Abstract

This research addresses the absent knowledge on the triggers of supply base complexity decisions by studying the influence of problemistic search in that decision-making process. Commonly decisions made in three dimensions define the complexity of a supply base. These include: the number of suppliers in the supply base; the level of differentiation between these suppliers; and the level of inter-relationships among them. We departed from predominant theories in supply chain management research to explore this gap, since those theories implicitly assume that decision-makers are rational and make optimal decisions. While, existing studies on supply management have rather found that managers are often bounded rational and their decisions are mainly problem-driven. Therefore, we drew upon problemistic search as a core concept of the Behavioral Theory of the Firm. For the reason that this theory predicts that because of bounded rationality managers primarily focus on problems and make satisfactory decisions to solve those problems. Accordingly, problemistic search is commonly defined as the search for solutions triggered by organizational problems. To study this gap, multiple case studies were conducted in five manufacturing firms with in total eleven supply managers. The results indicate that problemistic search influencing decisions defining supply base complexity are invoked by both reactive triggers (actual problems) and proactive triggers (potential problems). Furthermore, reactive triggers appeared to be predominantly influencing changes in both the number of suppliers and the level of differentiation, while proactive triggers predominantly influenced changes in the level of inter-relationships. Lastly, the dimensions concerning the number of suppliers and the level of differentiation appeared to be highly related. A change in the one dimension consequently led to a change in the other dimension. These findings have not been described in the literature before.

Keywords: problemistic search; change triggers; supply base complexity; problems; decision-making; bounded rationality.

Supply Base Complexity Decision-Making:

A Multiple Case Study In the Light of Problemistic Search

Master Thesis

Halil Ibrahim Deniz

University of Groningen

Newcastle University Business School

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Institutional- and Research Related Information

Student: Halil Ibrahim Deniz

Institutions: University of Groningen & Newcastle University Business School Study: Double Degree MSc Operations Management

Submission date: 12-01-2020 Word count: 14582

Student number: S2973836 Faculty: Economics and Business

Program: MSc Technology and Operations Management Course title: Master’s Thesis TOM-DD Newcastle

Course code: EBM028A30 Supervisor (1st): Dr. ir. N.J. Pulles

Student number: 190615677

Faculty: Humanities and Social Sciences Program: MSc Operations and Supply Chain Management (4120F)

Course title: Dissertation Dual Award OM Course code: NBS8399

Supervisor (2nd): Dr. Q. Yu

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Acknowledgment

This thesis was conducted as part of the double degree master Operations Management. Having worked on this research from March 2020 on, I received a great deal of support and guidance throughout this process and program. Therefore, I would first like to express my sincere gratitude to my supervisor Dr. Niels Pulles. He supported me when I had difficulties in defining a topic that would contribute to both my research theme and my personal interest areas. I am grateful for his constructive- and direct feedback, which was sometimes challenging, but it was at the same time motivating me to improve my work. He did not only helped me in improving my thesis, but also contributed to the improvement of my general academic writing skills. In short, I am thankful for having him as my supervisor. I would also like to sincerely thank my second supervisor Dr. Qionglei Yu. Although, we have not met in person, she was always available and sincere in here guidance. Her feedback really helped me to improve my problem statement, and made me more aware of the importance of having a clear and adequate research methodology in order to derive valid insights. I would also like to express my appreciation to the interview participants for taking the time and making the effort to contribute to this research. It was a great pleasure to interview them all. Finally, I would like to thank my family, friends, fellow students and also lecturers for their support and feedback in the thesis writing process and also during the whole master program. I hope that I can at least (partly) return the favor with this thesis.

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Table of Contents

1. Introduction .................................................................................................................. 5 2. Theoretical Background ............................................................................................... 7

2.1. The behavioral theory of the firm and its current state in supply chain management . 7 2.2. Supply base complexity .................................................................................................. 8 2.3. Conceptual Framework .................................................................................................. 8

3. Methodology ............................................................................................................... 10 3.1. Research design ............................................................................................................ 10 3.2. Context and sampling ................................................................................................... 10 3.3. Data collection ............................................................................................................... 10 3.4. Data analysis ................................................................................................................. 13 3.5. Research quality assurance methods............................................................................ 14

4. Findings ...................................................................................................................... 15 4.1. Within-case analysis...................................................................................................... 15 4.2. Cross-case analysis........................................................................................................ 23

4.2.1 Reactive and proactive triggers of problemistic search processes in the supply base .................. 23 4.2.2 Reactive versus proactive triggers influencing different supply base complexity dimensions ..... 23 4.2.3 Consequential change in the number of suppliers and level of differentiation ............................ 24

5. Conclusion and Discussion ......................................................................................... 26 5.1. General discussion ........................................................................................................ 26 5.2. Theoretical implications ............................................................................................... 27 5.3. Managerial implications ............................................................................................... 28 5.4. Limitations and suggestions for future research.......................................................... 29

6. References .................................................................................................................. 30 7. Appendix ..................................................................................................................... 34

Appendix A: Interview Protocol ............................................................................................... 34 Appendix B: Code Tree Per Supply Base Complexity Dimension ........................................... 36

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1. INTRODUCTION Manufacturing firms have to deal with numerous and intertwined supply base issues, such as unreliable delivery and global value creation (Handfield and Nichols, 2004; Brandon-Jones et al., 2014), but also in particular with the contemporary and disruptive impact of the Coronavirus. These challenges and the complexity associated with increasingly globalizing supply bases have increased the necessity of adequately managing this strategic area (Handfield and Nichols, 2004). Together with the ever increasing trend of outsourcing, taking appropriate supply base decisions has become a key strategic issue (Choi and Krause, 2006; Wilhelm et al., 2016). In that sense, decisions made in three dimensions commonly define how complex the management of a supply base will be (Choi and Krause, 2006). These include: the number of suppliers in the supply base; the level of differentiation of these suppliers; and the level of inter-relationships among them. Making appropriate decisions within these Supply Base Complexity (SBC) dimensions is crucial, since the resulting level of complexity influences how well firms can coordinate their Supply Base Management (SBM) activities. This in turn impacts a firm’s ability to obtain superior resources and competitiveness, and thereby its performance (Brandon-Jones et al., 2014). However, although firms evidently differ in the level of SBC, it is not yet well understood why supply managers actually make certain decisions regarding the dimensions of SBC. Knowing and understanding why supply chain decision-makers actually change their strategic behavior in defining SBC is important for understanding the (firm) performance implications of these decisions. Extant literature has already focused on the impact of SBC on firm performance. They suggested that firms have to find an optimal level of SBC to maximize that performance (Choi and Krause, 2006; Bozarth et al., 2009; Brandon-Jones et al., 2014; Lu and Shang, 2017). Particularly, it was found that SBC decisions impact how well a firm’s supply base performs with regard to transaction costs, supply risk, supplier responsiveness and supplier innovation, which thus in turn influences firm performance (Chakravarty, 2014). However, it is equally important to know and understand why these changes are made, because of this apparent impact of SBC decisions on firm performance. In the rare case in which literature did consider SBC decision-making, it was mainly conceptual rather than empirical, which limits its practical usability (Choi and Krause, 2006). Accordingly, in light of this gap a review of existing research suggests that the currently available conceptual and rational theories may not adequately describe the managerial behavior observed in SBC decision-making. To better understand this apparent gap, this research draws on the Behavioral Theory of the Firm (BTOF) to explore why decision-makers initiate SBC changes. The BTOF is suitable for the purpose at hand as it focuses on explaining the decision-making processes of bounded rational managers (Augier and March, 2008; Posen et al., 2018). Hereby, we step outside the realm of existing decision-making frameworks in Supply Chain Management (SCM) that have, albeit implicitly, relied on standard economic theories (Ketokivi and Schroeder, 2004; Mantel et al., 2006; Carter et al., 2007). Whereas these theories assume that decision-makers are rational and possess perfect information to make optimal decisions. It is argued by the BTOF and indicated by empirical evidence that these rational paradigms can be relaxed as (supply) managers are often bounded rational (Simon, 1957; Kahneman and Tversky, 1972). Supply managers often rely on heuristics and intuition in decision-making due to for instance prior experience or limitations in information processing capability (Mantel et al., 2006; Carter et al., 2007). However, this influence of bounded rational decision-making in SBM, and specifically regarding SBC changes, has received scant attention in research. This gap restricts the usability and usefulness of SBC frameworks in practice. Therefore, considering the increasing dynamism of SBM (Lu and Shang, 2017), and the (implicit) reliance of SCM on rational decision-making theories, a fruitful research opportunity exists. A core concept in the BTOF that can address this gap concerns problemistic search, which is explained as follows. The BTOF argues that because of bounded rationality, decision-makers cannot pay

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attention to all areas within the firm. Managers therefore mainly focus on the areas in which problems are signaled. In relation to that, it is explained that due to bounded rationality, decision-makers are not able to optimally evaluate their performance. To ease the task of performance evaluation, they will create (implicit) aspirations based on for example historical firm performance. When problems relative to these aspirations are found, it is assumed that managers will initiate changes to the organization’s current practices. This is especially for the reason that bounded rational managers learn and act based on prior performance and problems. This problem-driven change process is called “problemistic search” (Cyert and March, 1963). Extant literature in similar settings which focused on problemistic search in organizational decision-making has already addressed gaps similar to the ones we aim to address (Posen et al., 2018). These settings among others include, strategic partnership creation (Baum et al., 2005), sustainable supply chain decision-making (Kirchoff et al., 2016) and also the closely related area of supplier selection (Yang et al., 2017). This makes problemistic search therefore also a suitable approach for examining (bounded rational) SBC decision-making. Especially, when we consider that supply base problems, (implicitly) indicating below aspired performance, are likely to be central drivers of SBC changes. Research considering the influence of problemistic search regarding strategic changes in SBC is to our knowledge non-existent in the literature. Accordingly, the following question will be central to enhance knowledge on why supply managers make SBC decisions, and how problemistic search informs these decisions:

