Conclusion of the current state and possible areas of development

There are a number of different aspects influencing the current state of production ser-vice procurement. These factors are related to the scope of the serser-vices, the supplier and contract base, contract validities, spend distribution and revenue logics of the service contracts. Additionally, the roles of different departments of the case company, the in-ternal customer, purchasing and the supplier have an impact on the present situation.

The allocation and management of related resources are considered highly important.

Although as seen in this chapter, the managing of the mentioned factors isn’t simple or self-explanatory. In fact, different characteristics often have certain benefits and on the contrary, specific challenges. Hence, in the current state in Raahe, both advantages and disadvantages have emerged.

One of the most significant influencing features is the scopes of the agreements. Since there are a number of different service contracts in different factory areas, the amount of interfaces between services are increased. The interfaces can cause certain situations in the middle-ground when the responsibilities are unclear. Hence, the interfaces compli-cate the drafting of contract specifications. At worst, some of the same services provid-ed might be chargprovid-ed multiple times. The scopes of contracts should also be adjustprovid-ed according to customer company’s processes. Currently, in some of the services the sup-pliers actions don’t necessarily promote the buying company’s production process. On the contrary, as seen in the case of Luleå, having extremely wide scopes in agreements might also lead to some challenges. These have to do with the optimization of own ac-tion from the supplier, which have caused difficulties for the buying company.

The scopes are directly related to the service specifications. With properly drafted speci-fications, the service might be functional regardless of the scope of the contract. How-ever, in Raahe the level of specifications are considered quite reasonable and the con-tract contents have been, in many cases, adjusted and updated numerous times in the past. Hence, the cost-effectiveness and quality of the services is somewhat more up to the proper scopes and areas of different contracts.

The supplier base also raises some challenges and advantages. Due there are currently a number of different service providers the flexibility of the services might be endan-gered. Since the services are divided to small-sized areas which are often performed by different contractors, the adapting to exceptional situations is found difficult. Addition-ally, deviation handling and monitoring of the service provider are challenged in the interface area where separate contractors are working. Furthermore, some stated that the same reasons have negative effect on the development of the service. Due to the fact

that service areas are narrow and the contractor might easily be replaced after the con-tract period, some of the suppliers aren’t such willing to improve the service. Although, having a number of suppliers working in the same factory might increase the internal competition. Appearing extra work can fluently be tendered between the existing ser-vice providers. In addition, the competitive situation in between contract periods can be considered functional since there are a number of existing contractors able to provide proposal.

In addition to the interfaces, the amount of minor contracts leads to multiple other chal-lenges. First off, the contract management requires somewhat wasted resources from the purchasing department and the internal customers of the buying company. Moreover, small-scale contracts aren’t considered as the most attractive contracts for the suppliers to offer. The size of the contracts is also directly connected to the pricing. When the value and the expected revenue from the contract are low, the investments required from the supplier raises the prices. In the low-volume contracts the agreement period is like-wise often short, which makes the supplier to charge the buying company for the uncer-tainty and risks regarding the continuance of the service. The invested machinery might be left unused, which could be crucial for the service providers. The other extreme of the spend in the services are the few large ones. In these cases, the existing supplier might be excessively potential alternative, when selecting the provider for the next peri-od. This is due to the fact that the required investments are already made and the suppli-er has the expsuppli-erience from a long-scale contract psuppli-eriod.

The current situation causes stress to the purchasing department. The quantity of differ-ent contracts causes increased work load, since the procuremdiffer-ent departmdiffer-ent is somehow participated in every step of the contract process. This requires the management of all the potential, ongoing and ending agreements. Presently, the structure of the contract portfolio, consisting of numerous differently valued and sized agreements demands a lot of resources and the procurement department is not necessarily enough capable of deal-ing with existdeal-ing supplier relationships and contracts. Furthermore, the majority of the contract periods are ending within few years, which means a significant amount of work for the purchaser simultaneously. As said, the preparations for next agreement periods need to be planned way beforehand, which further indicates that the time for develop-ment is pressing.

The contracts require resources from the contract supervision and from the suppliers. At the moment, every contract demands a main supervisor. Additionally, a contract might have multiple operative monitors, who are performing their service supervision tasks alongside their own duties. The operative monitoring is quire scattered, which might have led to weaker handling of deviations and service quality. In terms of the machines used by the suppliers, the rates of utilization are not the highest possible ones, which affect the costs. Same type of machines are used in different services around the factory, however, since owned by different suppliers they can’t be used broadly. This affects the

flexibility of the service. Also the workforce of the supplier can’t be exploited flexibly in other service areas, unless it is provided by same supplier currently. The development possibilities are outlined in Figure 23.

The current state with similar services in the factory of Luleå can be considered as fairly opposite to the one in Raahe. In Luleå the services are partly performed in-house and there appears owned machinery and equipment. The amount of suppliers and contracts is remarkably lower, which reduces the quantity of service interfaces and effects the competitive situation. The service quality has somewhat suffered in Luleå, partly due to the specifications and the optimization of own action by the suppliers. The suppliers are additionally fairly dominating and the supervision and monitoring of them are regarded as troubled. Similarly with Raahe, the situation in Luleå has its advantages and chal-lenges.

Figure 23: Development possibilities in the current state in Raahe