Executive summary

Purchasing and materials management has always been a significant aspect for the success of any organization. It is a function that is very instrumental to the organizational competitive edge. Managers and business leaders have placed a lot of emphasis on purchases and material management since trends in the supply chain arena indicates that substantial operating cash can be freed if efficiency and leniency are enhanced in the handling of the organization’s inventory (Bhat, 2009). Purchases and material management agencies have the responsibility for ensuring that the organization holds the optimum materials that will enable its smooth daily operations. It is also essential for the material managers to interact and communicate with other stakeholders such as the warehouse managers and others involved in the supply chain to avoid instances of overstocking resulting from unnecessary purchases. In essence, purchasing and material management is a concept that is concerned with bringing materials from outside of an organization to the point of production and moving in the processes inventory. Every action in purchase and material management, or the supply chain, is very critical, and any down fall or miscalculation can have an adverse effect on the performance of the organization. In essence, organizational success is to a great extent determined by the firm’s ability to embrace an integrated approach to plan, acquire, process and distribute materials.

Introduction

As aforementioned, purchasing and material management are important aspects and play a significant role to an organization’s competitive edge.  Purchasing is a function that involves sourcing goods and services from external sources to a firm. It is prudent that the organization purchase quality materials and in good quantities to ensure that there is no disruption of the organization’s daily activities (Bartezzaghi & Ronchi, 2004). Also, the purchasing department must also ensure that materials purchased are bought at the right price and meets the organization’s expectations. In today’s dynamic and challenging business world, strategic purchasing and material management is essential for effective performance of an organization. Purchasing and Material Management is a section that requires efficient and interaction between different departments within an organization to ensure efficient, economical and optimum performance within the organization. It is essential to point out that an effective purchasing and material management plays a critical role in customer satisfaction and overall marketing efforts within an organization.

Literature review

Objectives of P&MM

Purchasing and Material Management are becoming an increasingly important aspect that has made significance contribution to the success of business organizations. As a result, the topic has been given much attention by scholars and practitioners in the in the business field through a lot of literature works.  Many publications have been published on this concept and give a clear chronology of the significant developments achieved by the concept over the years.  Objectives of purchasing management are traditionally recognized as getting the right quantity, at the right time and for the right price. Nevertheless, this concept has evolved over the years and the firms’ purchasing management objectives is to consistently obtain quality services from its suppliers (Kern, 2011). Quality products will consequently lead to increased customer satisfaction thus reducing the marketing responsibility of the firm. In essence, there is the need for purchasing and material managers to incorporate business strategies in their decisions to enhance the overall performance of the organization. Purchasing and material management should ensure that they provide added value for it’s immediately or ended customers.  The purchasing functions should be in alignment with the firm’s long-term objectives. This will ensure that the corporate organization realizes its objectives of profit maximization.

It is also essential to note that quality control in the purchasing and material management. Organizations compete by quality and customer satisfaction. Purchasing and materials management must be inconsistent with the goals of the organization (Bartezzaghi & Ronchi, 2004). All industries, including manufacturing, construction and provision of services, mainly rely on quality and customer satisfaction for their competitive edge. The issue of quality has even become increasingly important in the recent years where the level of competition has also relatively increased. Customer satisfaction has therefore become a preeminent means of gaining market share and realizing a sustainable competitive edge. As a result, purchasing and material management have advanced the quality assurance program to ensure that all materials supplied to meet the expected standards and hence guaranteeing customer satisfaction.

Relationship with suppliers

Purchasing and Material Management is a concept that requires integration of different stakeholders.  The purchasing department has the responsibility of forming a partnership with the suppliers that will help achieve the organizational goals.  It is a partnership aimed at achieving certain objectives and benefits.  It is essential that the two identities form a partnership based on mutual benefits rather than the traditional buyer-seller relationship that was too short term. Recent studies suggest that a long-term partnership with the supplier is better than the adversarial relationships.  With the increased globalization and competitiveness in the business world, it is prudent for the organizations to have relationships with the suppliers as it will be more beneficial than casual relationships.  In recent years, firms have put more emphasis on core competencies, and attempt to realize competitive edge through efficient management of purchasing activities and partnerships relationships with the suppliers (Karpak, Kumcu, & Kasuganti, 2001).  The variability and uncertainties involved in the purchasing process further necessitate the importance of supplier collaboration.  Improved partnership is essential in the reduction of miscommunication between the buyer and the supplier.

From previous studies, it has been established that big firms prefer to establish and develop the partnership relationships instead of the traditional relationship with their suppliers when carrying out the purchasing function.  Most of these firms end up reducing their supply base to help easy management and strategic approach in the purchasing process.  Its argued that, unlike in the traditional relationship, supplier partnership relationship usually brings about long-term expectations regarding the quality, quantity and timely delivery of the materials. Such long-term relationships play a significant role in the reduction of risks during the purchasing process.  It is also worth to point out that the relationship brings about consistency that is essential in enhancing the performance of the organization and realization of the organizational goals. Different theories, such as from Shin, Collier, and Wilson, have emphasized this concept of supplier partnership relationships since customers and suppliers share information that is of mutual benefit (Bartezzaghi & Ronchi, 2004). This partnership relationship reduces certainties from both the supplier and the purchasing agents thus promoting mutual understanding.

