Document purpose and use
LHTS AB is a fictitious industrial manufacturing company created for Learn How to Source (LHTS) learning material. It is not intended to represent a real company, supplier, country or sourcing event. Its purpose is to give future buyers a consistent internal business context when they work with category strategy, sourcing, supplier management, operational procurement and procurement transformation.
The company description is deliberately detailed. A category strategy is not only an assessment of a supply market. It is a business decision made inside a specific operating model, with specific products, customers, factories, financial objectives, decision rights, data limitations and stakeholder interests. Reusing the same company context allows students to see how the same procurement method produces different answers for electronics, aluminium, freight, engineering services or temporary labour.
This document defines the internal conditions that should normally remain stable across LHTS AB cases. A future case may add a time-bound business change, such as a new product launch, a capacity shortage, a supplier quality problem or an acquisition. It must state that change clearly and must not silently contradict this handbook.
Category-specific external information is intentionally not included here. When a case is written, the author or GPT must retrieve current and credible information about the relevant market, technology, regulation, price drivers, geographical exposure and supply risks. External facts must be dated and sourced. Where current evidence is unavailable, the case must distinguish reasonable assumptions from verified facts.
How to read the company description
The company has three operating divisions, a global sales footprint and a European-centred industrial base. Its products are manufactured equipment with meaningful engineering content, but not products with the extreme regulatory burden of aviation, defence or medical devices. This makes the company realistic and flexible for training.
LHTS AB is large enough to have global category management, formal governance and modern systems. It is also small enough for local factories and business units to retain legitimate influence. This creates the trade-offs that buyers encounter in real work: global leverage versus plant responsiveness, specification standardisation versus customer value, lowest unit price versus total cost, and resilience versus working-capital efficiency.
1. Company at a glance
1.1 Corporate identity
LHTS AB is a Swedish-headquartered industrial technology group. It designs, manufactures, sells and services energy-efficient climate-control, power-management and industrial automation equipment. The company helps commercial buildings, light industry, data centres, public infrastructure and selected original equipment manufacturers reduce energy use, improve operational reliability and manage indoor or process conditions.
The legal parent company is LHTS AB, registered and headquartered in Linköping, Sweden. The group is listed on Nasdaq Stockholm. In daily communication, employees normally refer to the group simply as “LHTS”. The company’s financial year follows the calendar year and its reporting currency is Swedish kronor (SEK).
LHTS is a mature but growth-oriented company. It has built its reputation on robust products, practical engineering knowledge, dependable delivery and strong local service. It competes against larger multinational industrial groups in some product lines and specialised regional competitors in others. The company is neither the market leader everywhere nor a small niche player. It must therefore choose carefully where scale, differentiation and customer intimacy create advantage.
1.2 Size and key figures
Unless a case specifies otherwise, use the following baseline figures for the latest completed financial year.
| Measure | Baseline |
|---|---|
| Net sales | SEK 28.4 billion |
| EBIT margin | 9.2% |
| Employees | 10,850 |
| External third-party spend | SEK 17.6 billion |
| Addressable procurement spend | SEK 15.1 billion |
| Direct-material and production spend | SEK 9.7 billion |
| Logistics, warehousing and packaging spend | SEK 1.45 billion |
| Indirect goods and services spend | SEK 3.95 billion |
| Active suppliers in ERP | approximately 8,400 |
| Suppliers representing 80% of addressable spend | approximately 310 |
| Manufacturing and assembly sites | 12 |
| Major distribution centres | 7 |
| Sales and service countries | 43 |
These numbers provide scale, not precision for every case. A category case should give its own spend, volumes, supplier base, contract position, demand profile and business importance. It may state that numbers are rounded for learning purposes.
1.3 Purpose, vision and strategic direction
LHTS’s purpose is to make essential industrial and building systems more efficient, reliable and easier to maintain. Its vision is to be the most trusted partner for efficient and resilient technical environments.
The group strategy for the next three years has five priorities:
- Grow in energy-efficiency solutions, data-centre cooling and electrification-related infrastructure.
- Improve profitability through design-to-value, product modularisation, supply-chain productivity and service growth.
- Increase resilience in critical supply chains without creating unnecessary inventory or duplicated complexity.
- Reduce lifecycle environmental impact, especially energy use in customer operation, materials footprint and transport emissions.
- Simplify the operating model through common platforms, better data, disciplined portfolio management and stronger execution.
Procurement is expected to contribute to every priority. It is not defined only as a savings function. It is accountable for securing competitive supply, supporting product and service innovation, managing supplier-related risk, improving sustainability performance and enabling profitable growth.
2. What LHTS AB sells and delivers
2.1 Business model
LHTS sells engineered equipment, systems, spare parts, digital monitoring tools and lifecycle services. Revenue is generated through a combination of project sales, distributor sales, direct sales to key accounts, OEM supply agreements and service contracts.
The company’s products generally have a physical lifetime of 12 to 25 years, depending on application. Customers expect reliable operation, availability of spare parts and technically competent support after installation. Consequently, a purchase decision made by an LHTS buyer can affect product performance, field-service cost, warranty exposure and customer relationships many years after the initial delivery.
Around 68% of net sales come from equipment, 18% from aftermarket spare parts and retrofit solutions, 10% from service and maintenance contracts, and 4% from software-enabled monitoring, commissioning and other technical services. The aftermarket business has a higher margin than original equipment sales and is strategically important.
