The traditional role of purchasing is to purchase materials conforming to specifications such as physical dimensions and the lowest bids. Most organizations still view purchasing as a tactical one with a short sighted approach. The tactical role of purchasing is underlined by the fact that most firms don’t have purchasing function in the corporate boardroom.
Purchasing as a tactical function is confined to clerical processes such as bid invitation, order management and payment. But purchasing is a complex function that manages suppliers for operation, new product launches and market planning. The strategic role envisages supplier involvement for increasing the efficiency of the business itself. This transition from tactical to strategic to engage suppliers is a long term process and therefore considerable change management processes.
The objective of strategic purchasing is to manage suppliers to reduce cost of materials and engage them in downstream processes and also to reduce the cost of purchasing. The implementation of IT in purchasing enables automation of many of the processes such as bid management and evaluation, order management and payment processes such as handling of invoices. The automation reduces errors in the purchase to pay cycle and increases process efficiency.
With increased competition and globalization, strategic purchasing involves sourcing supplies at the global level to reduce costs, better quality products. The global sourcing enables a firm to forge long term relationships with vendors who have the synergy and to share best practices and solutions. By having the supplier closely work with the firm, more products are launched quickly in the market and fewer inventories of finished products unsold are stored in warehouses.
Strategic purchasing enables firms to enter the ecommerce arena to source supplies online. According to Porter’s five forces theory, suppliers are seen as a force in the success of a product or firm and they are classified as either weak or strong. A chain is as strong as its weakest link. Strategic purchasing integrates suppliers into the network and collaborates to develop them.
Related Articles of Interest :
-
Purchasing Consultants
10 August 2010 8:30 PM |
No Comments
Businesses operate in circumstances which are caused as a result of macro- and micro-economic factors. Macro-economic factors are due to myriad forces such as political stability and unforeseen natural calamities upon which businesses have little or no control. For instance, businesses have little control over...
-
Purchasing Software
10 August 2010 8:30 PM |
No Comments
In manufacturing and engineering industries, the major proportion of operating costs is composed of raw materials, accessories and other miscellaneous items, generally clubbed as ‘bill of materials’. The basic purpose of businesses is to satisfy customers by adding value to these materials. Purchasing is the...
-
Purchasing Solutions
10 August 2010 8:30 PM |
No Comments
In a traditional organization, the role of purchasing is to simply purchase and the means was to negotiate and to have a confrontational attitude with the vendors. This led to the concept of ‘buying power’ of organizations into the management literature. For instance, large organizations...
-
Purchasing Management Software
10 August 2010 8:30 PM |
No Comments
The IT strategy of an organization focuses on deploying IT systems and solutions to different functions to capture the cost advantages enabled by those systems. Each function may have the authority to decide the areas to be automated in consultation with IT department. Alternatively, organizations...
-
Strategic Business Planning
10 August 2010 8:30 PM |
No Comments
Strategic Business Planning generally focuses on a particular product, service or program. Chalking out, maintaining and upgrading a Strategic Business Plan is essential for any business (including successful and growing businesses). Essentially, a Strategic Business Plan is, theoretically, a no-holds-barred, can-do approach to success. It...
-
Supply Chain Management Software
10 August 2010 8:30 PM |
No Comments
Purchase-to-pay cycle starts with purchase, logistics, inspection, production and pay. Supply chain management integrates all of these functions, keeping at the same time, the vendor-user role in a collaborative mode. In a collaborative environment, the role of supplier is not just restricted to supply materials,...
-
Purchasing Outsourcing
10 August 2010 8:30 PM |
No Comments
Businesses compete in the real world with core competency. The core competency can be, for instance, excellence in design and low cost manufacturing. The purpose of businesses is to satisfy customers. Businesses, with its number of functions and process flows, have to add value to...
-
Strategic Media Planning
10 August 2010 8:30 PM |
No Comments
Strategic Media Planning concerns strategically outlining the extent to which an organization and/or an individual can get the greatest reach and the maximum response for services, products or programs offered. Strategic Media Planning can involve chalking out some short-term objectives or long-term campaigns, or even...
-
Strategic Planning Software
10 August 2010 8:30 PM |
No Comments
Strategic Planning Software is designed for implementing, deploying and communicating strategic plans throughout the organization in an automated manner. The object is to bring about improved business results. Common purposes served by Strategic Planning Software include helping in the creation and reporting of an initial...
-
ASP Contract Management Software
10 August 2010 8:30 PM |
No Comments
More and more corporations are going in for contract management software to manage their business more efficiently and effectively. Installation of contract management software is in line with the primary objective of any business: to make money. The contract management system software market is booming...