Purchasing Approaches and Strategies - Paper Example

Purchasing approaches and strategies are helping firms maintain and improve competitiveness. The traditional purchasing profession had been somewhat dormant and not deemed to carry much prestige. Activities in a lifelong career, for instance, were predictable. Global competition, however, enabled the development of progressive purchasing strategies for better management of purchasing. Among the benefits of these new approaches are dramatic reductions in cost, exponential improvements in quality, and unheard-of reductions in the time it takes to develop new products (Monczka, et al. 5). Moreover, the new purchasing staff roles pushed the positions higher in organizations hierarchy. This report will focus on the organizational purchasing structure, the purchasing roles responsibilities, challenges purchasing professionals encounter and their ethical requirements, and finally address the future trends in purchasing.

Purchasing Organizational Structure Centralized vs. Decentralized. Organizational design determines the success or failure of purchasing objectives. The structure shows the formal system of communication, division of labor, coordination, control, authority, and responsibility required to achieve organizational goals and objectives. Centralized purchasings position in an organization coupled with its placement in the firm hierarchy is significant. The general reason for positioning is that it shows the positions importance and the influence it has. Trends in research show that purchasing positions are gaining importance in organizations.

Several factors have over time influenced the purchasing positions in the organizational structure include an organizations purchasing history, type of industry, philosophy of the founder, type of purchased material and ability to influence the companys performance among others. As such, the executive level to which purchasing position holders report to has continued to increase over time. These developments are against any attempts to decentralize the purchasing positions.

Purchasing Roles and Responsibilities. Purchasing has the legitimate role in exercising authority over activities in its span of control in an organization. Before the final decision is reached, the internal customer has already had their input on various concerns. Evaluating and selecting suppliers is one of the most critical responsibilities of purchasing. This process, often done with the assistance of other departments in some instances such as engineering, ascertains that indeed what the supplier is offering is value for money. Hence, commitments and contracts that are to be made to sellers must have the purchasing involvement. Secondly, the purchasing division reviews supplies specifications. Whatever extensive knowledge and expertise of materials purchasing team develop over time is applied. This role, however, has departments such as engineering legitimately feeling that the role is theirs to perform (Monczka, et al. 40).

Purchasing divisions also act as the primary contact contacts with the suppliers. This policy, nonetheless,is being relaxed gradually. The reason is the increasing realization of the need for other departments to interact with the suppliers if needed. Lastly, purchasing also determines the approach to use in the awarding of purchasing contracts. It is solely purchasing departments responsibility to decide either a competitive process or a negotiation (Monczka, et al. 42).

Issues/Challenges in Purchasing: Purchasing Policy. Policies provide the basis for action. Companies maintain a set of directives that guide employees on how to work. However, these directives have to be regularly revised to adjust them to the changing business environment. As such, the business regains or retains its competitive edge. While policies set the ground for consistency in decision-making, they are also a disadvantage. First is that policies are difficult to communicate in large firms. Secondly, policies can also appear to purchase teams as an alternative to active management. Moreover, policy development may significantly curtail innovation and flexibility in an organization (Monczka, et al. 87).

Legal/Ethical aspects of Purchasing. Among the advantages of purchasing policies is that they assist in aligning organizations on the right side of the law. Contract law influences the bulk of the purchasing contracts. These laws specify the nature of agreements and create legal rights between the buyer and the seller. The more delicate details on offer and their subsequent acceptance, satisfactory servicing of the purchase orders, and nonperformance consequence are all made open for inspection by both parties. Additionally, agency law applies to the individual manager as they represent their firms in the day-to-day business (Monczka, et al. 544). The purchasing executives need to comprehend the role they play standing as organizations representatives.

Purchasing divisions also hold the potential for ethical abuse owing to the power in its executives ability to give away an organizations business. Ethics guide the moral principles or values in someones behavior. In business and particularly in purchasing departments, ethical behavior is the use of social principle to deliver justice and fairness throughout business engagements. Ethical officer offers their energy to meet their organization's objectives better. Being ethical does not also allow one to be influenced by gift vouchers or favors. Furthermore, ethics would demand that buyers do not fall for the manipulative ways of salespeople or have a financial arrangement with them. Ethics is the top knowledge any purchasing professional should possess (Monczka, et al. 567).

Future trends in Purchasing. Excellent competitors will continue to force firms to improve their internal processes to remain competitive. Factors that will potentially influence purchasings future are: mergers, acquisitions, and supply market consolidation; increased legislation, technological advances increased product or service variety, and shorter life cycles. Also expected to exert itss influence is the businesses social and environmental responsibilities. Thechanges that will occur will serve to expand the goals and expectation of purchasing (Monczka, et al. 744). Other complementary areas also expected to experience changes are: developing and managing suppliers; designing and operating multiple supply networks; leveraging technology enablers; collaborating internally and externally; attracting and retaining supply management talent; and managing and enabling the future supply management organization and measurement systems (743).

ANALYSIS AND CONCLUSIONS

Through this report, it has been possible to comprehend what it takes for organizations to pick the right source to meet the right quality and quantities of supplies, at the right and right price. Achieving excellence in those aspects is a mesh of continually advancing mesh of firms organizational structures, purchasing roles, and policies all bound together by laws and ethics. The importance is the understanding of the new competitive environment demand for close relationships with essential suppliers, performing due diligence on suppliers before awarding long-term contracts, and participating with suppliers during product and process development.

Works cited

Monczka, Robert M et al. Purchasing and Supply Chain Management. 4th ed., Mason, OH 45040 USA, South-Western Cengage Learning, 2009.