2.2 Division A: Climate and Thermal Systems
Climate and Thermal Systems (CTS) is the largest division. It provides commercial and industrial heating, ventilation, cooling, heat-recovery and process-temperature equipment. Its customers include commercial-building contractors, installers, industrial end users, logistics facilities, public organisations and data-centre operators.
Main products include air-handling units, heat pumps, industrial chillers, rooftop systems, fan-coil units, process-cooling skids, heat exchangers and integrated controls. Many systems are assembled from standard modules but configured for individual projects. This produces a mixture of forecast-driven volume production and project-driven demand.
CTS depends on sheet metal, stainless steel, copper and aluminium; fans and electric motors; compressors; heat exchangers; valves; insulation; sensors; circuit boards; controls; packaging; and specialised subcontract manufacturing. Supply continuity, technical qualification, energy performance and quality are often as important as purchase price.
2.3 Division B: Power and Energy Solutions
Power and Energy Solutions (PES) provides electrical distribution, power-conditioning and energy-management equipment for commercial buildings, light industry and critical infrastructure. The division’s growth is supported by electrification, data-centre investment, grid constraints and customers’ efforts to control energy use.
Products include low-voltage power-distribution panels, compact substations, uninterruptible power systems, battery-storage control cabinets, variable-speed drives, power-quality equipment and energy-monitoring gateways. Selected products are supplied under private-label or co-development arrangements to OEM customers.
PES has high exposure to copper, electrical steel, aluminium, cable and harnesses, power semiconductors, printed circuit boards, contactors, relays, enclosures, batteries, software licences and specialist test equipment. Product compliance, component obsolescence, electronic component allocation and cybersecurity requirements can materially influence category strategy.
2.4 Division C: Automation and Lifecycle Services
Automation and Lifecycle Services (ALS) combines industrial automation hardware with digital tools, installation support, field service, repairs and long-term maintenance. The division supports LHTS equipment as well as selected third-party systems in customer facilities.
ALS sells sensors, controllers, industrial gateways, condition-monitoring devices, retrofit kits and software subscriptions. It also employs field-service technicians, commissioning engineers, application specialists and service planners. Demand is driven by installed base, customer uptime requirements and retrofit opportunities rather than only new-equipment sales.
The division depends on electronics, cables, mechanical housings, contract manufacturing, calibration services, software development, cloud hosting, field-service vehicles, personal protective equipment, training and contingent engineering capacity. It is particularly exposed to shortages of skilled labour and to the need to protect customer and product data.
2.5 Value proposition and competitive advantage
LHTS does not aim to win every order through the lowest equipment price. Its core value proposition is “efficient performance over the installed lifetime.” Customers should receive equipment that is reliable, energy-efficient, serviceable and supported by people who understand the application.
The company’s competitive advantages are:
Application engineering
LHTS engineers have strong expertise in climate, energy and control applications. They can adapt proven platforms to customer conditions without designing a completely new product every time. This ability improves win rates in technically demanding projects but can create unnecessary variation if engineering governance is weak.
Modular product platforms
The group is investing in common modules, standard interfaces and shared component families. Standardisation creates volume leverage, reduces complexity and makes product qualification easier. However, business units sometimes resist it when they believe local customer needs are unique.
Service access and installed-base knowledge
Local service teams, spare-part availability and field knowledge help LHTS retain customers. The service business provides data about product reliability and failure modes. Procurement should use this feedback when selecting suppliers and setting quality requirements.
Energy and lifecycle economics
For many customers, operating energy and downtime cost more than the initial purchase price. LHTS therefore competes with total cost of ownership, documented performance and maintainability. Procurement must be able to support lifecycle costing, not merely unit-price comparison.
Trusted regional presence
The company combines a European engineering heritage with regional sales, service and selected manufacturing capabilities. Customers value local language, compliance understanding and delivery support. The global procurement model must not undermine this customer-facing strength.
3. Customers, markets and commercial model
3.1 Customer segments
LHTS serves five main customer segments. The mix differs by division and region.
Building and installation partners
Mechanical and electrical contractors, distributors and installers purchase standard and configured equipment for commercial buildings, schools, hospitals, warehouses and multi-use developments. They value lead time, technical support, product availability, documentation and competitive bid support.
Industrial end users
Manufacturers, food and beverage companies, logistics operators, process industries and utilities purchase LHTS equipment for production, utilities, storage and facility operations. They emphasise uptime, energy performance, safety, maintenance and technical integration.
Critical-infrastructure customers
Data centres, telecommunications operators, transport infrastructure owners and selected public-sector customers buy resilient systems and long-term service. They have higher requirements for quality assurance, cybersecurity, documentation, emergency support and business continuity.
OEM customers
Equipment manufacturers buy selected LHTS components or subassemblies for incorporation into their own products. OEM programmes can require stable pricing, engineering collaboration, long product lifecycles and change-control discipline.
Service-contract customers
Existing equipment owners purchase maintenance, repairs, upgrades, remote monitoring and spare parts. Their decisions are influenced by service response, technician competence, availability of genuine parts and predictable cost.
3.2 Routes to market
LHTS uses multiple channels. Approximately 45% of equipment revenue is sold through direct key-account and project sales, 30% through distributors and installation partners, 15% through OEM agreements and 10% through e-commerce or service channels. Percentages vary by division and geography.