How does problemistic search influence the decisions defining supply base complexity? To address this research question, a multiple case study was conducted in five different manufacturing firms with in total eleven supply managers. Data was collected by conducting semi-structured interviews on cases concerning decisions made in the three SBC dimensions. We contribute to the BTOF literature as we found that both reactive triggers (actual problems) and proactive triggers (potential problems) invoked problemistic search influencing SBC decisions. This sheds a new light on the BTOF, since it is assumed that a problem triggering problemistic search is unidimensional, while we showed that it is multi-dimensional. We contribute empirically to the SBC literature as we found that reactive triggers lead to problemistic search influencing changes in the number of suppliers and the level of differentiation, while proactive triggers invoked problemistic search influencing changes in the level of inter-relationships. This complements existing conceptual knowledge on SBC decision-making, since beside the problem itself it was found that the type of problem is influential as well in the decision-making process. Lastly, we also contribute to the SBC literature by showing that a change in the number of suppliers often consequently leads to a change in the level of differentiation in the supply base and vice-versa. We hereby add knowledge as existing research rather assumes that these two dimensions are only related in terms of their influence on the level of SBC, without acknowledging the influence on each other. From a managerial point of view, this research enables supply managers to compare and contrast their own perception of SBM with the findings of this paper. Thereby supporting them in more effectively understanding and leveraging supply base decisions to solve or prevent problems. The remaining sections of this thesis are therefore structured as follows. Section 2 covering the theoretical background will first discuss the BTOF literature and its current state in SCM research. We will continue by explaining the dimensions of SBC, and then discuss how problemistic search can conceptually influence SBC changes. Section 3 discusses the research methodology. Section 4 discusses the findings and the identified patterns. Section 5 provides a discussion on the key findings of this research. Where after the theoretical- and managerial implications are stressed. We will conclude this study by providing recommendations for future research, mainly based on the limitations.

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2. THEORETICAL BACKGROUND

2.1. The behavioral theory of the firm and its current state in supply chain management The BTOF has been influential in explaining decision-making processes within firms (Posen et al., 2018). In that sense, the BTOF has argued that firm decision-makers are bounded rational (Cyert and March, 1963). Hence, managers will only pay attention to the organizational areas which are signaled to be problematic or unsatisfactory. In relation to that, it is explained that bounded rationality undermines the ability of decision-makers to optimally evaluate (firm) performance. To overcome this limitation, decision-makers set (implicit) aspirations to reflect and evaluate their desired performance. An aspiration is then defined as “the smallest outcome that would be deemed satisfactory by decision-makers given the current choice situation” (Schneider, 1992, p. 1051). Historical performance or industry peer performance often serve as reference points for setting these aspirations. In which problems relative to these aspirations will make managers aware of the presence of problematic organizational practices that need to be changed. Cyert and March (1963, p. 121) explicitly explained that firms “make decisions by solving a series of problems; each problem is solved as it arises; the organization then waits for another problem to appear”. In that respect, problems are specifically argued to be the central drivers of decision-making (Greve, 2003b; Kacperczyk et al., 2015). As a consequence of these problems, a so-called problemistic search process will be triggered (Audia and Greve, 2006). Problemistic search is commonly defined as the process of identifying problems and making changes to solve these problems (Posen et al., 2018). Greve (2003a) further suggested that as a consequence of problems indicating below aspired performance, the problemistic search behavior of firms will intensify. This aids to riskier firm decision-making and change. Consequently, decision-makers will be more willing to engage in riskier problemistic search. Especially, when existing knowledge and practices do not effectively solve the problems. This might for instance be the case when riskier problemistic search is required if unique supply base issues require novel solutions, such as selecting non-local suppliers (Baum et al., 2005). These novel solutions or partners might not yet exist in the supply base’s current stock, prompting the buying firm to look beyond existing channels for obtaining resources (Banerjee et al., 2019). Positive performance feedback, so when problems are absent, in contrast tends to make managers risk averse and uncertainty avoidant. Managers in that case prefer to stick to current routines and practices. In other words, the achievement of aspirations discourages the managerial willingness to invoke problemistic search. These arguments and the following findings in similar settings might therefore also imply that SBC decision-making is likely influenced by problemistic search. Problemistic search has already been found to be influential in strategic activities such as acquisitions (Iyer and Miller, 2008), R&D (Greve, 2003b; Chen and Miller, 2007; Chen, 2008), capital allocation (Arrfelt et al., 2013) and strategic partner selection (Baum et al., 2005). In the field of SCM, Yang et al. (2017) examined how aspiration attainment and problemistic search influence supplier selection when considering relational referrals. They argued that managers initiate strategic supplier changes according to their believe whether organizational problems need to be fixed. Rather than rationally evaluating the advantages and disadvantages of relational supplier referrals. They found that positive performance feedback undermines a decision-maker’s incentive to change. Rather stimulating firms to make use of relational referrals as this is less risky and less uncertain. Whereas, problems triggered decision-makers to engage in problemistic search to select (riskier) suppliers beyond the relational network. Another study linking SCM and the BTOF argued that managers are bounded rational, making the current rational theories explaining supply chain decision-making regarding sustainability inadequate (Kirchoff et al., 2016). They found that as a result of positive performance feedback supply chain managers will not pursue problemistic search, since this indicated that there are no problems in the existing practices and routines. Specifically, it reduced the motivation of these supply chain decision-makers to pursue

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currently absent sustainability practices, especially since they were doing well in terms of firm performance.

2.2. Supply base complexity Choi and Krause (2006, p. 638) defined a supply base as the “portion of the supply network that is actively managed by the focal company through contracts and the purchase of parts, materials and services”. They for instance argued that when a buying firm has to deal with a high number of differentiated suppliers, decision-makers could struggle to deal with the complexity of the supply base. This can in turn negatively influence firm performance. Hence, making it important for decision-makers to understand and take appropriate SBC decisions. In that sense, they argued that the following three SBC dimensions, determining the structure of a supply base, impact how well a firm performs (Chakravarty, 2014). First, the number of suppliers in the supply base involves the suppliers that are within the visible reach of the buying firm. Deciding upon a suitable number of suppliers is important, as creating a smaller supply base often results in lower costs since the number of information flows, physical flows, and relationships to be maintained are reduced (Bozarth et al., 2009). However, this reduction can also severely impact operations in case of problems, such as with disruptions. On the other hand, increasing the supply base size reduces the reliance on specific suppliers, as volumes can be more easily moved. However, a large supply base could also lead to (delivery) issues if the focal firm is only a small buyer at the suppliers. Second, the level of differentiation in the supply base concerns the extent to which suppliers differ in terms of organizational cultures, working practices, technical sophistication and/or geographical dispersion (Choi and Krause, 2006). The more differentiated the suppliers are, the more complex SBM becomes, and the more problems might occur in the supply base. For instance, when the focal firm has to coordinate activities with geographically dispersed suppliers that do not share similar working practices or cultures (Handfield and Nichols, 2004). On the other hand, having a more differentiated supply base increases the likelihood of generating novel knowledge or products which can contribute to innovation (Choi and Krause, 2006). Third, the level of inter-relationships involves the presence of working relationships among suppliers in the supply base, often defined as supplier-supplier relationships (Choi et al., 2002). Decision-makers can initiate working relationships between suppliers when they deem it beneficial to for instance coordinate the alignment of specifications in the product development process (Handfield and Nichols, 1999). Moreover, existing research has mainly argued that an optimal level of SBC is required to maximize firm performance (Choi and Krause, 2006; Bozarth et al., 2009; Brandon-Jones et al., 2014). However, the triggers and rationale behind SBC decision-making have not received sufficient attention yet. This absent knowledge is especially important because of the influence of SBC decisions on firm performance. Rationality based decision-making frameworks in SCM may come short in that respect. Manager often do not rationally make decisions but rather act based on problems and prior performance, and consequently initiate problemistic search (Greve, 2003b). The next section will further explain how problemistic search can conceptually inform decisions defining SBC.

2.3. Conceptual framework In general the performance of the suppliers in the supply base contribute to the competitiveness of manufacturing firms. The delivery lead time and reliability of suppliers (Vachon and Klassen, 2002), the quality of their inputs (Zhang et al., 2009), their role in the innovation process (Choi and Krause, 2006) and potential supply disruptions (Choi and Krause, 2006; Craighead et al., 2007) can severely impact manufacturing firm performance (Bozarth et al., 2009). Therefore, supply base problems in terms of for instance delivery issues or poor input quality would negatively influence the focal firm’s operations and performance. These problems can be the result of the complexity of the supply base.

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Hence, it is very likely that a manufacturing firm’s unsatisfactory performance can stem from below aspired supplier performance or issues in the supply base. These supply base problems would conceptually trigger problemistic search for changes in the dimensions of SBC. For the possible reason that problems stimulate managers to change existing (supply base) practices (Greve, 2003b). Whereas, positive performance feedback, so the absence of problems, likely diminishes the willingness of decision-makers to initiate problemistic search. This can be for the reason that existing routines and practices regarding SBC are deemed satisfactory, making managers risk averse and uncertainty avoidant (Greve, 2003a). This conceptualization is illustrated below with a framework including SBC decision-making and the influence of problemistic search (Figure 2.1). The secondary box within this figure clearly shows our research scope. This research scope is based on our objective to identify what triggered the problemistic search process and how this process then influences what SBC decisions are made. The activities regarding the impact of SBC decisions on the level of SBC and firm performance are beyond the scope of our research (Figure 2.1). As aforementioned, those topics have already been studied extensively by other scholars, such as by Lu and Shang (2017) and Brandon-Jones et al. (2014). Nevertheless, the whole SBC change process and its eventual impact is still depicted here to provide a better and complete understanding on how important it is to understand the triggers of SBC changes. Particularly, since these decisions eventually impact firm performance. However, how problemistic search actually influences decisions defining SBC remained up until now an open question. The following methodology section discusses how we addressed this gap.

