- Learning Objectives
- Introduction and History of Purchasing
- Why Is Purchasing Important?
- How Can the Appropriate Relationships with Suppliers Create Value?
- Purchasing and Supply Management and Return on Investment (ROI)
- Purchasing and Information Technology (IT)
- The Purchasing Process
- Strategic and Tactical Roles of Purchasing
- Types of Purchases
- Conclusion and Chapter Wrap-Up
- Key Terms
Purchasing and Information Technology (IT)
In a later chapter, the use of technology to improve supply operations is discussed. Trending social network sites and other open-sourcing programs make it challenging sometimes to keep up with the many market changes. IT helps purchasing streamline processes, increase information, and obtain access to necessary data.
Many firms purchase business-to-business e-commerce buy-side software systems from firms such as Arriba, Commerce One, and PeopleSoft. These systems help to streamline the purchasing process and facilitate communication internally and externally. Many of these systems also include database technology that provides timely and accurate input to supply management for strategic planning and tactical activities. Chapter 4 is dedicated to supply chain technology, and types of e-sourcing tools and trends are discussed. The relationship between purchasing and IT is changing as quickly as the technology to effectively source products and services.
Purchasing and Logistics
Logistics is concerned with the movement of goods, sometimes both inbound and outbound, to the organization. Usually, it controls outbound only. The logistics professionals design and manage a firm’s distribution system, which consists of warehouses, distribution points, and freight carriers. In some organizations, purchasing plays a dominant role in sourcing and pricing of logistics services. In others, the logistics department performs these services with little or no supply management involvement.
Generally, the sourcing and logistics roles are not linked. This is primarily because warehouse management and transportation management systems are generally not linked to e-sourcing tools. Also, the transportation aspect is performed at the plant or facility level, whereas sourcing is often centralized at a more corporate level. There is also a lot of price volatility in the transportation industry, which requires a different type of skillset to manage and to measure supplier performance.
The primary idea in the linkage between sourcing and logistics is that whoever does the sourcing should use professional purchasing practices. This is a growing area of opportunity for collaboration and cost-savings. Many organizations have set their sights on improving their transportation spend and, as mentioned earlier, reducing their carbon footprint in the transportation area.
Purchasing and Legal
Legal professionals are frequently involved in contract negotiations and contract formation. They review and approve contracts developed by the purchasing professional. However, there is often little collaboration on working with the firm’s legal suppliers.
As with the logistics area, these intra-organizational relationships vary within the area of services spend as indicated in the following case in point. This variation is often due to budget ownership of the service. For example, marketing and advertising spend is usually owned by the marketing area. The involvement of purchasing is often nonexistent or minimal in an area of spend that is potentially a significant portion of the organization’s overall expenses.