The multi-channel model matters to procurement because demand signals are not equally reliable. Distributor stock orders can be volatile; project orders can be delayed by construction schedules; OEM forecasts may be contractual but still subject to customer-market changes; and spare-parts demand can be urgent and intermittent.
3.3 Commercial priorities and constraints
Sales teams are measured on revenue, margin, win rate, customer satisfaction and delivery reliability. They have a legitimate interest in responsiveness and configuration flexibility. Procurement is expected to support these goals, but it may challenge commercial commitments that create unmanaged supplier risk, non-standard components or unrealistic lead times.
No sales employee may make a binding commitment to a customer that requires a new supplier, a non-approved component, an unqualified material, a special inventory position or a contractual supply guarantee without engaging the relevant product, operations and procurement functions. In practice, this rule is not followed perfectly. Category managers must build working relationships that allow early involvement rather than relying on escalation after a promise has been made.
4. Global footprint and supply-chain network
4.1 Geographic presence
LHTS has its headquarters and group functions in Linköping, Sweden. The company’s main markets are Europe and North America, with growing activity in the Middle East, India and selected countries in Asia-Pacific.
The group has major sales and service organisations in Sweden, Norway, Denmark, Finland, Germany, the Netherlands, France, the United Kingdom, Poland, Italy, Spain, the United States, Canada, China, India, the United Arab Emirates and Singapore. Smaller sales or representative operations cover a further 27 countries.
The group sources globally but is working to reduce avoidable long-distance exposure in standard, regionally available components. Global sourcing remains appropriate where capability, technology, cost structure or supply-market concentration makes it necessary.
4.2 Manufacturing and assembly sites
LHTS operates twelve manufacturing or final-assembly sites. The network is intentionally diverse; a category strategy should consider the requirements of all relevant plants rather than assume one factory represents the whole company.
| Site | Main role | Typical output |
| Linköping, Sweden | Group R&D, prototype build, low-volume final assembly | Advanced controls, pilot products, specialised skids |
| Västerås, Sweden | CTS assembly and test | Premium air-handling units, heat-recovery systems |
| Gothenburg, Sweden | PES engineering and production | Power cabinets, UPS and energy-management equipment |
| Turku, Finland | Thermal-component production | Heat exchangers, coil assemblies, selected modules |
| Aarhus, Denmark | CTS final assembly | Heat pumps and commercial cooling equipment |
| Kassel, Germany | High-volume configuration and service parts | Air-handling modules, controls integration, spares |
| Brno, Czech Republic | Cost-competitive volume production | Sheet-metal assemblies, enclosures, configured units |
| Gdańsk, Poland | Electronics and cable integration | Control cabinets, harnesses, gateways |
| Milan, Italy | Project equipment and aftermarket refurbishment | Industrial chillers, process systems, retrofit kits |
| Monterrey, Mexico | North American final assembly | Commercial climate and power products |
| Raleigh, United States | Critical-infrastructure solutions | Data-centre cooling and power packages |
| Suzhou, China | Regional sourcing, assembly and supplier development | Standard controls, regional product variants |
Not every site has identical manufacturing capability. Some purchase complete modules; others fabricate more parts internally. A global category strategy must balance common specifications with plant-specific process needs, local certification and regional customer requirements.
4.3 Distribution and service network
Seven major distribution centres serve the manufacturing network and regional customers. The central European distribution centre is in Germany, Nordic distribution is managed from Sweden and Finland, North American distribution is concentrated in the United States, and Asia-Pacific distribution is supported from China and Singapore.
Service parts are held in central warehouses, factory stores and local technician vehicles. Inventory policy differentiates between standard service parts, critical uptime parts, slow-moving legacy parts and project-specific items. Procurement decisions that extend lead time, change a component or end a supplier relationship must consider the installed base and service-parts obligation.
4.4 Supply-chain characteristics
LHTS’s supply chain is a hybrid of make-to-stock, assemble-to-order, configure-to-order and engineer-to-order models.
- Standard motors, fans, fasteners, enclosures, selected controls and spare parts are normally forecast and supplied through planned replenishment.
- Configured air-handling and power products are assembled to customer order using common modules.
- Large industrial cooling systems, critical-infrastructure packages and OEM developments are often project- or programme-driven.
- Service and retrofit parts may be planned from installed-base data but are subject to urgent breakdown demand.
This mix creates conflicting procurement requirements. A component category may need low cost and high availability for standard production, engineering agility for projects, and long-term continuity for aftermarket. The category manager must make the trade-offs explicit instead of selecting one supplier model for all demand.
5. Organisation and governance
5.1 Group organisation
LHTS is led by a Group Executive Committee, chaired by the Chief Executive Officer. The main executive roles are Chief Financial Officer, Chief Operations Officer, Chief Commercial Officer, Chief Technology Officer, Chief People Officer, Chief Digital Officer, General Counsel and Chief Procurement Officer.
The three divisions have responsibility for their product portfolios, sales performance, divisional profitability and day-to-day execution. Group functions set common policy, governance and selected shared capabilities. This is a matrix organisation: a plant manager has local accountability for delivery and safety, while functional leaders set standards and develop functional capability.
The company has a strong history of decentralised entrepreneurship. Its current strategy seeks more common platforms and disciplined governance without losing local customer responsiveness. Procurement is one of the functions expected to make this balance work.
