CASE STUDY – Suppliers’ strategy: the case of TIMBER HOMES.

Adapted from Bildsten, L., Rehme, J., & Brege, S. (2010). Applying the kraljic model to the construction sector: The case of a
prefab housing factory. Proceedings of the 26th Association of Researchers in Construction Management (ARCOM), 1029-
1037.

The case company studied is a manufacturer of timber houses (TIMBER HOMES Ltd.). They produce
vacation houses, villas and multi-storey residential buildings. The company is situated in northern
Sweden and has an annual turnover of 4.8 million Euros. The factory produces timber panels that are
assembled as a complete structure at the construction site. The company is only responsible for the
production of the house shell components, and not, for example, for the foundations, water, gas and
electricity supplies or interior decoration. The CEO of the house manufacturer was interviewed by
telephone about the company's purchasing strategies. The CEO then verified the answers to
guarantee validity. The values of the purchased materials were taken directly from the company’s
bookkeeping accounts.

The questions asked to the CEO were:

 What construction materials do you purchase?

 What is the annual purchasing cost of each component?
 What is the total purchasing value for a year?
 Who are the suppliers for each of the components?
 Why have you chosen these particular suppliers?
 How satisfied are you with your suppliers? (scale 1-3, 1=dissatisfied, 3=very
 satisfied) Why are you satisfied / dissatisfied with them?
 Is it easy to shift supplier for the different materials (scale 1-3, 1=easy,
 3=hard)?
 Do you have few or many alternative suppliers?

The answers are summarised in table1. The total purchasing value of the materials is 50%, including
transports of the total turnover. Many suppliers are local distributors and the CEO says that this is
the only way to handle the factory’s low sales volumes. Excessive warehouse stock is otherwise
eventually destroyed. The local distributors were chosen because of their total offer regarding
logistics rather than price.

Questions:

1. Segment TIMBER HOMES suppliers against Kraljic’s matrix.

2. Looking into the levels of satisfaction (provided in table 2), and the results of the Kraljic’s
matrix…Would you do any strategic change in relation to existing suppliers?
3. Do you think a new suppliers’ strategy could increase TIMBER HOMES competitive
advantage? How?
Table 1. Suppliers table

Type of Percentage Source Level of Switching Alternative

product of total satisfaction costs suppliers
purchasing
Insulation 20% Local Medium Low Few
distributor
Windows 12% Local Low Low Few
distributor
Timber 15% National Medium Medium Many
distributor
Inner floors 8% Local Low Low Many
and walls distributor
Doors 5% Local High Low Many
distributor
Rafters 6% Local High Medium Few
distributor
Scaffoldings 5% Local Low Low Few
distributor
Outer roofs 4% National Medium Medium Many
distributor
Timber 5% National Low High Few
machinery distributor
Nails, 2% National Medium Medium Many
hammers distributor
Drillers 2% National Medium Low Many
distributor
Project and 5% Local Low Medium Few
compliance distributor
management
services
Computers & 3% National Medium High Many
printers distributor
(HW)
CAD 2% National Low High Few
software distributor
Office 1% Local Medium Low Many
supplies distributor