Exploring the Development of Agricultural Commodity Sourcing Strategies: A Case Study on Coop Trading

Abstract

The increased strategic importance of the purchasing function has led to the creation of various frameworks and tools to aid practitioners in developing sourcing strategies that not only are more cost efficient, but that are also aligned to the objectives of an organization. Nonetheless, literature fails to address the application of such frameworks and tools in the agricultural industry. Given the fact that agricultural commodities can be just as important in terms of spend as noncommodities and commodities, this thesis seeks to explore the matter further. The frameworks of the strategic sourcing process outlined by Handfield, Giunipero, and Patterson (2011), the purchasing portfolio matrix founded by Kraljic (1983), and the Supplier Dutch Windmill model developed by Van Weele (2009) were identified as relevant frameworks and tools used for the development of sourcing strategies. Thus, the purpose of this thesis is to explore the theoretical roles that these frameworks and tools can play in determining sourcing strategies for agricultural commodities. Reviewing the literature led to the creation of a theoretical framework, in which the step of strategy development within the strategic sourcing process outlined by Handfield et al. (2011) was extended. The theoretical framework was then compared to the strategic sourcing process done in practice by Coop Trading. Coop Trading has only recently started using similar natured frameworks and tools and this enabled the motivations, advantages, and disadvantages of using these models to emerge. Findings reveal that Coop Trading does not fully utilize its version of the purchasing portfolio matrix to determine sourcing strategies and the general purpose of the matrix is unclear. This also applies to how the company links the product portfolio matrix to its version of the Dutch Windmill model. The mismatch between theory and practice could serve as a basis for the challenges that Coop Trading is facing in developing sourcing strategies for complex categories. Furthermore, the manner in which these models are applied largely changes on a buyer basis. Consequently, recommendations are given to Coop Trading in order to optimize the application of the framework and tools. Moreover, this thesis recommends that further research is conducted on the development of sourcing strategies for agricultural commodities in addition to how the application of similar natured frameworks can change on a buyer basis.