5.2 Decision-making principles
LHTS uses five principles to determine where decisions should be made:
- Decisions should be taken as close to the business need as practical, unless scale, risk or standardisation creates a stronger reason to decide centrally.
- Decisions that affect safety, legal compliance, product certification, cybersecurity, human rights or group reputation require formal controls regardless of spend value.
- A category decision should be owned at the highest organisational level that can aggregate meaningful demand and manage the supplier relationship effectively.
- Local exceptions must be evidence-based, time-limited and visible; “our plant is different” is not by itself a sufficient justification.
- Accountability for a decision cannot be transferred merely by involving many stakeholders. One accountable business owner and one accountable procurement owner must be clear.
5.3 Corporate functions relevant to procurement
Group Procurement, Finance, Operations, Technology, Quality, Sustainability, Legal, Information Security, Digital, HR and Compliance each have formal roles in procurement decisions.
Procurement owns commercial strategy, sourcing process, supplier selection recommendation, contract management standards, supplier performance governance and spend transparency. It does not own product design, production scheduling, quality release, legal interpretation, technical approval or business-case ownership. These boundaries are important for learners: a strong buyer leads the procurement process but does not pretend to make every decision alone.
5.4 Delegated authority and signatory rules
LHTS has a formal delegation of authority (DoA). It defines who may approve business cases, commitments, purchase orders, contracts, supplier nominations, capital expenditure and deviations from policy. Authority is based on role, legal entity, spend type and risk—not seniority alone.
Contract signature authority is separate from approval authority. For example, a plant manager may approve a justified local operational need within budget but may not sign a long-term international supply agreement. Legal entities must use authorised signatories registered in the DoA system. No employee may split a purchase, purchase order or agreement to avoid an approval threshold.
The exact monetary thresholds are case-dependent and should be supplied when they matter. As a general learning rule, higher-value, longer-term, strategically sensitive, cross-border, exclusive, IP-intensive or risk-bearing commitments require more senior approvals and Legal involvement.
6. Stakeholder map for category work
6.1 Stakeholder philosophy
A category strategy at LHTS is developed with the business, not delivered to it after the fact. Stakeholder mapping is therefore a mandatory early activity for material categories. The category manager identifies stakeholders who are affected by the category, have knowledge needed for the strategy, control a dependency, or can enable or block implementation.
The aim is not to invite every interested person to every meeting. The aim is to understand interests, decision rights, influence, information needs and likely sources of resistance early enough to manage them constructively.
6.2 Core stakeholder groups
| Stakeholder group | Main interests | Typical contribution to category work |
| Product management | Customer value, product roadmap, portfolio margin | Demand outlook, feature priorities, lifecycle plans |
| R&D and engineering | Technical performance, design freedom, qualification | Specifications, alternatives, validation requirements |
| Plant operations | Continuity, quality, productivity, practical implementation | Process needs, supplier performance, capacity constraints |
| Supply-chain planning | Lead time, forecast reliability, inventory, service level | Demand data, replenishment parameters, continuity scenarios |
| Quality | Defect prevention, audits, corrective action | Supplier quality requirements, approval and release criteria |
| Sales and key accounts | Customer commitments, lead time, competitiveness | Market needs, customer-specific requirements, volume outlook |
| Service and aftermarket | Parts availability, repairability, field reliability | Installed-base impact, service data, continuity needs |
| Finance | Profit, working capital, forecast accuracy, control | Cost-model challenge, benefit validation, risk valuation |
| Sustainability | Climate, materials, human rights, due diligence | Supplier requirements, emissions data, improvement plans |
| Legal and compliance | Contract risk, sanctions, competition law, data protection | Contract terms, legal due diligence, governance advice |
| Digital and information security | System integrity, cyber risk, data protection | Supplier-system requirements, security assessment |
| HR and people leaders | Labour model, capability, worker conditions | Labour categories, contingent labour governance |
| Local management | Local P&L, delivery, people, compliance | Exception validation and implementation sponsorship |
6.3 Stakeholder mapping method
For each significant category, the procurement lead creates a stakeholder map containing at least: stakeholder name or role, organisational unit, interest in the category, level of influence, decision or approval role, required input, likely concern, engagement approach and meeting cadence.
Students should understand the difference between stakeholder influence and formal authority. A senior design engineer may not have authority to approve a contract but may strongly influence whether a substitution is technically accepted. A finance controller may not choose the supplier but may validate whether savings are real. A plant buyer may not own the global strategy but may determine whether it is implemented correctly.
6.4 Typical tension points
Recurring tensions at LHTS include:
- Engineering wants qualified options and controlled change; procurement wants leverage and substitution possibilities.
- Plants value a supplier that solves daily problems quickly; global procurement sees fragmented spend and inconsistent terms.
- Sales needs a customer promise now; supply chain needs credible lead times and approved capacity.
- Finance expects measurable savings; operations may value avoided disruption or improved quality that is harder to translate into a budget effect.
- Sustainability needs transparent evidence; suppliers may be willing to make commitments but unable to provide reliable data quickly.
A good category strategy names relevant tensions and shows how decisions will be made. It should not suggest that stakeholder alignment means everyone receives their preferred answer.
7. Procurement organisation
7.1 Procurement mission
The mission of Procurement is to secure competitive, responsible and resilient supply that enables LHTS to deliver profitable customer value. Procurement is expected to combine commercial discipline with technical understanding, supplier collaboration and robust execution.
