order for such startups to continue to develop and reach their goals. A critical and resource consuming business activity for any manufacturing company is supplier selection. Therefore, the purpose of this study was to explain and contribute to an increased understanding of the issues small hardware manufacturing companies face when selecting suppliers and how certain factors affects the supplier selection process. In order to fulfil the purpose a qualitative case study was conducted where semi-structured interviews with different startups, representing small companies, were the main source of primary data. A theoretical framework regarding supplier selection methods together with empirical findings have lead to interesting results. Initially, the fact that startups lack resources suggests that focus must be on basic core activities such as innovation and product development while important activities such as supplier selection is neglected. The results also show that existing methods for supplier selection is not suitable for startups based on their size and financial strength. However, they would still benefit from the structure that such models provide when making critical business decisions such as selecting suppliers. Upon analysing methods for supplier selection it has become clear that traditional factors such as price have become “order qualifying” while new, soft factors such as trust have become “order winning”. In order to select a supplier that is suitable for the needs of a startup, critical factors must be identified to be able to stipulate a framework for what parts of existing models that can be used. Hence, a tailor-made solution have been created where parts of traditional methods have been cherry-picked to obtain structure.