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Procurement & Supply Chain Management

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Copyright (c), Micro-Touch & Consult (TM) 2015

Supply Chain Management - Procurement Trends


Keywords

Purchasing - Procurement - Purchasing and Change - Purchsing Relationships - Purchasing within Supply Chain Management - Sustainability - Sustainable Procurement - Supply Chain Management - Sustainable Supply Chain Management

Produced by: Micro-Touch & Consult, 2015
Purchasing
Purchasing has a mixed definition and is called different names as a business function, like  procurement  and  supply management.  Overall it  covers a  wide  area  from  buying goods  and  contract  negotiation  to  more  complex  social,  political, economic, technological and ethical aspects (Barrat & Whitehead, 2004).  

There  is  a  distinction  to  make  between  local  and  national  or  global  purchasing  and supply  management  where  complexity increases  in  all  the  elements  (Pooler,  et  al., 2004).  Purchasing  and  supply  chain  management  can  positively  contribute  to the competitive position of an organization by increasing its effectiveness and efficiency in buying and selling (Barrat & Whitehead, 2004; Bailey, et al., 2015). 

Procurement
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There is a shift detectable from purchasing to overall procurement management where purchasing is just one of the many elements. Overall this means that the responsibilities of purchasing increased and that the expertise needed  demands  many  more qualities from  staff  being  occupied  with  procurement  (Marquez,  2010;  Barratt  &  whitehead, 2004).  

The transformation from purchasing to procurement changed from operational to tactical and  strategic  management  of resources and  suppliers.  Procurement  is  more  about change management to guide the process of purchasing, the connected activities and the  relationships  within  the  whole  supply  chain  (Cooper,  et  al.,  2005;  Bailey,  et  al., 2015). 

The evolvement of procurement can help to implement the correct organizational design and  processes  to  prevent  having  poor service  levels,  bad  performance,  fragmented resources and insufficient skills among employees. To be able to influence these factors it is necessary to analyze what transformation means  when seen from a procurement perspective (Burt & Pinkerton, 1996; Baily, et al., 2015) 

Purchasing and Change
Several  drivers  stood  at  the  foundation  of  the  evolution  of  purchasing.  These  drivers transformed the role of purchasing dramatically and the needed changes can be found within the definition of  them (Burt & Pinkerton, 1996; Marquez, 2010). Although many driving forces are formulated in different sources, four of them are mentioned here being the  technological,  social, political  and  economic  drivers.  They  turned  purchasing  into strategic procurement management (Bailey, et al., 2015). 

Technology made purchasing fundamentally different through the change from paper to electronic  transactions.  The  social interaction  changed  because  communication  could be done with the speed of light. International economic drivers made purchasing a much more  global  integrated  endeavor  and  political  changes  made  the  borders  of  doing business fluid resulting in an exploding exchange of goods and knowledge (Bailey, et al., 2015).  

Purchasing changed through these driving forces from an internal focused activity to a strategic organizational movement where the company acts as one global business unit (Quitt, 2010). 

Purchasing Relationships
The buyer-supplier relationship has changed dramatically over the years from traditional to a more mutual beneficial intertwined connection. The traditional approach was often short termed and mainly focused on price where the supplier was not seen as a closely related business partner (Barrat & Whitehead, 2004). 

Over  the  years  this  traditional  view  changed  into  a  more  strategic  supply  partnership where  transparency  in communication  between  the  connected  organizations  is  a  key element for its success (Burt & Pinkerton, 1996). 

Competitive  and  consistent  procurement  strategies  are  mainly  focused  on  increasing the bargaining power of the buyer for leveraging purchasing on a global scale as part of the procurement  management strategy (Marquez, 2010). This approach is fully in line with the strategic supply partnership as described by Burt & Pinkerton (1996) and the successful partnering relationships based on clearly defined and transparent contractual terms between the related business partners (Mosey, 2009). 