Figure 2.1. Conceptual framework on the influence of problemistic search in the SBC change process

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3. METHODOLOGY

3.1. Research design The objective of this research has been to study the influence of problemistic search in SBC decision-making. As our objective is of exploratory nature, we deemed qualitative research in the form of a case study an appropriate method (Yin, 1994). Especially, since a case study enables the collection and analysis of data on the triggers of SBC decisions in a way that provides an holistic and in-depth understanding on the topic itself, and on the influence of problemistic search (Yin, 2009). While it also reveals the deeper meaning of SBC decision-making behavior (Lincoln and Guba, 1985). A multiple case study was conducted by means of semi-structured interviews to derive detailed insights (Karlsson, 2016).

3.2. Context and sampling The unit of analysis was the SBC decision taken at the individual level. Our unit of analysis enabled studying how problemistic search influences the SBC decisions of bounded rational managers. Manufacturing firms were contacted for this research. For the reason that similar to SBC changes, strategic changes made as a result of problemistic search (e.g. strategic partner selection and investment) are most prevalent in such organizational settings (Chen, 2008; Yang et al., 2017; Deb et al., 2019). Purposeful sampling was thus used to deliberately select specific interview participants, settings and cases that fitted the research objective (Maxwell, 2012). Participants thus had to be employees within manufacturing firms, while also having a significant influence on procurement. Whereas, as also stressed in the invitation, cases were discussed with these interviewees that met the following criteria. First, cases that concerned decisions made with regard to the number of suppliers in the supply base, their level of differentiation and/or the level of inter-relationships. Hereby we could validly address our research objective, as this ensured that we covered the core concepts derived from the theoretical background (Arksey and Knight, 1999). Secondly, the changes in the cases were undertaken (relatively) recently to ensure that the participant was able to adequately recall memories, especially as we acknowledged the role of cognitive limitations. Next, Eisenhardt (1989) suggests four to ten cases as the optimal number in case studies, as with more cases researchers would struggle to cope with the complexity and volume of the data. Therefore, we tried to stay within this range, also considering our unit of analysis at the individual-level. However, since we studied decision-making in three dimensions of SBC at the individual level, contingency plans were in place to achieve an adequate state of saturation (Suddaby, 2006). One additional participant was contacted afterwards, because not all participants discussed decisions regarding all three SBC dimensions. Nevertheless, most cases did discuss decisions made in all the dimensions.

3.3. Data collection Multiple semi-structured interviews were conducted to collect data. Due to the development of the contemporary Coronavirus and the preference of the participants, interviews were on-site, via video chat and by phone call. In total eleven participants from five different manufacturing firms took part in the interviews and their profiles are summarized in Table 3.1. As generalizability can only be made within this research context, using firms from different industrial categories rather contributes to the transferability of the findings to other settings (Kaufmann and Denk, 2011). A semi-structured interview protocol was used to ensure that predetermined topics of relevance were covered, while it also enabled the interviewees to provide additional insights (Spradley, 2016). The protocol is summarized below in Figure 3.1. In more detail this protocol included the following aspects as suggested by Yin (1994) to increase the validity and trustworthiness of the outcomes. First, participants were asked consent to audio tape the conversation. Where after, the procedures and measures to ensure confidentiality were discussed. Second, we briefly introduced the background of

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the study to familiarize the participants with the likely unknown topics, such as for instance SBC. Hereby we could derive insights that are both interesting and valid for addressing our research objective. Third, predefined questions were covered with each participant to ensure that the same basic lines of inquiry with regard to the three SBC dimensions were discussed. Specifically, we could explore if and why decision-makers made strategic changes with regard to the number of suppliers in the supply base, their level of differentiation, and the level of inter-relationships. With the objective to eventually explore how problemistic search influenced these changes. The complete interview protocol is provided in Appendix A. How we decided upon the main questions of the interview protocol and how they relate to the core concepts of the theoretical background is explained in Table 3.2. After each question was answered, the response was summarized and validated with the interviewees to ensure that it was interpreted correctly. For instance, to make sure that we interpreted the trigger of a certain SBC decision correctly. Further, to enhance construct validity, participants were also given the possibility to review and revise their responses (Yin, 2009). When deemed relevant for analysis, we requested additional firm documents or information. So, both primary and secondary data was collected, while we also tapped into multiple sources of evidence. The semi-structure of the interviews led to varying interview times between 45-75 minutes. However, participants were informed beforehand that the interviews could take one to two hours to complete. Hereby, sufficient time was reserved to probe additional details and to encourage discussions.

Table 3.1. Profile overview of the cases and their anonymized pseudonyms

Firm Industry Position Participant

Annual Spending

(Million €) Key SBC Change Triggers Experience in

Procurement Case

Pseudonyms

A Cable Manufacturing

Purchase Manager Raw Materials 80-90 Actual innovativeness problems &

potential quality problems 6 years Cable1

B Animal Healthcare Manufacturing

Head of Purchase 25-50 Actual material availability problems & potential quality problems 23 years Animal

Healthcare2

C C Machinery Manufacturing

Strategic Purchaser 8-10 Actual material availability problems & potential price increases 3 years Machinery3

Purchasing Manager & Strategic Purchaser

25-30 Actual interchangeability problems 30 years Machinery4

D D D

Animal Food Manufacturing

Supply Chain Manager 15-20

Actual and potential delivery problems & potential quality problems

21 years AnimalFood5

Project Manager Purchasing 12-15 Potential delivery problems 36 years AnimalFood6

Process Manager 1-2 Potential delivery problems 20 years AnimalFood7

E E Baby Food Manufacturing

Strategic Buyer 30-40 Actual material availability problems & actual high transaction costs. 24 years BabyFood8

Strategic Buyer 50-55 Actual high transaction costs & potential delivery problems 22 years BabyFood9

Strategic Buyer 50-80 Actual interchangeability problems & potential delivery problems and price increases

21 years BabyFood10

Procurement Manager 200-250 Actual material availability problems

& actual delivery problems 11 years

BabyFood11

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Figure 3.1. Summary of the interview protocol

Table 3.2. Explanation of the linkage between the main interview questions and theoretical background

Core Concepts Question Explanation

Number of suppliers in the supply base

§ Did the size of your supply base change over time?

Explore if the supply managers made a decision to change the size of the supply base and what that decision was.

§ Why was that the case, so why did it increase, decrease, or not change?

Get insights on the underlying motivation. Was the decision driven by problems and consequently problemistic search.

Level of differentiation in the supply base

§ Do you or did you source from different type of suppliers?

Explore if the supply managers made decisions to change the level of differentiation in the supply base, such as removing suppliers with different working practices.

§ Why was that the case? Get insights on the underlying motivation. Was the change problem-driven and thus influenced by problemistic search.

Level of inter-relationships in the supply base

§ Do you, or did you induce relationships between suppliers in the supply base?

Explore if the supply managers made a decision to create working relationships among suppliers in the supply base.

§ If so, why was that the case?

Get insights on the underlying reasons. Did they wanted to solve problems or did they wanted to prevent something.

Problemistic search in SBC changes

§ If not, did this negative performance feedback influenced the strategic changes in the supply base with regard to the three dimensions of supply base complexity?

Get (explicit and direct) insights on problems triggering problemistic search in SBC changes.

Opening Section

• Consent• Familiarization between researcher and interviewee

• Confidentiality assurance• Research motivation & objective

• Broad kickoff questions• Explaining background of study and core concepts

Main Section

• General questions on supply base management

• Core questions on supply base complexity decision-making

• Explicit questions on problemistic search (if needed)

Concluding Section

• Feedback from interviewee• Restate applicable rules after interview (e.g. possibility for reviewing answers)

• Express appreciation for participating

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3.4. Data analysis Transcribing the interviews was done as soon as possible after the interview had taken place in order to recall and denote all interactions. Data analysis on problems triggering changes in each dimension of SBC was performed by using open, axial and selective coding techniques (Corbin and Strauss, 2014). This was done with the qualitative analysis software NVivo 12. Below in Table 3.3. we have illustrated how we coded the influence of problemistic search on the decisions to change the number of suppliers in the supply base. In Appendix B the coding trees for all the dimensions can be found. The purpose of these coding techniques was to organize and analyze non-numerical and unstructured data as prevalent in this study on SBC decision-making behavior. This began by scanning of passages, where after the focus narrowed down on sections, sentences, phrases and words to discover differences and patterns with regard to the explained gap on the drivers of SBC decision-making (Omar et al., 2012). This enabled the comparison, the detailed analysis and combination of themes arising from the categories, their properties and raw data. This to address our main objective regarding the influence of problemistic search in SBC decision-making. Furthermore, comprehensive descriptive and explanatory tables plus figures are used to clearly reveal the connection between problemistic search and SBC decisions (Suddaby, 2006). Both within- and cross-case analyses were performed in this research. Within-case analysis was used to explore in detail what the triggers of SBC decisions were in the individual cases (Eisenhardt, 1989). In the within-case analysis we primarily discuss the decisions that were problem-driven to explore how problemistic search influences SBC decisions. For instance, a decision to change nothing is not discussed, as it does not address the influence of problemistic search and thereby our research question. The within-case part was followed up by a cross-case analysis to identify patterns across different cases with regard to the influence of problemistic search on decisions defining SBC. Both of these analyses increase the accuracy and reliability of the findings in relation to our research objective (Eisenhardt, 1989).

Table 3.3. Example of open, axial and selective coding for changes in the number of suppliers in the supply base

Exemplary Quote Open Coding Axial Coding

Selective Coding Decision

“We decrease and that was based on technology, that there was a lot of differentiation in the nutrients in the weight powders.” – BabyFood10

Actual interchangeability

problems

Reactive triggers

Problemistic search

Change in the number of suppliers

“But when I just started at [AnimalFood] there was a purchaser who was dividing a lot of small volumes against a lot of suppliers. That made us according to the suppliers, especially in the meat business a small partner, which gave a lot of delivery issues as they had bigger customers.”– AnimalFood5.

Actual delivery problems

“It is easier to manage and also delivers lower [transaction] costs. Because you negotiate with one supplier, where you in previous times negotiated with five suppliers.”- BabyFood9.