The function has approximately 310 employees. Around 95 work in group and regional category roles, 135 work in plant procurement and operational buying, 35 work in supplier quality or supplier development roles with a procurement interface, and the remainder support procurement operations, data, systems, governance and programme management.
7.2 Operating model
LHTS uses a federated procurement model with global category leadership and strong local execution.
Group Procurement
Group Procurement is led by the Chief Procurement Officer. It owns procurement policy, category-management standards, major global categories, procurement capability development, supplier risk governance, procurement systems roadmap and group-level performance reporting.
Global Category Management
Global category managers own strategies for categories where spend, supplier markets, technical platforms or risk exposure are materially shared across regions and divisions. They lead cross-functional category teams, negotiate global or multi-regional frameworks, set preferred-supplier models and coordinate supplier relationship management.
They do not replace local buyers. Their responsibility is to make a viable strategy, secure stakeholder commitment, establish agreements and govern performance. Local teams must execute call-offs, manage site-specific requirements and report implementation challenges.
Regional Procurement
Regional procurement teams manage categories with regional supply markets, coordinate regional supplier relationships and support cross-border implementation. They are especially important for logistics, regional services, indirect spend, local regulatory requirements and supplier-development activities.
Plant Procurement and Operational Buying
Plant buyers and procurement managers secure day-to-day supply, execute approved sourcing events, manage purchase orders and delivery escalation, support production changes and maintain local supplier contact. They are closest to real operational performance and provide indispensable input to category managers.
Procurement Excellence and Operations
Procurement Excellence maintains templates, processes, training, performance management, master-data standards and continuous-improvement initiatives. Procurement Operations supports transactional activities, vendor onboarding coordination, catalogue maintenance, data-quality work and user support.
7.3 Roles in a category team
Every strategically significant category has a named category manager and a cross-functional category team. Typical roles include business sponsor, category manager, engineering representative, quality representative, supply-chain planner, finance controller, sustainability representative and local implementation leads.
The category manager is accountable for the category strategy, sourcing plan, commercial recommendation, supplier-performance model and implementation follow-up. The business sponsor is accountable for ensuring the strategy supports business objectives and for resolving cross-functional conflicts that the team cannot resolve. Finance validates realised financial benefits. Technical and quality functions retain authority to approve product and process changes within their domains.
7.4 Capability expectations
Buyers at LHTS are expected to develop capability in spend and market analysis, cost analysis, sourcing process management, negotiation, contracting, supplier performance, risk management, sustainability due diligence, stakeholder management and digital tools. Category managers additionally need strategic thinking, financial literacy, change management and the ability to lead without direct authority.
The company recognises that a buyer moving from operational procurement to category management will need structured development. The role is not merely “buying larger volumes.” It requires understanding the business need, external market, supplier economics and implementation mechanisms.
8. Category architecture and ownership
8.1 Category-tree principles
LHTS maintains a group category tree for spend analysis, sourcing governance and reporting. The tree has four levels: spend family, category, subcategory and buying channel or commodity group. It is aligned as far as practical with ERP purchasing groups, supplier classifications and product/material master data.
The category tree is not a perfect mirror of accounting accounts, supplier legal entities or engineering bills of material. It is a management structure used to understand demand and supply markets. Procurement Excellence is responsible for the design and controlled maintenance of the group tree, while category managers are responsible for its business relevance.
8.2 Top-level spend families
| Spend family | Examples | Indicative ownership |
| Metals and fabricated parts | Sheet metal, castings, machined parts, enclosures | Global with regional execution |
| Thermal and fluid components | Compressors, coils, heat exchangers, valves, insulation | Global or division-led |
| Electrical and electronic components | Motors, drives, PCBs, sensors, semiconductors, cables | Global |
| Mechanical components and modules | Fans, bearings, fasteners, pumps, assemblies | Global or regional |
| Contract manufacturing and external operations | EMS, machining, powder coating, module assembly | Regional or global depending on technology |
| Packaging and intralogistics | Corrugated packaging, pallets, returnable packaging, handling | Regional with local implementation |
| Transport, warehousing and customs | Road freight, ocean, air, parcel, 3PL, customs brokers | Regional/global |
| MRO, production consumables and EHS | Tools, PPE, lubricants, maintenance, gases | Local/regional |
| Professional services | Engineering, consulting, legal, audit, marketing, training | Global policy; regional/local sourcing |
| IT, digital and telecom | Software, cloud, hardware, cyber services, telecom | Global |
| Facilities, utilities and real estate services | Energy, cleaning, security, waste, facility maintenance | Regional/local |
| People-related categories | Temporary labour, recruitment, travel, benefits, training | Regional/global policy |
| Capital expenditure | Production equipment, test rigs, automation, buildings | Project-led with procurement support |
8.3 Key direct categories
The following direct categories are frequently material to LHTS and are suitable for category-strategy examples.
Electrical and electronic components
This family includes printed circuit boards, electronic manufacturing services, sensors, control units, power semiconductors, relays, contactors, connectors, cables, wiring harnesses, drives and electrical steel. It has global supply markets, long qualification cycles, technology and obsolescence risks, and significant exposure to geopolitical disruption.
