Procurement & Supply Chain Management
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
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).
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
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).