Actual high transaction costs

“The existing suppliers cannot offer that, then we had to look for new suppliers. I think that is the most important reason in our case.” – BabyFood8.

Actual material availability problems

“All three of them, they are fine, but they are not let’s say really innovating.” – Cable1.

Actual innovativeness

problems

“Because the risk for the on time delivery. What we produced in totally will be every year more and more, and when you have one or two suppliers and it is too much for them, then you need other suppliers.”- AnimalFood6.

Potential delivery problems

Proactive triggers

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3.5. Research quality assurance methods Validity and reliability had to be ensured to a high as reasonably possible level. This was important because of the prevalence of qualitative data on behavior, which is open for various interpretations. The protocols and techniques used to enhance construct validity, internal validity, external validity and reliability, as largely discussed above, are summarized below in Table 3.4.

Table 3.4. Reliability and validity assurance methods

Quality criteria

Method of Addressing Criteria

Construct validity

§ Using multiple sources of evidence by means of literature, interviews and firm data

§ Differentiating between rational and bounded rational behavior

§ Triangulation by using more methods than case studies to collect data

§ Allowing participants to review and revise their responses

Internal validity § Pattern matching with both within-case and cross-case analysis to

support explanation building

External validity

§ Purposeful sampling of manufacturing firms to make findings (partly) transferable among manufacturing supply bases

§ Theoretical replication to gather different and valuable insights to be able to transfer among different manufacturing supply bases

Reliability

§ Using a case study protocol

§ Confidentially organizing and storing case study data and analyses in a case study database.

Source: Karlsson (2016)

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4. FINDINGS This section discusses the main results regarding our research objective on the influence of problemistic search in SBC decision-making. First, in the within-case analysis the key triggers of SBC changes are explained by discussing the cases individually. This in order to explore the broader gap on the actual triggers of SBC decision-making. However, as aforementioned greater attention is given to cases with decisions that were problem-driven as these trigger problemistic search. Furthermore, this part serves as a bridge to the cross-case analysis. In the cross-case analysis our main contribution on the influence of problemistic search on decisions defining SBC is addressed. The aforementioned pseudonyms for the cases and the firms (Table 3.1) are used in this section.

4.1. Within-case analysis. This part explains what triggered the decisions in the dimensions of SBC in each individual case as summarized in Table 4.1. The analysis begins by discussing the triggers for changing the number of suppliers, then the level of differentiation and ends with the level of inter-relationships if applicable.

Table 4.1. Main within-case findings for making changing in the dimensions of supply base complexity

Case Change Triggers Case Description Decisions

Cable1 Actual innovativeness problems & potential quality problems

The size of the supply base was increased with a geographically and technologically differentiated supplier to solve the innovativeness problems in the supply base. Whereas, a working relationship was created to mitigate potential quality problems.

Increased the number of suppliers and level of differentiation, and created inter-relationships.

AnimalHealthcare2 Actual material availability problems & potential quality problems

Certain critical raw materials for new medicines were only available in China and India, leading to an increase in the differentiation and size of the supply base. Whereas, a working relationship was created to prevent potential quality problems.

Increased the number of suppliers and level of differentiation, and created inter-relationships.

Machinery3 Actual material availability problems & potential high price increases

Certain parts for new products were not available in the supply base but for instance in Italy, leading to both an increase in the differentiation and size of the supply base. Whereas, a working relationship was created so that potential problems related to high price increases were prevented.

Increased the number of suppliers and level of differentiation, and created inter-relationships.

Machinery4 Actual interchangeability problems

Quality differences in a part delivered by multiple suppliers caused interchangeability problems. This was solved as the level of differentiation was decreased by removing three suppliers. Inter-relationships could not be discussed as the manager could not remember one.

Decreased the number of suppliers and level of differentiation. Could not remember creating inter-relationships.

AnimalFood5 Actual and potential delivery problems & potential quality problems

The focal firm was previously a small buyer at multiple suppliers, which resulted in regular delivery problems. Therefore, the number of suppliers were decreased and by keeping the similar ones potential delivery problems were mitigated. Whereas, a working relationship was created to prevent potential quality problems.

Decreased the number of suppliers and level of differentiation, and created inter-relationships.

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Table 4.1. Main within-case findings for making changing in the dimensions of supply base complexity (cont.)

Case Change Triggers Case Description Decisions

AnimalFood6 Potential delivery problems

The demand of the focal firm for certain materials was increasing. However, there was a risk that the supply base could not handle this, which could potentially result in delivery issues. Therefore, more suppliers with similar flexible working practices were added to prevent this risk.

Increased the number of suppliers. Kept a similar level of differentiation. Did not create inter-relationships.

AnimalFood7 Potential delivery problems

The focal firm had new customers in Southern Europe. However, there was a risk that the existing transportation suppliers would have potential delivery problems to serve this area, as this was not their focus. Therefore one new transportation supplier with similar working practices was contracted.

Increased the number of suppliers. Kept a similar level of differentiation.. Did not create inter-relationships.

BabyFood8 Actual material availability problems & actual high transaction costs.

Certain ingredients for producing new products were not available in the supply base, but only at differentiated suppliers. Leading to both an increase in the differentiation and size of the supply base, Whereas, problems related to high transaction costs led to the decision to create working relationships between suppliers.

Increased the number of suppliers and level of differentiation, and created inter-relationships.

BabyFood9 Actual high transaction costs & potential delivery problems

Having too many IT suppliers led to high relationship and negotiation efforts and costs. This triggered the decision to decrease the size of the supply base to one IT supplier, which consequently reduced the level of differentiation. Whereas to prevent potential delivery issues, working relationships were created between suppliers who were going to work together in a new logistics hub.

Decrease the number of suppliers and level of differentiation, and created inter-relationships.

BabyFood10

Actual interchangeability problems & potential delivery problems and high price increases

Having five different suppliers for a single raw material caused interchangeability problems due to ingredients with inconsistent specifications. The two most differentiated suppliers were then removed from the supply base. Whereas, a working relationships was created to prevent potential delivery issues and to mitigate high price increases.

Decreased the number of suppliers and level of differentiation, and created inter-relationships.

BabyFood11 Actual material availability problems & actual delivery problems

The Coronavirus led to a shortage of certain ingredients, which were only available at differentiated suppliers. The supply base therefore became more differentiated and consequently the size also increased. Whereas, a working relationship was created to solve the cross-border delivery issues caused by the Coronavirus.

Increased the number of suppliers and level of differentiation, and created inter-relationships.

Cable1

Interviewee Cable1 began by explaining the trigger for the change process in the number of suppliers and level of differentiation by discussing that R&D made an internally produced cable smaller as this would gave many operational advantages. As the ducts in which these cables are placed were sourced

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externally, they also needed their suppliers to develop a smaller one. Although the suppliers told that they would do their best, their cooperation and also general innovativeness was perceived as unsatisfying. “I went to my suppliers together with my sales director for this specific business unit and we asked our suppliers, guys look we have a cable which is smaller can we design a duct which is also smaller? And all of them they said, okay we will give it a try, but none of them was really cooperative. All three of them , they are fine, but they are not let’s say really innovating. […] And there was a supplier knocking on the door for quite some time. They are called Supplier X and are based in in Dubai.” More specifically, this unsatisfactory R&D cooperation triggered the decision to bring in a new supplier from Dubai who was willing to meet the wishes of the buying firm. While at the same time is was also explained as a decision to increase the differentiation of the supply base. For the reason that from the new geographically distanced supplier, different technological capabilities and knowledge could be obtained. This was also perceived as a solution for the general below aspired innovativeness of the existing suppliers. Thus, these changes were triggered by actual problems. The interviewee then moved on by explaining that the trigger for creating inter-relationships in the supply base had to do with preventing potential quality problems. The case concerned a customer requesting a product improvement. However, since this was concerning a highly specialized product, potential quality problems could happen if the product was not developed adequately. In order to prevent that risk, the manager decided to create a working relationship between the two specialized suppliers who would normally work separately on this product. By making them work together to adequately align product specifications, quality problems were prevented. So this decision appeared to be also problem-driven. However, the distinct characteristic of this trigger was related to it being a potential problem rather than an actual one. “So we decided to do business with two of our suppliers. One is an expert in epoxy and one is an expert in silicone sheds.”

AnimalHealthcare2 In this case the interviewee explained the trigger for changing the size and differentiation of the supply base to be due to actual material availability problems. In the development of new animal medicines certain new raw materials were needed. However, the problem was that these critical raw materials were not available in the existing supply base nor at external similar suppliers who could have been contracted otherwise. According to the manager, these raw materials were only available in China and India. These availability issues made and forced the manager to increase the level of differentiation in the supply base. Particularly, since next to the geographical locations and cultures, the contracted Asian suppliers also differed in terms of size as they were often bigger than the focal firm. Their turnover was primarily coming from human rather than animal healthcare. Consequently the number of suppliers increased as well. For the reason that the existing suppliers could not be replaced as they had certain raw materials in their portfolio, which were still needed by the focal firm. This change was thus made to solve an actual problem to be able to attain aspired needs. When continuing our discussion on the trigger for creating inter-relationships, it was explained that is was done to prevent potential quality problems, as it was also the case for Cable1. AnimalHealthcare2 was in the process of developing a new product, for which they wanted a new packaging design. What they did was that instead of having the bottle supplier and the cap supplier work on the packaging separately, they created a working relationship between them. This so that the specifications of the two products would perfectly fit. This would in turn prevent potential quality issues, such as leaking bottles. So, a potential problem was underlying this decision. “The same one supplier is making the bottle and the other one is making the cap and we have to work together, just to make sure that we do not get the problems afterwards, let's say leaking bottles or whatever.”