Metals and fabricated parts
This family includes steel sheet, stainless steel, aluminium extrusions, copper tube, castings, machined parts, welded frames, enclosures and sheet-metal fabrication. The category may be influenced by commodity prices, energy cost, capacity cycles, trade measures, transport cost, carbon requirements and local supplier capability.
Thermal and fluid components
Compressors, fans, motors, heat exchangers, pumps, valves, filters, insulation and refrigerant-related components are central to CTS. They are performance-critical and often require technical validation. Supplier capability, product efficiency, lifecycle reliability and field-service data are key evaluation dimensions.
External manufacturing and modules
LHTS uses suppliers for electronic manufacturing, cable harnesses, machining, coating, welding, coil production, module assembly and selected complete subassemblies. Make-or-buy decisions may be sensitive because they affect internal capability, capacity flexibility, IP protection and total landed cost.
8.4 Key indirect categories
Important indirect categories include logistics and 3PL, maintenance and MRO, energy, contingent labour, technical consulting, IT software and cloud services, telecom, travel, facilities services, waste management, PPE, tools, professional services and marketing services.
These categories should not be treated as less strategic merely because they do not go into a product. Transport affects delivery performance and emissions. IT services affect cybersecurity and productivity. Contingent labour affects capability, compliance and intellectual-property protection. Energy affects manufacturing cost and sustainability commitments.
8.5 Ownership model: global, regional and local
Category ownership is assigned using spend aggregation, supply-market structure, technical commonality, risk exposure, regulatory variation and implementation need.
| Ownership level | Appropriate when | Typical categories |
| Global | Supplier market is global; specifications are shared; risk or leverage is material | Semiconductors, PCBs, motors, major metals, enterprise software, global logistics standards |
| Regional | Supply market, regulation or delivery economics are regional | Road freight, packaging, regional contract manufacturing, energy, temporary labour |
| Local/site | Demand is site-specific; rapid response or local regulation dominates; aggregation is limited | Plant maintenance, local construction works, waste, utilities support, small MRO |
| Project-led | Requirement is unique and tied to a defined investment or customer project | Capital equipment, major installation projects, specialist engineering packages |
Ownership determines who leads the strategy; it does not mean others are excluded. A global category manager for motors must work with plants, engineering and regional supply teams. A local procurement manager buying facility maintenance must follow group policy, conduct due diligence and use approved contract standards.
9. Procurement process and decision gates
9.1 Source-to-contract process
LHTS uses a common source-to-contract process for material purchases and a proportionate version for lower-risk purchases. The process is designed to secure good decisions, compliance and an auditable trail—not to slow down routine work.
Stage 1: Define need and mandate
The business defines the need, expected outcome, demand horizon, budget, technical requirements and relevant constraints. Procurement confirms category ownership, process route and stakeholder plan. Requirements must be clear enough for suppliers to respond fairly; where they are not, an RFI, supplier workshop or specification-development step may be needed.
Stage 2: Baseline and category assessment
The team analyses demand, spend, volumes, specifications, supplier base, contract coverage, performance, risk, cost drivers and stakeholder needs. This creates an evidence-based view of the current situation. A category strategy begins here, but current external market information is collected separately for each case.
Stage 3: Strategy and sourcing plan
The category team selects a sourcing approach and documents objectives, scope, risk treatment, supplier model, commercial model, sustainability requirements, timeline, governance and expected benefits. Significant strategies are approved by the relevant category board or steering group before a competitive event begins.
Stage 4: Market engagement and competition
Procurement selects an appropriate route: benchmarking, RFI, RFQ, RFP, e-auction where suitable, negotiation, direct award under an existing framework, supplier-development plan, or a make-buy review. Competition is normally the default for new material commitments, but not a ritual. A justified direct award may be appropriate where there is proven technical uniqueness, protected IP, a critical continuity need or an existing contract that provides demonstrable value.
Stage 5: Evaluation, recommendation and approval
The cross-functional team evaluates offers against agreed criteria. Procurement documents the evaluation, commercial logic, risks, deviations and recommendation. Technical approval, quality approval, finance validation and legal review occur as required. The approving authority reviews the business case and commitment; it does not redo every technical assessment.
Stage 6: Contracting and supplier onboarding
The agreement includes scope, price and payment terms, delivery, quality, warranties, change control, IP, confidentiality, compliance, sustainability, information security, audit rights, data requirements, termination and dispute provisions as appropriate. Supplier master data, due diligence, bank validation and required onboarding checks must be complete before a new supplier is used.
Stage 7: Implementation and benefits realisation
The category manager and local teams implement the decision through ERP master data, approved vendor lists, catalogue or contract visibility, phase-in/phase-out plans, inventory treatment, communication, training and supplier-performance routines. A signed contract is not the end of category management. The strategy is only successful when the intended business result is realised.
9.2 Purchase-to-pay process
For routine purchases, LHTS expects employees to use approved suppliers, contracts, catalogues and purchase orders. The basic flow is business need, purchase requisition, approval, purchase order, supplier confirmation, goods or service receipt, invoice matching and payment.
Three-way matching is standard for goods. Service invoices require an approved service confirmation or equivalent evidence. Exceptions are monitored. Retrospective purchase orders, invoice-only buying and use of unapproved suppliers are treated as compliance issues because they weaken spend control, risk management and benefit realisation.