Purchasing within supply chain management
Procurement  is  tightly  integrated  in  supply  chain  management  and  together  with  the supplier  focus  it  is  one  of  its building  blocks  (Basu  &  Wright,  2008).  Supply  chain management  is  concerned  about  the  flow  of  goods  and  materials  to support  the organization, wherein procurement management has its natural place and is focused on purchasing within this flow (Segal, 2009). 

Sustainability
There are a lot of definitions of sustainability but three main areas are shared among many  of  them.  These  three  main  areas  are the environmental,  social  and  economic aspects. The environmental elements are concerned with the planet and being green, where the social aspects are more concerned with the people, but in many ways they are closely related to each other. The economic drivers are concerned with profits and prosperity but within the boundaries of the first two (Morris & Pinto, 2007). 

The  importance  of  purchasing  and  supply  in  the  sustainability  efforts  organizations undertake  will  grow  in  the  future  and includes  suppliers.  Today  the  environment demands  continuous  improvements  in  procurement  costs  and  quality.  These 
sustainability improvements must be reflected in the whole supply chain (Hoeven, 2009; Monczka, et al., 2009). 

Sustainable procurement
While often the short term benefits prevail, it is important to  integrate sustainability in procurement and supply chain management strategies. Sustainability does hit two sides of  the  coin  in  this  context.  It  is  about  sustainability  related  to  future generations  and being careful with environmental aspects, but it can also be related to the sustainability of the relationship between business partners  and customers in the supply chain and procurement process (Kotzab, et al., 2005; Ross, 2011).  

To increase the sustainability of these two sides partners needs to closely work together in the startup phases of a project (Mosey, 2009). This kind of procurement and supply chain  management  is  about  shared  processes  and  co-development  from where partners grow towards a linked competitive vision.  Combined strategies must be created with mutual beneficial marketplace development, contract transparency and risk management; where sustainability is increased through the  use  of highly  integrated and  complex  green  environmental  savvy  technologies (Kotzab, et al., 2005; Ross, 2011).

Supply chain management
It can help to visualize the concept of supply chain as a group of organizations linked together in purchasing and procurement collaboration (Barrat & Whitehead, 2004). The supply chain characteristics changed dramatically over the last decades from traditional buyer,  seller  contract  negotiations  towards  a  more  strategic  partnership  where sustainability in the relation as well as towards environmental elements  became  more important and experienced as valuable elements (Burt & Pinkerton, 1996). 

In the current global market it is better to think about value-supply chain management with  a  focus  on  the  suppliers  and customers  to increase  the  value  by leveraging  and optimizing  its  elements.  The  goal  of  value-supply  chain  management  is to  create  an overall view of all the links in the chain to minimize the time and maximize the quality of the strategic supply chain partnership. This is done for optimal production and transfer from raw materials to the final products and consumption (Chang, et al., 2004; Burt & Pinkerton, 1996).  

There  is  a  trend  towards  service  on  all  levels  of  this  value  added  supply  chain. Especially in the global market place it is imperative that the value-supply chain includes the services and manufacturing as an integrated system (Basu & Wright, 2008).. 

Sustainable Supply chain management
Sustainability in supply chain management increased through the shift from just having a  supply  chain  focus  towards  the  value-added  supply  chain  management  strategy where services in all the layers towards suppliers, buyers, customers and environmental factors are taken into consideration (Chang, et al., 2004; Burt & Pinkerton, 1996; Basu & Wright, 2008).  

When doing so it is easier to detect and remove or avoid risks because supply chain risk  management  is  related  to  multi-dimensional  problem  analysis  between  limited resources.  Adequate  planning,  quality  of  services  from  suppliers  and transparent contract  negotiations  are  necessary  elements  to  make  this  kind  of  analysis  work properly (Wu & Blackhurst, 2009).  

Ethical behavior and trustworthiness are key elements that should be in place or else risks  are  more  difficult  to  detect  and measurements  will  be  too  late  and  insufficient. Without these elements green sustainability and responsibility for environmental factors and future generations are difficult to control within supply chain management strategies (Moncka, et al., 2009). 


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