What is Purchasing?
The classic definition of purchasing defines the objectives as:
To buy materials at the right quality, in the right quantity from the right source delivered to the right place at the right time, at the right price.
- There are some criticisms of this definition as what is meant by “right”, and there are associated difficulties.
- What is “right” is contingent on a particular organization or situation.
- In practice, some of the above “right” are irreconcilable and a particular “right” can only be obtained by trading off another. Thus it may be possible to obtain the right quality but not the right price. In practice the right supplies are often, but not necessarily, the busiest and also the most expensive.
The above definition is outmoded as it implies that purchasing is:
- Reactive rather than proactive – that is purchasing is a service activity buying what it is instructed to buy, rather than one that takes the initiative in helping to determine purchasing policies.
- Transactional rather than relational – that is purchasing is primarily concerned with the mechanics of all the placing on a one-off basis love then the establishment, where appropriate of long-term collective supplier relationships.
- Tactical rather than strategic – that is purchasing is focused on short-term buying rather than contributing to the achievement of long-term corporate goals.
Procurement and has a wider term them purchasing, which implies the acquisition of goods or services in return from monetary or equivalent payment. Procurement however is the process of obtaining goods or services in any way, including borrowing, leasing and even force or pillage. As procurement is strictly, a more accurate term, it is unsurprising that the word procurement is often supplemented purchasing in job titles, such as procurement manager, procurement agents, and head of procurement.
Purchasing as organisational buying, have been defined by Marrian as: those buyers of goods and services for specific purpose of industrial or agricultural production or for the use in the operation will conduct, plant, business, institution, professional or service.
Organisation buyers are, therefore, those who buy on behalf of organisations rather than individuals or families for the use of consumption.
Purchasing and supply management may be defined as: that aspect of purchasing or procurement concerned with rational that the rationalisation the supply base and selecting, coordinating, appraising the performance of and developing the potential of supplies and, where appropriate, building long-term collaborative relationships.
Research in the USA indicate that, that future trends relating to PSM would include:
- An increase in the strategic importance of PSM
- Tactical purchasing activities, such as ordering and expediting, will increasingly be automated and selected low value, non-critical, standard commodity purchases, to be outsourced full-service providers
- Most non-technical items will be brought under master contracts
- The Internet/the World Wide Web will be the main vehicle for electronic purchasing
- Strategic alliances with supplies from increase
- Organisations in the supply triangle increase in the share resources
- Increase coordination of supplies by supply associations
- Global supply development will be critical to global penetration
- There will be increasing emphasis on win-win negotiation
- Dominant companies in the supply chain to influence the source and decision of the first second and third tier suppliers
- Environmental factors will become increasingly important to purchasing
- Personnel employed in PSM require a high level of training, including that in leadership and influence skills.
World-class purchasing: Schonberger defined world-class manufacturing as an analogous to the Olympic motto, “citius, altius, fortius (meaning faster, stronger) 12 characteristics of world-class supply management were identified for the USA Centre for advanced purchasing studies as follows:
- commitment to total quality management (TQM)
- commitment to just-in-time (JIT)
- commitment to total cycle time reduction
- long-range strategic plans
- supplier relationships
- strategic cost management
- performance measurements
- training and professional development
- service excellence
- corporate social responsibility (CSR)
- management and leadership
Ultimately world-class purchasing depends on obtaining world-class suppliers, which will involve continuous improvement, technology and innovation and adaptability. Here are Oliver John Procurement Consultants the line to succeed where others fail.