9.3 Competitive conduct and ethics
Employees must follow competition law, anti-bribery rules, sanctions requirements, export-control obligations, data-protection rules and the LHTS Code of Conduct. Buyers must not exchange competitively sensitive information between suppliers, coordinate supplier behaviour, accept inappropriate gifts or allow personal relationships to affect a decision.
Supplier meetings may be collaborative, but they must remain professional and properly documented. Procurement may seek innovation and cost transparency from suppliers; it may not misuse confidential information or use one supplier’s detailed quotation to pressure another supplier unfairly.
10. Systems, data and tools
10.1 Core systems landscape
LHTS operates a mixed but increasingly harmonised systems landscape. SAP S/4HANA is the strategic ERP platform, but several legacy entities still use earlier SAP versions or locally integrated applications. The group programme “One LHTS Operations” is consolidating processes and master data over a multi-year period.
The main procurement-related tools are:
| Tool area | Current approach | Main purpose |
| ERP | SAP S/4HANA with legacy systems in transition | Purchase orders, material and vendor master data, receipts, invoices, inventory |
| Procurement suite | Coupa for indirect procurement and selected sourcing | Requisitions, catalogues, sourcing events, contracts, supplier portal |
| Product lifecycle management | Siemens Teamcenter | Drawings, specifications, BOMs, engineering changes |
| Supplier quality | Integrated quality-management system | Audits, non-conformances, corrective actions, supplier approvals |
| Spend analytics | Power BI data model fed from ERP and procurement suite | Spend cube, compliance, savings and supplier dashboards |
| Contract repository | Central digital repository linked to Coupa | Contract metadata, approvals, renewals, obligations |
| Supplier-risk monitoring | External risk-data service plus internal review | Financial, geopolitical, sanctions and ESG alerts |
| Collaboration | Microsoft 365 and Teams | Category workspaces, document control, meeting records |
10.2 Data strengths and limitations
LHTS has good visibility of purchase-order spend in entities using SAP S/4HANA and Coupa. It has weaker visibility of non-PO invoices, local service spend, historical supplier ownership changes and indirect purchases in recently acquired businesses. Supplier names may be duplicated across legal entities, and material descriptions are not always classified consistently.
Students should not assume the spend cube is automatically correct. Procurement analysts and category managers must challenge data quality, reconcile material anomalies and clarify what is included or excluded. A data-quality limitation should influence confidence in the strategy, not be hidden.
10.3 Use of AI and digital analysis
LHTS permits approved AI tools for drafting, classification support, document comparison, data exploration and research assistance where security, confidentiality and human review requirements are met. AI is not authorised to approve suppliers, select a source, sign contracts, change ERP master data or make decisions that require delegated authority.
For category work, AI may support early hypothesis generation, supplier-market research, RFx drafting, contract-clause comparison and data cleansing. A qualified human must validate results, particularly where data may be incomplete, current conditions matter or supplier claims are involved.
11. Supplier management, quality and risk
11.1 Supplier segmentation
LHTS segments suppliers based on spend, business criticality, technical dependency, supply risk, innovation potential, sustainability exposure and performance. The four broad segments are transactional suppliers, preferred suppliers, key suppliers and strategic partners.
Transactional suppliers provide low-risk, standard goods or services. Preferred suppliers meet defined commercial, quality and operational requirements and are normally used ahead of non-preferred alternatives. Key suppliers have material impact on performance, continuity or cost. Strategic partners have long-term importance to product roadmap, innovation, critical capability or joint business development.
Segmentation is not a reward for supplier size. A relatively small specialist supplier may be strategic if it provides a unique technology. A large distributor may remain transactional if its offering is readily substitutable.
11.2 Supplier-performance management
Key and strategic suppliers are governed by documented performance reviews. Core measures usually include delivery performance, quality, responsiveness, cost and productivity, sustainability and compliance, innovation or technical support, and risk status. The exact KPI definitions depend on the category and must have a formula, data source, owner, target and management purpose.
Supplier scorecards support dialogue; they are not a substitute for management. When performance falls below agreed levels, the responsible buyer and supplier define corrective actions, owners, due dates and follow-up. For critical failures, LHTS may activate a structured Back-on-Track Programme involving senior operations, quality and procurement leaders.
11.3 Supplier qualification and approval
New suppliers must complete a proportionate qualification process before production or sensitive service work begins. The process can include financial checks, sanctions and beneficial-ownership screening, quality-system assessment, capability review, sustainability due diligence, information-security assessment, sample approval, audit and contractual acceptance.
For direct-material suppliers, qualification usually includes technical and quality validation. An approved supplier for one material, site or process is not automatically approved for another. Engineering changes and supplier changes must follow defined change-control processes.
11.4 Supply-chain risk management
LHTS assesses supplier-related risks across financial health, capacity, quality, geography, logistics, regulatory exposure, single-source dependency, cyber risk, ethical conduct, climate exposure and business continuity. Risk management is integrated into category strategy, supplier selection and ongoing SRM.
The company does not seek to eliminate all risk. It seeks to understand material risk, decide how much is acceptable and apply appropriate mitigations. Mitigations may include dual sourcing, regional alternatives, safety stock, tooling ownership, contractual commitments, supplier development, business-continuity plans, redesign, standardisation or customer communication.
11.5 Sustainability and responsible procurement
LHTS requires suppliers to comply with its Supplier Code of Conduct, which covers legal compliance, human rights, labour conditions, health and safety, environmental management, business ethics and responsible sourcing. Higher-risk suppliers and categories receive enhanced due diligence.