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Machinery3 Similarly as in the case of AnimalHealthcare2, Machinery3 explained that actual material availability problems triggered an increase in the number and differentiation of the supply base. He started with discussing that they are an innovative company and that their R&D department continuously creates new innovations and improvements. However, the problem was often that certain parts needed for producing those R&D innovations were not available in the existing supply base. “Then the production or the assembly they develop it, they need for example a certain part, which was not available at the current suppliers. For example, we needed a pump with two inputs and the current supply base was only able to deliver with one input. So, therefore we choose more suppliers. […] There are companies in the north of Italy, who are specialized in producing that, so that is reason why we have quite important suppliers over there. And, well that supplier is quite large and they are completely, I think qua size and qua how they are organized quite different than us.” It appeared that the decision to solve these availability issues was done with often more organizationally and geographically different suppliers, such as for the pump. This consequently also increased the supply base size. Although the level of SBC increased, their aspired needs were met by this decision. In short, this change was triggered by an actual problem. The interviewee then discussed that inter-relationships were created in order to prevent potential problems related to price increases. It was explained that they are purchasing certain ‘steel’ parts from a small local supplier who also needs bolts and nuts for those parts. What was done in this case is that a working relationship was induced between this small supplier and an existing big supplier of bolts and nuts. This was done according to the interviewee so that the smaller supplier would be able to purchase under the favorable price conditions of the focal firm. As the small supplier could hereby purchase at a good price on the long-term, the risk of high price increases in the future were prevented. In other words, this decision was made to prevent a potential problem. “Then they will receive a better price, and at the end it also causes that the total price of assembly will not become too high.”

Machinery4 The manager here explained that actual interchangeability problems were solved by decreasing the number of suppliers in the supply base, and consequently the level of differentiation. It was detailed that for the part ‘hydraulic cylinders’ there were five different suppliers, which led to certain problems. “That concerns hydraulic cylinders. For that type of product we have at the time five different suppliers.” The problem stressed was that having multiple suppliers for a single part led to inconsistencies in the quality when it was delivered by a different supplier. To attain the aspired interchangeability from standard hydraulic cylinders, the interviewee explained that he removed suppliers from the supply base and consequently kept the ones with similar working practices. So, these decisions were made to address an actual problem. “To get it on two suppliers, back to two suppliers. […] To get more of a standard and to get a better price.” Unfortunately, the manager could not think of inter-relationships he created, therefore the decisions and triggers for changing the level of inter-relationships could not be discussed here.

AnimalFood5 In this case actual delivery problems were underlying the supply base size reduction, while potential delivery problems triggered a decrease in the level of differentiation. The interviewee explained that when he started at the firm the supply base consisted of too many suppliers from whom only small quantities were purchased. The manager stressed that the low share in the turnover of its suppliers made them a less important customer. This resulted in actual delivery problems as suppliers often cancelled orders to meet the demands of bigger customers. “But when I just started at AnimalFood there was a purchaser who was dividing a lot of small volumes against a lot of suppliers. That made us according to the suppliers, especially in the meat business a small partner, which gave a lot of

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delivery issues as they had bigger customers.” This below aspired delivery performance at that time then triggered the decrease in the number of suppliers. Whereas, to prevent potential future delivery problems that could lead to production stops, the interviewee specifically choose to remove the suppliers with dissimilar working practices as they aspired flexible suppliers that could meet changing and unplanned requests. This was especially important since the focal firm does not have the money nor the inventory capacity to buy and store excessive stock. As a result of these decisions the firm became a more important customer for the remaining suppliers, which eventually solved the delivery problems. In short, the decisions here were triggered by both an actual problem and a potential problem. “Approximately 40% of the suppliers were killed. I changed over to a new multiple suppliers strategy in which I had at least for most of the products two suppliers for one product. […] As I have not the cash and not the space to have a lot of stocks, I need reliable and flexible suppliers.” When we moved on to the decision to create inter-relationships in the supply base, the manager discussed a similar trigger as interviewees Cable1 and AnimalHealthcare2. Namely, that it was done to prevent potential quality problems. AnimalFood5 explained that quality regulations on vitamins were constantly changing. Therefore, his ‘gel’ suppliers were connected with his ‘vitamin’ supplier to prevent the potential problem that the vitamin content in the ‘gel’ would be out of quality specifications. This working relationship assured that all the gel suppliers would get vitamins with the correct and adapted quality specifications. It was even explained that a recent change in the regulations on vitamins was easily addressed as a result of this working relationship. So this clearly indicated that this decision was made to prevent a potential problem which they already expected beforehand. “I have a new issue, a new change where we need to adjust our vitamin levels and then it is very good that you have your own recipe which you can change with all supplier. It gives you more power and regulates the risks of that important route because it is very tight and all regulated in laws.”

AnimalFood6 This manager detailed that potential delivery problems both triggered the decision to increase the supply base and to keep the differentiation at a similar level by selecting similar new suppliers. The manager told that their annually growing business led to an increase in the volumes he aspired from his supply base. However, there was a risk that the capacity of the existing supply base could not cope with their growth, and this could potentially lead to delivery problems. “Because the risk for the on time delivery. What we produced in totally will be every year more and more, and when you have one or two suppliers and it is too much for them, then you need another suppliers.” Hence, to prevent this problem the supply base was expanded. While at the same time suppliers were selected based on whether their working practices were as flexible as those of the focal firm. So these decisions were triggered by a potential problem. “Our company is very flexible to our customers and also our suppliers must go with us in that flow, we do not need a static supplier. But one who can change something, some rules and we can get our products earlier then we expect.” For the level of inter-relationships it was mentioned that the manager had not created any inter-relationships recently. It is therefore not discussed further here, as this indicates strategic inaction which could not address our objective as we already explained in the research methodology.

AnimalFood7 This manager explained in a similar fashion as AnimalFood6 that potential delivery problems triggered the decision to increase the size of the supply base by selecting a new supplier with similar practices to also keep the same level of differentiation. However, this interviewee was in comparison responsible for the sourcing of transportation and freight. The case here was that the focal firm was getting some new customers from Southern Europe. However, that region was not the focus area of the existing transportation providers. In order to prevent potential delivery problems that could result because of this, the manager made the decision to add a new transportation supplier to the supply base. This new

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supplier was found by asking an existing supplier for a referral. This made it easier to manage the delivery processes as this supplier had similar working practices. This was also important because this made it possible to get a credit limit from them. This was needed as the focal firm was short on cash. Without the credit limit potential delivery issues could occur, since the focal firm could often not pay in advance for the services. Thus, these decisions were made to prevent potential problems. “The one I chose for the south of Europe is a partner of [our existing] Supplier X, which we are using in Belgium for the external warehousing, so they know them so I know that it is easier to step in with them. Also, with regards to the credit.” Also, in this case the manager explained that no inter-relationships were created recently, making this strategic inaction irrelevant for addressing our research objective.

BabyFood8 In a similar fashion as in the cases of AnimalHealthcare2 and Machinery3, it was explained here that actual material availability problems triggered the increases made in the level of differentiation and the number of suppliers. The interviewee explained that their product portfolio is growing due to continuous R&D innovations for which they sometimes needed new ingredients. “I think the most important reason is that we at the end are expanding our finished product portfolio. So, and that means in some cases that we need different ingredients for that.” The problem stressed here was that those required ingredients were often not available at existing suppliers. While, those ingredients were actually available at suppliers with differentiated working practices and organizational cultures. Those suppliers were particularly differentiated as their main target group was not the baby food industry but rather bigger sectors such as adult healthcare. To solve the availability problem, the interviewee explained that the level of differentiation in the supply base had to be increased which consequently increased the size, since existing suppliers with special materials could not be replaced. In short, here the decisions were triggered by an actual problem. “The existing suppliers cannot offer that, then we had to look for new suppliers. I think that is the most important reason in our case. Suppliers which focus mainly or predominantly on different type of industries actually, for example the vitamin industry for adults or for sports nutrition. And those suppliers might be partly on a different level in terms of the way they look at the market, the procedures they have in place.” When we discussed the trigger for creating inter-relationships in the supply base, it appeared that is was done to solve actual problems related to high transaction costs. The interviewee explained that ‘ingredients’ sourced from their suppliers were previously combined into a pre-mix by the focal firm themselves. However, the interviewee explained that directly sourcing all these single ingredients from many different suppliers made the purchasing process too complex and costly to manage. Specifically, transactions costs were high in terms of maintaining relationships, placing multiple orders, doing multiple quality inspections and, handling and storing all the single ingredients. Therefore, a working relationship between all the ingredient suppliers was created. In which two suppliers received the ingredients from the others to make the pre-mix and to deliver it to the focal firm. The high transactions costs were solved as they did not had to purchase directly from so many suppliers anymore. So, in contrast to the previous cases on changes in the level of inter-relationships, this decision to create working relationships was driven by an actual problem rather a potential one. “We said instead of buying 30 different ingredients, we would like to have two producers who source those ingredients blend it for us and deliver it to us as a semi-product. You would order only one like we call it for example pre-mix, you would only have to do one quality analysis, you would only have to store one product, you would only have to handle one box instead of 30 different ingredient boxes.”

BabyFood9 In this case it was explained that actual problems related to high transaction costs rather triggered the decision to decrease the number of suppliers, which consequently decreased the level of differentiation

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in the supply base. The interviewee being responsible for indirect sourcing, explained that previously Information Technology (IT) solutions were sourced from five different suppliers. However, since the interviewee was not only responsible for this product group, it became difficult to manage the relationships with all the different IT suppliers. The interviewee stressed that besides the high relationship costs, the undesirable negotiation costs as a result of many suppliers made the transaction costs levels problematic. To solve this, the size of the supply base was decreased to one IT supplier. While the interviewee did not gave specific attention to the impact of this decision on the differentiation in the supply base, it can be safely argued that by reducing the supply base size to one supplier the level of differentiation naturally decreased. In the end, the interviewee explained that by taking these decisions it became easier and less costly to manage the IT part of the supply base. So, this change was directed towards solving an actual problem. “It is mainly that reason, it is easier to manage and also delivers lower [transaction] costs. Because you negotiate with one supplier, where you in previous times negotiated with five suppliers.” The interviewee then continued by explaining that the inter-relationships he created were triggered by potential delivery problems. The focal firm had created a new logistic hub, in which it was decided to create working relationships among suppliers, as they were going to work in the hub. “We developed a logistic hub in City X, it is obvious that you let suppliers cooperate with each other. So that all comes together at the logistics, the facility side, but also the IT component. So, when you talk about relationships between suppliers, what we always did is to act as the leading company when bringing suppliers together to collaborate.” This appeared to be done in order to foster the collaboration and the sense of responsibility among those suppliers, with the ultimate goal to prevent the risk of delivery problems that could otherwise occur from this hub. So this decision was triggered by a potential problem. “Better collaboration and less [supply] risk. Because when suppliers discuss with each other what the project is about, then they could also take responsibility for it together.”

