Developing a decision‐making framework for implementing purchasing synergy: a case study

Abstract

Purpose

The purpose of this paper is to report on research undertaken within a European‐based airline services firm. As a result of pressures within the airline industry the firm embarked on a cost reduction programme, recognising the need to achieve more synergy from its procurement spend, located in semi‐autonomous business units (BUs). The paper describes sequentially the two stages of the author's involvement in the project and the outputs and results realised.

Design/methodology/approach

The aim was to design a practical tool, based on academic inputs, which could be used by the business to achieve purchasing synergy. The research is reported in a case study format and develops an original mixed method approach. This approach combines interviews, a focus group, cognitive mapping and portfolio analysis and leads to the production of a decision‐making framework for implementing purchasing pooling.

Findings

The results illustrate that prior to the study, procurement was highly fragmented with little co‐ordination between BUs. The company needed to standardise many of its item specifications to facilitate purchasing pooling. A hierarchy is created as a valuable tool for understanding the various and conflicting factors in item selection for pooling initiatives. In addition, four purchasing strategies are identified, to support synergy in the firm.

Practical implications

The decision‐making framework developed for the business is used to illustrate how the firm achieved purchasing synergy across its BUs. The approach can similarly be adopted in organisations with a high level of fragmentation in their spend.

Originality/value

The research demonstrates the value of applying academic knowledge and multiple methods in creating practical solutions for managers. It also addresses some of the weaknesses identified in using single methods of analysis such as portfolios.

Citation

Smart, A. and Dudas, A. (2007), "Developing a decision‐making framework for implementing purchasing synergy: a case study", International Journal of Physical Distribution & Logistics Management, Vol. 37 No. 1, pp. 64-89. https://doi.org/10.1108/09600030710723327