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Samenvatting - Purchasing Strategy ()
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Summary regarding to theoretical literature of the course. Course passed with an 7.4.
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Week 1 Strategic Purchasing, grand theories and currentdevelopments of the field
“The term procurement itself has a very administrative connotation: It’s associated with buying ‘stuff’
for the lowest prices possible.”
“Procurement doesn’t register on the C-suite’s radar in a manner proportionate to its growing
importance within the organization, and most procurement departments are neither ready nor
empowered to take on their new responsibilities. Here are some of the reasons for this:”
• An unproductive fixation on cutting costs (example: Kelly, K., & Kerwin, K. (1993). There’s another
side to the lopez saga)
Many procurement departments focus solely on cost reduction without considering broader strategic
goals. This narrow focus can limit their ability to add value to the organization. An example is the
Lopez saga, where cost-cutting measures may have negative consequences beyond short-term
savings.
• Organizational isolation
Procurement departments are often isolated within the organization, not integrated with other
functions. This isolation can hinder collaboration, information sharing, and strategic alignment with
the rest of the company.
• Glacial Processes (long tendering processes for example)
Some procurement processes, such as lengthy tendering processes, can be excessively slow and
bureaucratic. These delays can impede the organization's agility and responsiveness to changing
market conditions or opportunities.
• Acting without inquiry (linked to organization isolation)
When procurement acts in isolation without seeking input or feedback from other departments, it
can make decisions that are not aligned with the broader needs and goals of the organization. This
lack of inquiry and collaboration can lead to suboptimal outcomes.
Why would the customer buy your product
When the direct competitor has the exact
Same resources as you? See picture
Supply base: The supply base refers to the
group of suppliers or vendors from which a
company sources its goods, materials, or
services. It represents the network of
suppliers that a company relies on to meet
its operational needs.
Supply Chain: A supply chain is the end-to
-end process and network of activities
involved in producing and delivering
products or services to customers. It
encompasses everything from raw material suppliers to manufacturers, distributors, retailers, and
ultimately, the end consumer.
Supply management: Supply management is the practice of overseeing and optimizing the
procurement and management of goods and services from suppliers. It involves activities like supplier
selection, negotiation, and ongoing relationship management.
,Supply chain management: Supply chain management is a broader concept that involves the
coordination and integration of all activities within the supply chain. It includes planning, executing,
and controlling the flow of goods, information, and finances to deliver value to customers while
minimizing costs and improving efficiency.
Purchasing: Purchasing is the specific function within supply management that deals with acquiring
goods, materials, or services from suppliers. It includes processes like sourcing, negotiating contracts,
placing orders, and ensuring the timely delivery of products or services to meet organizational needs.
Difference Purchasing and Supply management
Purchasing is a functional group as well as a functional activity. It consists of the five rights: getting
the right quality, in the right quantity, at the right time, for the right price, from the right source.
Supply management: Strategic approach to planning for and acquiring the organization’s current and
future needs through effectively managing the supply base.
Grand theories in Purchasing
BEST VALUE SUPPLY CHAIN
The effectiveness of strategic supply chain management is closely tied to three attributes: agility,
adaptability, and alignment
Agility refers to the ability of a supply chain to react quickly to unexpected or rapid shifts in supply
and demand
Adaptability refers to a willingness to reshape supply chains when necessary, without ties to legacy
issues or the way the chain has been operated previously
Alignment refers to ensuring that the interests of all participants in a supply chain are consistent
Transaction Cost Economics
Core thesis: Firm boundaries (and the resulting levels of vertical integration) are explained by
governance (transaction) costs
Governance costs are the costs associated with acquiring necessary inputs for the operation of the
business, including the costs of search, negotiating, bargaining, contracting and contract
management.
Rationale for Make-or-Buy decisions:
Activities should be integrated into the firm when their external governance costs (outsoucring) are
larger than the costs of performing the activity in-house and using an internal governance structure.
Cost of transactions will differ depending on the characteristics of the transaction in question:
transactions with high; 1. Uncertainty 2. Frequency. 3. Transaction specific investments
Transactions that score high will be performed more efficiently within the firm
, Grand theories in Purchasing – Transaction cost economics
Resource dependence theory
•Organizations depend on resources.
•The resources one organization needs are often in the hand of other organizations.
•Power and resource dependence are directly linked:
Organization A's power over organization B is equal to
organization B's dependence on organization A's resources.
Even though the possession of unilateral power does not necessarily result in the exercise of this
power the underlying knowledge that “you need us more than we need you” implicitly forces
suppliers to adapt to the buyer’s wishes.
Resource Dependence Theory is a management theory that suggests organizations depend on
external resources, such as suppliers, customers, and regulatory bodies, to function effectively. It
emphasizes the need for organizations to manage and control these dependencies strategically to
ensure their survival and success. This theory helps explain how organizations interact with their
environment and make decisions to secure necessary resources for their operations.
Resource Based View (RBV) is a management theory that focuses on an organization's internal
resources and capabilities as key drivers of competitive advantage. It suggests that a firm's unique
and valuable resources, such as expertise, technology, and intellectual property, can enable sustained
success and should be the basis for formulating competitive strategies. In essence, RBV emphasizes
that a company's internal strengths and distinctive resources are more important than external
factors in achieving a competitive edge.
Valuable – A resource must enable a firm to employ a value-creating strategy
Rare – To be of value, a resource must be rare
In-imitable – A valuable resource is controlled by only one firm and competitors should not able to
duplicate this resource
Non-substitutable –Competitors should not be able to counter the firm’s value- creating strategy with
a substitute resource
Obtaining VRIN (Valuable, Rare, Inimitable, Non-substitutable) resources is indeed a complex
challenge because these attributes imply that such resources are not readily available on the market.
Organizations must often develop these resources internally or through strategic partnerships.
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