BabyFood10 Interviewee BabyFood10 explained in a similar fashion as Machinery4 that actual interchangeability problems triggered the decision to decrease the number of suppliers and the level of differentiation. ‘Nutrient’ ingredients for their ‘weight powder’ were previously sourced from five different suppliers. However, it appeared that this resulted in nutrients being delivered with different specifications. This was due to suppliers having different working practices and them working under different circumstances. This made the production process more difficult. Technologists had to frequently adjust the quantities of other powders when the ingredients of the weight powder were delivered by different suppliers. This was necessary, because otherwise the nutritional balance of the end-product would be out of specification. “Because if you make a base powder, you add like 5 or 10 materials [powders] together to create one base powder [end-product].” The resulting interchangeability issues made the decision-maker decide to decrease the number of suppliers, while he consequently removed the ones with the most deviating nutrients. It was explained that they hereby solved the problem as the remaining three suppliers had more similar working practices and therefore delivered more interchangeable nutrients. In short, an actual problem triggered these decisions. “There was a lot of differentiation in the nutrients in the weight powders. We had to adjust a lot during productions to fit the weight powder in our base powder, […] it was not do-able by using all the five [suppliers]. The two with the most deviating vitamins and minerals [nutrients], we stopped. They are within the limits, and that is more easy to work with. We took out these costs in the end of the process.” Concerning the decision to create inter-relationships in the supply base, the interviewee explained that this was done to prevent potential delivery problems and also potential problems related to high price increases. In this case, the decision-makers required a supplier to change an existing organic product, but the supplier needed the special ingredient called ‘organic lecithin’ to do so. As the decision-maker already had a supplier of organic lecithin in the supply base, a working relationship was created

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between the two. “We needed to change an organic fed blend. They needed to add organic lecithin and I had two suppliers and I know the one was also producing organic lecithin. So I connected them to each other, said you can buy your organic lecithin from them.” This was done with the intention to prevent potential price increases that could occur if this lecithin was sourced from outside the supply base, while it was also aimed at preventing potential delivery problems as the supplier was struggling to find the ingredient. Thus, potential problems were underlying this decision. “To mitigate future risk of high cost prices and supply security, because they were looking at sunflower lecithin organic, they could also not find it, so I called it.”

BabyFood11 In this final case it became apparent that similarly as for AnimalHealthcare2, Machinery3 and BabyFood8, actual material availability problems triggered the decision to increase the level of differentiation, which consequently increased the number of suppliers. Additionally, actual delivery issues were also contributing to this decision. It was explained that the current supply base was having issues in delivering the aspired quantities for a ‘dairy’ ingredient. This was particularly due to the Coronavirus causing a supply shortage for that ingredient as it was unexpectedly needed by other parties. However, the problem was mainly that these ingredients were only available at certain diverse suppliers causing availability issues. “Scarcity of the product, so the current base was not able to deliver the volumes that we needed. So in the market there is not like 100 suppliers from which you can choose.” Accordingly, these actual availability and delivery problems triggered the decision of the manager to increase the level of differentiation in the supply base. In which then suppliers were chosen with often differentiated working practices and cultures, who were often bigger than the focal firm because of their competitive products. Additionally, since the focal firm still needed their existing suppliers due to their special products, they could not replace them either. This consequently increased the number of suppliers in the supply base as well. These changes were thus made in order to have sufficient access to the aspired ingredients. In short, the decisions were triggered by actual problems. “It was fairly recent we have Corona crisis, where dairy products are used also for other applications. This was not expected so the higher demand for that specific product was caused by Corona crisis and therefore we had to expand. We see then most of the differences caused by the working practices so the supplier company has a different philosophy on how things work. They are also I have to admit, in the position in the market that they can do that.” The reason for creating inter-relationships in the supply base was mentioned to be triggered to solve actual delivery problems. The manager explained that they were sourcing an ‘oil blend’ ingredient from a foreign supplier in Europe. What happened was that cross-border delays due to the Coronavirus resulted in delivery issues of that ingredient. According to the manager, the solution for this problem was to keep excessive stock of that ingredient. However, the focal firm did not had the required inventory capacity. “It was also in this Corona crisis right, where you learn a lot of things where there was this uncertainty about transportation. Now so this supplier comes from abroad in Europe, but there was delays at the borders of the different countries. So therefore we decided that we wanted to have some additional storage capacity.” The manager therefore made the decision to create a working relationship between the foreign supplier and another existing supplier located in close proximity. The closely located supplier worked together with the foreign one to store the ingredient and to deliver it to the focal firm when needed. Hereby, the aspired quantities could be attained. So this decision was driven by an actual problem, while in almost all cases inter-relationships were created to prevent potential problems. “So that is storage capacity we did not have, but we worked together with a, it is of course our supplier and we work together with another supplier in between, who had this storage capacity. The primary reason was to create flexibility and to reduce delivery constraints, reducing the disturbance into our production facility.”

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4.2. Cross-case analysis In this analysis we will discuss the following three patterns that we identified from the within-case analysis: (1) proactive and reactive triggers of problemistic search influencing SBC changes; (2) different triggers of problemistic search leading to changes in particular SBC dimensions; and (3) consequential change between the number of suppliers and level of differentiation in the supply base being influenced by problemistic search. After each finding propositions are made. We then illustrate the implications of the influence of problemistic search on SBC decision-making in Figure 4.1. 4.2.1 Reactive and proactive triggers of problemistic search processes in the supply base

As discussed in the theoretical background section, problemistic search is commonly defined as a change process which is triggered by a problem and aimed at solving that problem. This search process is therefore explained as the central driver of decision-making. In relation to that and as explained in our conceptual framework (Figure 2.1), problemistic search processes indeed appeared to be influential in SBC decision-making. Problem-driven triggers signaled to the managers that the current supply base practices and routines were unsatisfactory, which in turn triggered problemistic search for making changes in the dimensions of SBC. However, when analyzing this finding in-depth, a more interesting pattern was found which contributes to a more thorough understanding on the influence of problemistic search in SBC decisions. It was found that problemistic search influencing SBC decision-making was not only aimed at solving an actual problem, but it was also directed towards preventing or mitigating a potential future problem. Most of the SBC decisions discussed within the individual cases were influenced by problemistic search being triggered by an actual (supply base) problem. Implying that these changes were thus mainly triggered by immediate problems that required immediate solutions. For instance, four cases indicated that actual availability problems of certain materials triggered problemistic search. This led to the decision to increase both the differentiation and size of the supply base to solve the below aspired responsiveness performance. Whereas, multiple cases also explained that SBC decisions were rather triggered by a potential problem that needed to be prevented, or at least the severity of that problem had to be mitigated if it did occur. For instance, in three cases it became apparent that potential quality problems triggered problemistic search to create inter-relationships. This was done to be able to keep the aspired quality performance also in the future. So, it was observed that problemistic search being influential in SBC changes was not only aimed at solving an actual problem, but also to prevent or mitigate a potential problem. In other words, the findings imply that both reactive triggers (actual problems) and proactive triggers (potential problems) can lead to problemistic search influencing decisions defining SBC. Therefore we can conclude with the following proposition. Proposition 1.1. Problemistic search influencing decisions defining supply base complexity are likely invoked by both reactive- and proactive (problem) triggers. 4.2.2 Reactive versus proactive triggers influencing particular supply base complexity dimensions

In relation to the findings above, it was then identified that reactive triggers were predominant drivers of problemistic search in the dimensions concerning the number of suppliers in the supply base and the level of differentiation, while proactive triggers predominantly invoked problemistic search in the level of inter-relationships. Reactive triggers, so actual problems, appeared to be predominantly triggering problemistic search that influenced changes in the number of suppliers and level of differentiation in the supply base. Actual material availability problems appeared to be the most influential reactive trigger in the decisions to increase the size and differentiation in the supply base. In three of these cases, the firm was in the process of improving or developing a product for which they needed new materials. However, these materials were not available in the existing supply base, but only at suppliers who were differentiated

