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Purchasing Management Master Supply Chain ManagementArticles Author: Andreas S. Melisse
Lecture 1 – Monday 01-02-2021
Purchasing and supply management as a multidisciplinary research field: Unity in
diversity? – Wynstra, F., Suurmond, R. & Nullmeier, F. (2019)
1. Introduction
Since the 1960s PSM has developed from a predominantly administrative process into a strategic function.
Nowadays, there is a shared realisation that PSM encompasses activities through which organizations can realise
their strategic objectives. Purchasing and Supply Management is typically defined as the design, initiation,
control and evaluation of strategic, tactical and operational processes within and between organizations, aimed
at acquiring products and services at the most favourable conditions. Three disciplines have made substantial
contributions to PSM research: marketing, operations management, and strategy & organization. Most
importantly, the current study is the first to explicitly define PSM as a multidisciplinary research field and to
develop its inquiry specifically along the lines of various management research disciplines.
2. Research in PSM: historical development and multidisciplinary nature
Vertical disintegration of activities provoked a growing interest in interorganizational coordination of operations
strategy and processes, which also led to the introduction of the term ‘supply chain management’. Three
disciplines have played a pivotal role in the development of PSM research:
1) Operations Management (OM). Study of the transformation processes that create products or services in all organizations,
for profit and non-profit. OM is concerned with the study of effective and efficient transformation processes, in particular,
production and logistics. Examples of concepts related to PSM include JIT logistics, the ‘bullwhip’ effect and SCM.
2) Marketing (MA). Study of the organizational function and the processes for creating, communicating and delivering value to
customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
3) Strategy and Organization (SO). Building and testing theory about organizations, their members and their management,
organization-environment relations, and organizing processes. The Resource Dependence Theory and Porter’s (1985) Five Forces
Model can be applied to understand how companies can effectively interact with their suppliers.
Other disciplines within management research have also studied PSM phenomena and have contributed theories
to PSM research. Technology and innovation management has studied how suppliers can contribute to
innovation. Management accounting research has examined PSM processes and tools such as TCO and target
costing. However, these disciplines focus on a limited range of specific topics related to PSM, whereas the MA,
OM and SO disciplines contribute theories spanning a range of phenomena within PSM research.
In PSM research, differentiation has taken place in research is increasingly focused on specific moderators that
may affect the relationship between supplier involvement and product development outcomes. There are three
forms of research involving multiple disciplines: multidisciplinarity, interdisciplinarity and transdisciplinarity.
Multidisciplinary research or coexistence (working with several disciplines) draws on knowledge from different
disciplines but does not change these different perspectives; it only contrasts them. Interdisciplinary research or
collaboration (working between several disciplines) synthesizes and integrates knowledge. Transdisciplinary
research or cross-fertilization (working across and beyond several disciplines) transcends traditional boundaries,
creating new understanding and theories.
5. Content analysis of PSM research: topics and theories
PSM consists of two distinct process types: strategic and tactical/operational processes. Strategic processes in
general and Supplier Relationship Management in particular are the most prevalent area of PSM research. Much
research on PSM is also concerned with the tactical process of (supplier) selection, contracting and ordering. In
sum, one can conclude at an aggregate level that research attention shifted from strategic to tactical/operational
PSM processes, which is at odds with the common notion that PSM practice and research have increasingly
emphasised strategic aspects.
7. Conclusions and implications
Considering PSM as a multidisciplinary application field changes the type of research questions that researchers
ask and their understanding of what constitutes valuable contributions to PSM research. Surely, PSM could
develop its own theories, and especially interdisciplinary or transdisciplinary theories would leverage the
potential of our field. However, we do not see the development of own theories as an essential ingredient in
becoming a discipline – because PSM is not a single discipline.
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,Purchasing Management Master Supply Chain Management
Articles Author: Andreas S. Melisse
Lecture 2 – Thursday 04-02-2021
U.S. chief procurement officers’ perspectives on public procurement – Baldus, B.J.
& Hatton, L. (2020)
2. Important factors affecting public procurement
Public procurement officers face structural issues as well as efficiency and effectiveness issues as they asses their
capabilities and choices across a range of purchasing options. Unlike private industry procurement officers, public
procurement officers face a broader range and greater extent of unique regulative, structural, and normative
challenges. Best value in public procurement is often defined as achieving the optimal benefit of goods and
services at the best cost.
The Model Procurement Code’s three purposes were to provide: (1) the statutory principles and policy guidance
for managing and controlling the procurement of supplies, services, and construction for public purposes; (2)
administrative and judicial remedies for the solution of controversies relating to public contracts; and (3) a set of
ethical standards governing public and private participants in the procurement process.
