Value-Driven vs. Market-Driven Purchasing of Kitchen Cabinets

Louise Beldsten1, Anders Bjornfot2 & Erik Sandberg3

1PhD student, Department of Management and Engineering, Linköping University, 581 83, Linköping, Sweden, Phone +46 13/281547, FAX +46 13/281101, louise.bildsten@liu.se
2Assistant Professor, Department of Civil, Mining, and Environmental Engineering, Luleå University of Technology, 971 81, Luleå, Sweden, Phone +46 920/492067, anders.bjornfot@ltu.se
3Assistant Professor, Department of Management and Engineering, Linköping University, 581 83, Linköping, Sweden, Phone +46 13/284492, erik.sandberg@liu.se

Abstract

In economic and management literature, the relationship between supplier and buyer can be more or less intimate. It can vary from market-driven with a constant change of suppliers to a value-driven relationship with one sole supplier. Purchasing strategies of construction companies have often been described as short-sighted, where price is the most considered aspect. Recent lean management literature promote value-driven purchasing, since it provides benefits such as just-in-time delivery, zero defects and customized products through close technical collaboration. This article hypothesises that value-driven purchasing of customized kitchen cabinets is more profitable than market-driven purchasing in industrialized housing construction. The hypothesis is examined through a case study of kitchen carpentry at one of Sweden‘s largest producers of industrialized prefabricated multi-storey housing. By comparing characteristics of market-driven vs. value-driven purchasing, this article aims to further clarify the benefits and drawbacks of these two strategies. At the case company, kitchens are ordered cabinet-by-cabinet and then installed inside the factory. The company is considering the possibility of a long-term relationship with a smaller local supplier that can deliver a new kind of innovative kitchen cabinet solution that is prefabricated. If the local supplier can meet the expectations of just-in-time delivery, zero defects and a product ―tailor-made‖ for the housing company, there is much to gain.

Keywords

Lean purchasing, Prefabrication, Purchasing strategies, Supply chain management

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Reference

Beldsten, L. , Bjornfot, A. & Sandberg, E. 2010, 'Value-Driven vs. Market-Driven Purchasing of Kitchen Cabinets' In:, Walsh, K. & Alves, T., 18th Annual Conference of the International Group for Lean Construction. Haifa, Israel, 14-16 Jul 2010. pp 202-211

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