The purchasing management process - How purchasing and supply management develops over time

8 important questions on The purchasing management process - How purchasing and supply management develops over time

The purchasing and supply development model can guide purchasing managers in professionalizing their strategies and organization. It assumes that in order to professionalize purchasing, companies need to go through six different stages. What are these stages?


Stage 1: transaction orientation --> 'serve the factory'
Stage 2: Commercial orientation --> 'lowest unit price'
Stage 3: Co-ordinated purchasing --> 'savings through synergy'
Stage 4: internal integration: cross - functional purchasing --> 'total cost of ownership'
Stage 5: External integration: supply chain management --> Supply - chain optimization'
Stage 6: value chain orientation --> 'total customer satisfaction'

What's the primary task in stage 1 "transaction orientation"?

In this first stage, the primary task of purchasing is to find appropriate suppleirs and Ensure that the company's operations' processes do not run out of raw materials and components. There is no explicit purchasing strategy in place.

What's the primary task of stage 2 "commercial orientation"?

At this stage, a proactive type of purchasing manager is recruited who can negotiate credibly with suppliers for lower prices.
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What is the primary task of stage 3 "co-ordinated purchasing"?

Led by a strong central purchasing department to implement uniform buying policies and systems, the emphasis here lies on cross-unit co-ordination and compliance with nationally negotiated contracts.

What is the primary task of stage 4 "internal integration"?

At this stage, the empasis is on cross-functional problem-solving with the objective of reducing total life-cycle cost and not just the unit cost of purchased components.

What is the primary task of stage 5 "external integration"?

This stage is characterized by an explicit outsourcing strategy combined with extra attention to collaborate with supply chain partners on product development and preproduction planning. The purchasing function concentrates on creating maximum leverage of the company's external resources.

What is residential engineering?

Situation where engineers from the supplier are co-located on a more or less permanent basis at the buyer's organization, in order to work on design or manufacturing problems which appear during the successive stages of development. Residential engineering also relates to a situation where a large OEM has placed its own engineering specialists at the supplier's premises in order to resolve a variety of technical problems.

What is the primary task of stage 6 "value chain orientation"?

The 'purchasing' strategy in this stage will be based on the recognition that most important for success is delivering value to the end-customer. To satisfy the needs in end-customer markets, subcontractors seek support among their suppliers. Suppliers are consistently challenged to support the company's product/ market strategies and to actively participate in product development. The goal is to design the most efficient and effective value chain possible to serve the end-customer.

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