State governors have the ability to influence public procurement. Private sector procurement is practiced under
the sponsorship of each individual firm’s governance policies, where public sector procurement must operate
within a range of regulations and policies established to accomplish desirable social as well as economic, financial
and public audit requirements.
3. Competing performance needs
Instead of focusing solely on costs, many public procurement officers focus on Best Value Procurement, which
is commonly defined as a procurement method that looks at factors beyond just price, such as quality and
expertise, when selecting vendors. The value of procured goods or services may be simply described as a
comparison of costs and benefits. The National Association for State Procurement Officials (NASPO) emphasizes
five key performance metrics for public procurement: (1) savings and cost avoidance; (2) procurement action
lead time; (3) competitively awarded contracts; (4) small, woman-owned, and minority-owned business; and (5)
cost of procurement.
4. Social and political factors that affect purchase agreements in public procurement
Purchase agreements are the primary tool for public procurement teams to save time and money as well as
improve the terms and conditions to achieve the best value. In general, public procurement in the U.S. is
managed through two main types of purchasing agreements. Cooperative purchase agreements are created
when one state creates an agreement with a vendor that allows other states to also utilize the agreement to
purchase goods and services without having to go through the full contracting process and typically just require
a brief participating addendum to be able to utilize the agreement. There is created a typology of five distinct
forms of cooperative purchase agreements: piggy backing, third party, lead buying, project, and program. In an
individual state-wide agreement, the chief procurement officer (CPO) and their procurement team typically
publish a request for proposal, go through the vendor evaluation and selection process, then write an agreement
between the state or state agency and the vendor.
Individual state-wide purchase agreements represent the bulk of public procurement contracting by three
explanations: (1) natural political forces push for procurement of goods and services that have a positive impact
on the social and economic conditions within the state; (2) many states have legal requirements that can put
cooperatives at relative disadvantage in the bidding process; and (3) each state has their own unique
combination of industries where many goods and services are readily available within a state so there is no need
to search for additional suppliers (no-bid agreements).
The importance of complying with purchasing laws, saving money, and creating economies of scale are the three
most important factors when creating a purchase agreement.
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,Purchasing Management Master Supply Chain Management
Articles Author: Andreas S. Melisse
Variety in business-to-business services and buyer-supplier interaction – Valk van
der, W. & Wynstra, F. (2014)
1. Introduction
The managerial challenge in service procurement is twofold. First, the fact that services are characterized by
simultaneous production and consumption implies continuous interaction between buyer and seller aimed at
communicating about, coordinating and adapting the activities and resources allocated to and/or used in the
buyer-seller relationship. Second, the traditional managerial focus on the content of different services
complicates the development of effective service sourcing strategies, as it disregards strategic segmentation
dimensions such as criticality to the final customer.
In this case study, NS buys cleaning services for passenger trains and stations, but also fir its offices. These
cleaning services fall into different categories of Van der Valk et al.’s (2009) typology, which distinguishes
between two main usage situations: (1) the service is used within the buying company; and (2) the service is
passed on to the buying company’s (business) customers.
2. Prior research on business service procurement
The mainstream literatures on business services can be summarised in a few main observations.
1) Studies in both service operations and marketing have consistently stressed that services are produced
and consumed in continuous interaction between buyers and sellers. The majority of research
conducted in these disciplines, however, focuses on business-to-consumer services.
2) There is research in the domain of purchasing and supply (chain) management, which does address
business-to-business services but focuses on the initial phases preceding the contract, but also pertain
to the phases following the contract/service delivery management.
3) In addition, there is not much literature focusing on direct services, i.e. services that end up in the
buyer’s offerings to end customers.
Infrastructural complexity refers to the extent to which the components of a project are “bespoke or highly
customised”. Performance complexity is defined as “a function of characteristics such as the level of knowledge
embedded in the performance and/or the level of customer interaction”.
Two types of business services move downstream in the supply chain to the customers of the buying firm.
Component services are directly delivered to end-customers by the supplier, while semi-manufactured services
are an input for the buying company’s offering to (end-) customers, and are usually integrated into the final
offering before being delivered to the end customer. The other two service types pertain to service use within
the buying company. Instrumental services affect how the buying company’s primary processes are carried out.
Consumption services primarily concern the support processes of the buying company.
The descriptions of the ideal interaction patterns for these four service types are conceptualised in terms of the
key objectives of: interaction, buyer representatives involved, buyer and supplier capabilities, and
communication.