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in terms of working practices, cultures and/or geographical dispersion. While, in the other case, the currently prevalent Coronavirus crisis resulted in availability issues for certain materials at existing suppliers, which could then only be attained from differentiated suppliers. Consequently, these actual availability problems reactively triggered problemistic search to increase the differentiation and size of the supply base. On the opposite side, actual interchangeability issues appeared to be the most influential reactive trigger of problemistic search for managers decreasing the size and level of differentiation in the supply base. They did so by removing dissimilar suppliers in order to be able to source materials with a consistent standard, which could then be more easily interchanged in the production processes. There were also other triggers for the changes in these dimensions, but no patterns were observable in those cases as there was either inconsistency in the findings, or they were not supported by other cases. Lastly, reactive triggers did also invoke problemistic search that influenced the changes in the level of inter-relationships. For instance, to solve actual delivery issues and actual problems related to high transaction costs. However, as they were only mentioned in one individual case, no pattern could be identified. Proactive triggers, so potential problems, rather appeared to be predominantly driving problemistic search influencing changes in the level of inter-relationships in the supply base. As already explained, preventing potential quality problems mainly triggered problemistic search which resulted in working relationships to be created. In two of the cases it was done so that suppliers, who would normally work separately on a product improvement, now worked together to prevent quality risks. Whereas in the other case, a group of suppliers were connected to another supplier in the supply base for sourcing certain ingredients for which the rules around quality specifications regularly changed. This working relationship improved the adaptability of those suppliers and therefore prevented potential quality problems. Two other cases explained that a potential risk related to prices becoming too high could occur if certain suppliers would source their materials from outside the supply base. Therefore, those suppliers were connected to other suppliers in the supply base who could meet their needs. Thereby, solving potential price increase problems as they could now purchase their materials from the existing supply base for a favorable price. Whereas, in two more cases it was discussed that potential delivery issues were prevented by creating working relationships among suppliers to work together in logistical processes. Further, although problemistic search driven by proactive triggers, such as potential delivery issues, was also present in some decisions in the other two SBC dimensions, so in the number of suppliers and the level of differentiation. They were not as predominant as the reactive triggers that influenced the changes in those two dimensions. In short, it was found that reactive triggers drove problemistic search predominantly changing the number of suppliers and the level of differentiation in the supply base. While, proactive triggers were underlying problemistic search which mainly influenced the changes in the level of inter-relationships in the supply base. Accordingly the following two propositions could be made. Proposition 2.1. Reactive triggers invoking problemistic search likely lead to changes in the number of supplier in the supply base and the level of differentiation among those suppliers. Proposition 2.2. Proactive triggers invoking problemistic search likely lead to creation of inter-relationships among suppliers in the supply base. 4.2.3 Consequential change in the number of suppliers and level of differentiation As it might have been already observed in the previous part, problemistic search appeared to be consequentially influencing changes in both the number of suppliers in the supply base and the level of differentiation among those suppliers, and vice-versa. As discussed in the theoretical background, these two dimensions are already found to be related, since they together with the level of inter-relationships define the level of SBC. However, we found that these two particular dimensions are also highly interrelated, because a change in the number of suppliers consequently influenced a change in

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the level of differentiation and the other way around. In addition, a more detailed finding was observed within this pattern. When problemistic search led to the conclusion that the problem could be solved by changing the level of differentiation, it then consequently changed the number of suppliers. However, when problemistic search led to the conclusion that the problem could be solved by changing the number of suppliers, it then consequently led to a change in the level of differentiation. So, the direction depended on whether problemistic perceived the solution to be residing in a change in the number of suppliers or in the level of differentiation. In all the cases in which problemistic search led to the decision to increase the level of differentiation, it directly followed by consequently increasing the number of suppliers. For instance, this was the case when there were material availability problems. The solution concluded from problemistic search was that the problem could be solved by contracting differentiated suppliers who had the particular materials needed by the focal firm. However, this consequently increased the number of suppliers as the existing suppliers could not be replaced with the new ones. Whereas on the other hand, if the perceived solution concluded by problemistic search was to decrease the number of suppliers, it then consequently decreased the level of differentiation. This specific pattern was for instance apparent when interchangeability problems triggered problemistic search. Problemistic search made the decision-makers conclude that they could solve that problem by reducing the supply base size, but consequently this made it also possible for them to specifically remove the more differentiated suppliers from the supply base. Thus, the problems in those cases were perceived to be solved by decreasing the number of suppliers, which then consequently reduced the level of differentiation. In short, changes made in the number of suppliers and level of differentiation were found to be highly interrelated. Specifically, an increase in the level of differentiation led to an increase in the number of suppliers, while a decrease in the number of suppliers led to a decrease in the level of differentiation. Proposition 3.1. Problemistic search influencing a change in the number of suppliers in the supply base likely and consequently influences a change in the level of differentiation and vice-versa. Proposition 3.2. Problemistic search concluding that problems could be solved by increasing the level of differentiation likely and consequently increases the number of supplier in the supply base, while problemistic search concluding that problems could be solved by decreasing the number of suppliers likely and consequently decreases the level of differentiation in the supply base.

Figure 4.1. The influence of problemistic search in decisions defining supply base complexity

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5. CONCLUSION AND DISCUSSION In this section we will start with discussing the overarching results from the findings section in relation to the literature. Where after the theoretical and managerial implications will be provided. We will complete this section by discussing both the limitations of this study as well as future research directions.

5.1. General discussion Making appropriate SBC decisions is important for obtaining superiors resources and competitiveness, which in turn impacts firm performance (Bozarth et al., 2009). Extant literature on SBC has mainly focused on what impact SBC decisions have on supply base- and firm performance, without considering the behavioral rationale behind these decisions (Choi and Krause, 2006; Bozarth et al., 2009; Brandon-Jones et al., 2014). In other words, up until now existing research has given scant attention to exploring the triggers of SBC changes. The limited knowledge which is available on SBC decision-making is conceptual rather than empirical (Choi and Krause, 2006). It is important to know and understand these triggers of SBC decisions, since as aforementioned, these decisions impact firm performance. This research has addressed that gap by adding empirical knowledge through multiple case studies on what triggers supply managers to make decisions regarding the number of suppliers, the level of differentiation, and the level of inter-relationships in the supply base. We explored this objective with the research question on how problemistic search influences decisions defining SBC. We drew on problemistic search, because it has been influential in explaining (bounded rational) decision-making processes in other similar settings. For instance, it was found that problemistic search explains the way in which bounded rational managers select new suppliers (Yang et al., 2017). Furthermore, by exploring this gap in the light of problemistic search and the BTOF, we departed from decision-making theories in SCM literature that are, albeit (implicitly), relying on rationality. Problemistic search being a core concept in the BTOF, predicts that decision-making is primarily driven by problems (Greve, 2003b). This is for the reason that managers are often bounded rational and therefore mainly pay attention to- and make decisions in areas in which problems are signaled (Cyert and March, 1963). In line with the BTOF, it was empirically found that problemistic search influences SBC decision-making. Problems related to the existing supply base triggered decision-makers to start searching for (risky) changes in the current practices regarding the three SBC dimensions in order to solve those problems (Greve, 2003a). More specifically, three interesting and in-depth findings are underlying this conclusion. First, problemistic search influencing SBC decisions were found to be triggered by both actual- and potential problems. In other words, implying that both reactive- as well as proactive triggers can invoke problemistic search in SBC changes. This distinction has not been described in literature before. This is important to know because different types of triggers have a different (predominant) influence on what SBC changes are made, as explained next. Second, problemistic search did not influenced changes in the SBC dimensions altogether at the same time, but it was rather the type of trigger that predominantly led to changes in particular dimensions. Problemistic search as a result of a reactive trigger, so an actual problem, appeared to be predominantly influencing changes in the number of suppliers in the supply base and the level of differentiation among those suppliers. Whereas, on the other hand, problemistic search being invoked through a proactive trigger, so a potential problem, was found to be predominantly influencing changes in the level of inter-relationships. This is likely for the reason that inter-relationships are often induced for strategic reasons (Choi et al., 2002), and preventing or mitigating potential problems can be classified as strategic reasons. Third, problemistic search influencing a change in the number of suppliers in the supply base also consequently influenced a change in the level of differentiation and vice-versa. This implies that these two dimensions are not only related as they are two of the three influencers of the level of SBC, but they are also related as they consequently influence each other. In more detail, an increase in the level of differentiation led to

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an increase in number of suppliers in the supply base, whereas a decrease in the number of suppliers led to a decrease in the level of differentiation in the supply base. This two-way interaction has not been stressed in the literature before. Lastly, as explained before, problems related to the supply base were underlying the problemistic search processes in SBC decision-making. However, most studies on problemistic search have rather focused on high level firm performance problems as being the trigger of problemistic search, with return on assets being the most widely used metric (Posen et al., 2018). Nonetheless, a smaller group of researchers have found that aspirations at the unit level rather than at the firm level are also prevalent triggers for problemistic search. For instance, below aspired new product introductions was found to be changing the intensity of R&D activities (Posen et al., 2018). This implication was also found in our research. Problems being related to the supply base, such as delivery problems indicating below aspired responsiveness performance, induced strategic changes to the existing SBC practices and routines. These problems in the supply base motivated the supply managers and increased their risk tolerance for making strategic SBC changes to solve the below aspired performance (Greve, 2003a). In most cases problems relative to specific supply base performance aspirations led to a change that narrowly matched that specific aspiration (Posen et al., 2018). In other words, supply base problems led to changes in the dimensions that define the complexity of a supply base.

5.2. Theoretical implications As argued by Sanders et al. (2016), to accelerate research discoveries in SCM, looking at it through the lens of the BTOF is a highly fruitful research direction. This study ‘confirms’ this suggestion as we found valuable insights on SBC decision-making by studying it in the light of problemistic search. Problemistic search, being core in the BTOF, was found to have an influential role in SBC decision-making and change. Future research in SCM decision-making should therefore consider incorporating the BTOF, and specifically problemistic search. Especially, because bounded rationality and problems were found to have a key influence in decision-making in SBM. Also, since existing theoretical, and (implicitly) rationality based SCM frameworks do not sufficiently address the complexity inherent in managerial decision-making regarding supply base related activities (Ketokivi and Schroeder, 2004; Mantel et al., 2006; Carter et al., 2007). Firstly, this research has been the first to demonstrate the influence of one of the BTOF’s core concepts being problemistic search, in explaining strategic changes in supply base related practices. In which the main contribution of this study to the BTOF literature concerns our finding on problemistic search in SBC changes being invoked by both reactive- and proactive triggers. This sheds a new light on problemistic search. The existing BTOF literature assumes that problems triggering problemistic search are unidimensional (Posen et al., 2018), whereas we found them to be rather multi-dimensional. Implying that the definition of problemistic search should be broadened by acknowledging the distinction between actual- and potential problems triggering the search process. Second, this study contributes to the SBC literature as we add knowledge on the triggers of SBC decision-making. Specifically, we found that reactive triggers likely lead to changes in the number of suppliers and the level of differentiation, while proactive triggers likely lead to changes in the level of inter-relationships. This pattern has not been highlighted in SBC literature yet. Moreover, this research complements and contradicts existing conceptual knowledge on this topic (Choi and Krause, 2006). Whereas, Choi and Krause (2006) conceptually explain why changes in the different dimensions could be made, we provide empirical insights on the influence of problemistic search and on the type of triggers leading to particular changes in the different SBC dimensions. Choi and Krause (2006) mainly explain that decisions in specific dimensions are related to specific problems, while we argue that decisions changing the levels in specific SBC dimensions are also related to the type of problem trigger.