The group has climate targets that require progress in operations and value-chain emissions. Procurement is expected to engage suppliers on emissions data, energy efficiency, lower-impact materials, circularity, packaging and transport. However, sustainability claims must be evidence-based. A supplier’s marketing statement is not sufficient proof of performance.
12. Financial model and procurement value
12.1 Financial context
LHTS seeks profitable growth, stable cash generation and a return on invested capital above its cost of capital. Margin pressure can arise from raw-material volatility, customer-project competition, capacity under-utilisation, warranty cost, expedited freight, currency movements and engineering complexity.
Procurement can influence the income statement, balance sheet and risk profile. The function should consider purchase price, total cost, working capital, inventory exposure, payment terms, quality cost, warranty, logistics cost, production efficiency, service cost and revenue protection.
12.2 Benefit categories
LHTS recognises several forms of procurement value:
- Realised purchase-price reduction against an agreed baseline.
- Cost avoidance, where a credible external increase is reduced or prevented.
- Design-to-value savings from product or specification improvement.
- Total-cost improvement through quality, logistics, yield, energy, maintenance or process changes.
- Working-capital improvement from inventory, payment terms, packaging or supply-model changes.
- Capacity release and productivity improvement.
- Risk reduction, resilience and revenue protection.
- Sustainability improvement with measurable business relevance.
Not every value item should be added together as if it were cash savings. Finance validates the calculation method, baseline, timing, ownership and P&L or balance-sheet effect. Procurement reports both financial benefits and strategic value, clearly labelled.
12.3 Cost modelling
For important categories, LHTS encourages should-cost thinking and open discussion of cost drivers. This may include material indices, labour, energy, yield, scrap, depreciation, overhead, logistics, currency and supplier margin. The appropriate level of transparency depends on the category and supplier relationship.
Cost modelling is used to improve commercial understanding, challenge proposals and identify joint improvement opportunities. It must not become a false claim of certainty. A model is only as good as its inputs and assumptions.
13. Standard assumptions for future training cases
13.1 What stays stable
Unless a case states otherwise, writers should use this handbook as the stable internal context: LHTS’s business model, divisions, broad footprint, federated procurement model, category architecture, process expectations, systems landscape, stakeholder groups and governance principles.
13.2 What a case must define
Each category-strategy case must provide the specific internal data needed for a credible baseline. This normally includes category scope, annual spend, volumes or demand profile, sites and business units in scope, current suppliers and share allocation, contract status, specifications, performance, quality, lead time, inventory, stakeholder objectives, current pain points, strategic relevance, financial targets and implementation constraints.
The case must also retrieve or clearly state current external conditions: market structure, supplier landscape, cost drivers, technology trends, regulation, trade conditions, sustainability factors, risk events and benchmarks. These facts should be dated and cited.
13.3 What a case may change
A case may introduce a clearly labelled scenario, such as a new data-centre product launch, a factory capacity expansion, an acquisition, a component shortage, a customer localisation requirement, an ESG due-diligence finding, a supplier insolvency warning or an ERP rollout. The scenario should be plausible and should explain which stable condition it changes.
13.4 What a case must not do
Cases must not invent external facts and present them as current evidence. They must not claim a real supplier is underperforming, unethical or financially weak without verifiable public evidence and careful wording. They must not treat a fictitious internal number as a benchmark for a real company. They must avoid unnecessary legal, medical, environmental or financial claims.
14. Writing and learning principles
14.1 Accessible language
LHTS learning content is written for people who are developing procurement capability, many of whom use English as a second language. Articles should use short, clear sentences, explain necessary terms and avoid unexplained acronyms. A professional tone does not require complicated language.
14.2 Realism without false certainty
The purpose of a case is to teach good reasoning, not to simulate perfect information. A good case can show data gaps, stakeholder disagreement, uncertainty and trade-offs. It should make clear what is known, what is assumed, what must be researched and who needs to decide.
14.3 Action orientation
Every category strategy example should move from analysis to a practical recommendation: a target position, strategic choices, sourcing plan, supplier model, risk treatment, stakeholder actions, implementation plan, KPIs and review cadence. The learner should be able to see how a category manager turns insight into controlled action.
15. Quick reference profile
15.1 One-paragraph company description
LHTS AB is a Swedish-headquartered industrial technology group with SEK 28.4 billion in annual sales and approximately 10,850 employees. It designs, manufactures and services energy-efficient climate-control, power-management and industrial automation equipment for commercial buildings, industry, critical infrastructure and OEM customers. The company operates twelve manufacturing or assembly sites across Europe, North America and China and sells in 43 countries. Its procurement model combines global category management with regional and plant-level execution. The company’s strategic priorities are profitable growth, modularisation, supply resilience, sustainability and simpler digital operations.
15.2 Procurement context in one paragraph
LHTS spends approximately SEK 15.1 billion per year through addressable procurement categories. Its most important direct categories include metals, thermal components, electrical and electronic components, mechanical modules and external manufacturing. Important indirect categories include logistics, energy, MRO, IT, contingent labour, professional services and facilities. Procurement leads commercial strategy and supplier governance in partnership with engineering, operations, quality, finance, sustainability, legal, digital and local management. Category strategies are expected to balance total cost, technical performance, supply continuity, sustainability, working capital and implementation practicality.