For component services, the key objective is to ensure a fit between the service being purchased and the buying
company’s existing offerings. For semi-manufactured services, an additional key objective is to optimise the form
and degree of processing of the service with respect to the buyer’s application. The key objective for instrumental
services is to make sure that the services have the desired effect on the buying company’s processes or the
resources used within those processes. Finally, for consumption services, the key objective is to ensure that the
service supports various core organisational processes in a way that facilitates the buying organisation and its
employees in carrying out their primary tasks.
3. Research design
Case study into the purchase of cleaning services by NS. The unit of analysis is the buyer-seller service exchange
relationship. The study has a 3x2 embedded design: case company NS buys cleaning services for three different
objects (stations, trains and offices), each from two suppliers.
3
, Purchasing Management Master Supply Chain Management
Articles Author: Andreas S. Melisse
4. Case background
NS is organised into two divisions: (1) passenger transportation, which consists of NS Travellers (who are
responsible for transporting passengers), and NedTrain (NS’s train maintenance company); and (2) NS Gate is
responsible for all resources and activities (development and exploitation) in and around train stations.
In their mission statement, NS indicates that they wish to “transport passengers from and to clean stations using
clean trains”. This involves three types of cleaning activities (volume ratio for station/train/office → 30:60:10):
1) Station cleaning involves daily cleaning activities, which is purchased and organised by NS Gate.
2) Train cleaning consists of two activities:
o Overnight cleaning jobs, which concerns intensive cleaning jobs. This is critical: a train which has not been cleaned today
cannot be included in tomorrow’s time table.
o “end-of-the-line” cleaning (performed at stations at the end of a line, before a train turns and continues its time table),
which concerns “quick” actions.
3) Office cleaning includes the daytime cleaning of offices, meeting rooms, etc, which is purchased by the
corporate housing department (CHD), which is formally a part of NS Gate.
NS decided to source the cleaning services for all three objects in one collective sourcing project for 3 purposes:
1) Bundling the volume of cleaning activities was expected to lead to price reductions.
2) NS would have to go through one rather than three complex, labour-intensive European tendering procedures.
3) By awarding the cleaning of stations and trains to one supplier, this supplier was expected to increase operational efficiency.
Contracting one nationally operating supplier is considered as too risky. NS therefore bundled the cleaning
activities for all three objects on a regional basis, where fifteen regions were identified.
5. Case description and analysis
The result of cleaning clearly impacts passenger satisfaction. Furthermore, demand for this service is directly
related to demand for train transportation. Given this direct and substantial impact on NS’s service offering to
passengers, station cleaning clearly constitutes a component service. The impact of train cleaning on passenger
satisfaction and the link between train transportation demand and cleaning demand make us consider this type
of train cleaning to be a component service either. The type of train cleaning overnight eventually becomes part
of NS’s offering to passengers in the form of a clean train and is thus considered a semi-manufactured service.
Office cleaning can be classified as a consumption service. It does not affect passengers, nor does it impact the
primary processes of NS. It brings additional benefits in terms of increased volume and efficiency.
Supplier performance was evaluated in three ways:
1) An independent party recurrently measured whether the required operations were performed properly and with the right
materials.
2) NS Gate used a service level monitor, a thrice-weekly quality check of eye-catching contaminations.
3) NS Travellers measured passengers’ perceptions of the cleanliness of stations (end-customer satisfaction) and forwarded the
results to NS Gate.
7. Conclusions
In this current study, the typology of effective buyer-seller interaction is used to investigate the ongoing
interactions between a single buying company and two suppliers of cleaning services. In particular, this research
highlights similarities and differences in the exchange process for a specific kind of service (cleaning) and the
associated interaction patterns for three specific usage situations: two types of cleaning services that become
part of the buying company’s value proposition, while the third type is “consumed” within the buying company.
We distinguish between different B2B service types, more specifically:
o Services that are used within the buying firm
o Services that are passed on to subsequent customers.
For practitioners, the finding that different patterns of effective interaction exist for different service types
suggests that managers should adopt a contingent rather than a best practice approach when buying business
services and managing business service suppliers. The result of the case study demonstrate that a uniform
approach to purchasing services that are similar from a technical content perspective may not always be
appropriate. A best practice approach that is very appropriate for buying cleaning for NS’s offices (consumption
service), may not at all be appropriate for buying cleaning for stations and trains at stations (component service).
This implies that considering content alone is not sufficient in setting up effective purchasing and supply
management processes for business services.
4
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