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Third, we also contribute to the SBC literature as we found that the SBC dimensions concerning the number of suppliers and the level of differentiation are highly interrelated. Changes in the one dimension consequently followed a change in the other dimension. This contradicts the work of Choi and Krause (2006) on this topic, as they do not treat the dimensions as interrelated decision areas. They argue that decisions in the three SBC dimensions are likely made in the respective order of first the number of suppliers, then the level of inter-relationships and lastly the level of differentiation (Choi and Krause, 2006). While we did not studied the particular order of SBC decision-making, that respective order did not apply in our case as changes in the size and differentiation of the supply base appeared to be interrelated and occurred consequentially. Furthermore, this study also contributes to the research work focusing on improving the impact of SBC. We do so as we add knowledge on how decision-making behavior in the SBC dimensions actually occurs. Existing studies on the impact of SBC on firm performance, so the work of Choi and Krause (2006), Bozarth et al. (2009), Brandon-Jones et al. (2014) and Lu and Shang (2017), argue that an optimal level of SBC can be achieved by decision-makers. However, they implicitly imply that SBC decisions can be made rationally and optimally. We contradict this suggestion, since in line with the BTOF and also indicated by our findings, bounded rationality shifted the focus of decision-makers from optimizing performance, to solving or preventing problems and making satisfactory decisions through problemistic search (Posen et al., 2018). The final theoretical contribution of this research is the development of a theoretical change process model (Figure 4.1) incorporating the different triggers of problemistic search, the three dimensions of SBC and also the influence of the different types of triggers on particular SBC dimensions. These findings altogether enhance the current state of knowledge on behavior and organizational decision-making in the upstream part of SCM, and specifically SBM.

5.3. Managerial implications The results of this study have demonstrated the importance of the different types of problemistic search triggers in taking supply base decisions. First, decision-makers should be conscious of their internal behavioral processes in SBC decision-making. Although, reactive triggers turned out to be highly influential in SBC decisions, supply managers should not only consider making changes in areas in which immediate problems are prevalent. They must also pay attention to areas in which potential problems are residing, which thus need to be prevented or mitigated before they occur. Secondly, most managers made changes in the supply base as a response to problems. However, it became also apparent that in most cases the decision-makers did not consider the implications of the decisions for the level of SBC. As a high level of SBC could consequently lead to other problems, managers should take into account whether changes increasing the SBC level are really necessary or whether other less risky decisions could be taken, such as supplier development initiatives. Thirdly, practitioners struggling with similar problems and risks can capture knowledge from this study, which they could take into account when seeking ways to attain their supply base aspirations. They could be inspired from the experiences and behaviors of these managers on how to solve problems and on how to improve their strategic supply base activities. However, although most changes were perceived as effective solutions for the problems faced, practitioners should still keep in mind that every firm and its problems are (highly) heterogenous and should therefore never mimic the strategic behavior of others (Cyert and March, 1963). Even within firms there is never a one-size-fits-all solution dominant for improving SBM. Practitioners should rather evaluate the applicability and feasibility of exemplary strategic changes by investigating the root causes underlying their problems. While, they should also consider their own capabilities when making decisions and changes. Lastly, this study also provides insights, especially for supplier firms, on why they are added or removed from the supply base, and why regularly performing as aspired or above aspiration is important. Unsatisfactory performance does not always lead to the buying firm inducing a supplier development program for instance. Decision-

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makers might rather opt to bring in more (competitive) suppliers to meet their aspirations, which could thus jeopardize the business of the existing suppliers.

5.4. Limitations and future research suggestions First, for the SBC dimension concerning the level of inter-relationships not all cases could discuss a decision made in that area, which limited the implications that we could derive for that dimension in comparison to the other two SBC dimensions. Therefore, we contacted another interviewee, but still more decisions were discussed regarding the number of suppliers and level of differentiation. It was not feasible nor manageable to gather data from more participants due to time constraints. Future research should pay attention to investigating more cases, especially since SBC decision-making commonly concerns decisions made in three big strategic dimensions. Second, although our diverse set of firms representing different industries made the transferability of the findings more feasible. We could not generalize findings to specific industries, because most industries were only represented by one or two firms. Future research could make these implications more generalizable by conducting research with firms from specific industries. Especially, as some decisions in the cases had to do with problems related to particular product groups which are found in specific industries. This would be a valuable addition to both literature and practice. Third, our study was conducted in the Netherlands, and all the interviewees were also Dutch. This limits the generalizability and transferability of the findings to a larger global context, since national- and cultural differences among managers may lead to different strategic behaviors regarding SBC (O'Brien and David, 2014). The effects of the different types of problems on SBC decision-making might change in different countries as culturally different managers might solves problems in different ways or may even ignore them if they are uncertainty avoidant (Hofstede, 1984). Future research could for instance interview culturally diverse participants by conducting research at firms with facilities in nationally and culturally different locations. Further, while some managers indicated that they made changes as problems indicated that their explicit (quantitative) aspirations were not achieved, such as lead time aspirations. For other managers it appeared that they made changes because some more implicit aspirations were not met, such as the dissatisfaction with the responsiveness of suppliers in providing new materials. Therefore, a fruitful research direction might be to explore the influence of problemistic search based on whether it was triggered by not achieving an explicit- or implicit aspiration. Moreover, while this study showed the importance of behavior at the individual level on strategic changes in SBM. Future research can conduct case studies at the firm-level. Thereby, they can for example account for joint decision-making, which is often the case when strategic supplier changes are made (Biehl et al., 2006). Finally, future research can also build upon these findings and even validate them by operationalizing measures for the core concepts to quantitively assess the findings.

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7. APPENDIX

Appendix A: Interview Protocol Opening interview

§ Consent to audio record; § Researcher and interviewee introducing themselves; § Rules and measures (e.g. anonymity and confidentiality assurance); § Briefly explaining research objective and motivation again.

I. Kickoff

1) Could you give a short description of your products and industry? 2) What is your role within the firm or plant?

Background information core concepts

§ Clarifying what supply base management is; § Briefly explaining supply base complexity and its three dimensions; § Briefly explaining the performance indicators of a supply base.

II. Supply base complexity and decision-making (main questions) General

1) What is your role in supply base management? 2) How would you describe your supply base in general? (e.g. size or geographical dispersion) 3) What area would you describe as most problematic for attaining desired performance? (e.g.

transaction costs, supplier responsiveness, supply risk, or supplier innovation) Number of suppliers of the supply base

1) Did the size of your supply base change over time? (e.g. 2018, 2019, 2020) a. Why was that the case, so why did it increase, decrease, or not change?

Level of differentiation among suppliers in the supply base 1) Do you or did you source from different type of suppliers? (e.g. geographical location,

technological sophistication, working practices or organizational culture) a. Why was that the case? ® Examples follow-up questions: Why did you choose a supplier

who is located in close proximity and who shares similar operational practices as your organization? Or why did you source from a geographical distanced supplier with dissimilar working practices?

Level of interrelationships among the suppliers in the supply base 1) Do you, or did you induce working relationships between suppliers in the supply base? a. If so, why was that the case? ® Example follow-up question: Was your goal to improve the

performance of your supply base through supplier collaboration?

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III. Follow-up questions if performance feedback is mentioned as the driver of problemistic search for supply base changes

1) What was the main reason (transaction costs, supplier responsiveness, supply risk, or supplier innovation) that caused the negative performance feedback leading to the previously mentioned changes/decisions in the supply base?

2) How important would you describe performance feedback in making strategic changes in the supply base?

3) What other reasons would you say have been influential drivers of supply base decision-making and change?

III. Follow-up questions if performance feedback and/or problemistic search is not mentioned as the driver behind supply base changes

1) Could you describe your financial (plant) performance in the past years? 2) Did these financial performance statements meet your aspired performance levels (KPIs)? a. If not, did this negative performance feedback influenced strategic changes in the supply base

with regard to the three dimensions of supply base complexity? b. If yes, did this positive performance feedback influence strategic changes in the supply base

with regard to the three dimensions of supply base complexity? Reflection and wrap up

§ Ask for the interviewee’s reflection and feedback of the interview and if they have any questions left;

§ State again that the interviewee can review and revise his answers; § State that the interviews will be transcribed directly after the interview, and that the transcript

and/or audio recording can be send to the interviewee; § State that the interviewee might be contacted after the interview if additional information is

needed or if certain answers need to be clarified in more detail; § State that the interviewee will receive the final version of the thesis when submitted, and if

deemed beneficial a managerial report on possible supply base management improvements; § Thank the interviewee for his time and effort.

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Appendix B: Code Tree Per Supply Base Complexity Dimension

Supply Base Complexity Dimension

Open Coding Axial Coding Selective Coding Decision

Number of suppliers in the supply base

Actual interchangeability problems

Reactive triggers

Problemistic search Change in the

number of suppliers

Actual delivery problems

Actual high transaction costs

Actual material availability problems

Actual innovativeness problems

Potential delivery problems Proactive triggers

Supply Base Complexity Dimension

Open Coding Axial Coding Selective Coding Decision

Level of differentiation in the

supply base

Actual interchangeability problems

Reactive triggers

Problemistic search

Change in the level of differentiation

Actual delivery problems

Actual high transaction costs

Actual material availability problems

Actual innovativeness problems

Potential delivery problems Proactive triggers Keeping the same level

of differentiation

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Supply Base Complexity Dimension Open Coding Axial Coding Selective Coding Decision

Level of inter-relationships in the supply base

Actual high transaction costs Reactive triggers

Problemistic search Change in the level of inter-relationships

Potential quality problems

Proactive triggers Potential delivery problems

Potential high price increase