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It has led to the role of purchasing becoming more strategic due to international competition for resources and raw materials on the one hand and lower labour costs on the other. According to Smith (1999), global procurement can also provide strategic advantage by way of gaining knowledge of foreign markets, exploiting tax and currency opportunities and through improved availability & quality. Firms are increasingly looking to suppliers to create added value.
Organisational dynamics have changed in so far as supply side goods & services now account for some 60% of total business costs (Jahns, 2006).
This has come about as a result of a move away from vertical integration towards outsourcing.
A trend in recent years away from in-house manufacturing towards outsourcing - or the outsourcing of non-core areas - has emphasised the strategic importance of purchasing (Hunter, Bunn & Perreault, 2006).
Part of this movement towards outsourcing has involved a shift from product purchasing to solution purchasing.
In consideration of this statement, the argument presented below is one which opposes the contention that the purchasing function is not strategically important in enabling organisations to gain competitive advantage.
This stance has been taken following a thorough literature review and consideration of the statement relative to pertinent models, tools and techniques.
The act of obtaining merchandise, capital equipment, raw materials, services, or maintenance, in exchange for money or its equivalent.
Classified into two categories: Merchants - wholesalers / retailers, who purchase for resale purposes Industrial Buyers - primary task is to purchase raw materials for conversion purposes Primary goals of purchasing is to ensure uninterrupted flow of raw materials at the lowest total cost, to improve quality of the finished goods, and to maximize customer satisfaction.
In terms of the threat of new entrants, if an organisation does not manage their suppliers well, they may involve themselves in downstream investment - thereby becoming competitors of the firm (Mol, 2003).
Therefore, through the work of Porter and the identification of factors which determine industry profitability, the importance of the purchasing function began to be appreciated. Success factors in strategic supplier alliances: the buying company perspective.