Global purchasing

As aforementioned, the concept of globalization has to a great extent affected the purchasing and material management in the modern organizations. Organizations can always source materials all over the world irrespective of existing geographical boundaries (Bhat, 2009).  As a result, the concept of global sourcing has become an interesting topic as a far as purchasing and material management is concerned. In essence, the concept becomes of paramount importance in developing a global competitive edge that most firms strive to achieve in the modern era.  For instance, previous studies indicate that firms in the United States have faced increased competition across the globe. The competition has brought about immense pressure from markets and consumers has forced many firms to improve the quality of their products and lower the cost of bringing them to the market (Hirschinger, 2015).

On the same note, other studies suggest that with the development of the global economy, sourcing materials all over the world offers a competitive advantage since firms can get cheaper materials, reduce labor costs and other overhead expenses that would otherwise lead to lower profits. The literature has however warned on the importance of being critical in the choice of the source country, from which to select the supplier since there are different laws, infrastructure, and customs as one move from one geographical location to another.  It is, therefore, imperative to look at all the risks and costs involved to ensure that the choice of the source does not adversely affect the performance of the organization. It is prudent to note that wide regional variety exists within many geographic boundaries.

From existing literature on global sourcing, it is evident that one of the major advantages of the approach is the fact that it enables firms to complete their purchasing objectives at relatively lower costs. According to Shippen, a firm selling in mature markets where there is little or no product differentiation, provision of similar products at lower prices has been critical for consumer products and the reduction in prices provides a competitive edge for the firm(Kern, 2011). It is nevertheless essential to point out that sourcing material across geographical locations may face risks such as customs, local laws and so on that exists amongst different countries.

History and future of purchasing and material management

Purchasing and material management have developed a lot since the 19th century. It has moved from just a passive function to a strategic business function. It is essential to note that the purchasing function has had the high personnel, and information gathering has become an instrumental part of it (Karpak, Kumcu, & Kasuganti, 2001).  In the recent years, the purchasing function has been classified to have profit generating capabilities and improving efficiency in marketing the firm’s products. Purchasing is correlated to the corporate strategy regarding monitoring and interpreting supply trends, identifying ways to support strategies and developing supply options. This one of the major developments, in the modern purchasing, unlike in the traditional one where purchasing was done just for the sake.

It is, however, prudent to note that purchasing function varies from one firm to another. There are still some organizations today where purchasing function is viewed as a clerical work while in others it’s a high strategic function and it is an integral part of the firm’s strategic planning process.  Studies indicate that purchasing as a strategic function depends on both internal and external factors within the organization (Bartezzaghi & Ronchi, 2004). Modern purchasing function is largely concerned with the long-term availability, reliability and price problems in the supply market. It is therefore expected that the procurement decisions in an organization are in alignment with the firms’ objectives to ensure a strategic approach.

In the 21st century, the purchasing and material management function have made tremendous strides as far as information technology is concerned. The urge by the corporate world to maintain a strategic approach in their purchasing function has resulted in most of these firms adopting the e-procurement approach (Bhat, 2009). Globalization has increased international competition, and it’s only through a strategic approach that a firm can remain competitive.  Firms are working towards ensuring that they increase the number of potential customers as well as the number of the potential suppliers. The increased diversity has come along with more sophisticated customer needs, and this necessitates the importance of organizations to creating competitive products. As a result, most organizations are currently adopting e-procurement and e-business approaches to conducting their business. This approach helps firms improve communication by adopting web-based communication such as e-mails in their purchases. Also, the approach enhances efficiency and saves on supply costs as well as reducing order error rate (Hirschinger, 2015). It is imperative to note that purchasing has a significant role in formulation and implementation of corporate strategy.

Conclusion and reccomendation

In a nutshell, purchasing and material management is an important aspect of the firm’s success. It is a function of the management of the firm’s success that is very critical for the success f the organization. According to different kinds of literature, the purchasing function has the responsibility to make or buy decision, the supplier technology and also the type of supplier relationship desired.  It has been noting that the purchasing function has made a tremendous contribution to corporate strategy and has evolved over the years from a passive role to a strategic approach(Karpak, Kumcu, & Kasuganti, 2001). The development requires that the purchasing function develops new skills and also to be considered as a key contributor to the corporate strategy by top management. It is also recommended that purchasing function should embrace information technology to gain the numerous benefits associated with e-procurement. In essence, firms will always buy materials required for their daily operations and hence a strategic approach is essential to ensure that firms achieve their goals and objectives.

References

Bartezzaghi, E. & Ronchi, S. (2004). A portfolio approach in the e-purchasing of materials. Journal Of Purchasing And Supply Management, 10(3), 117-126. http://dx.doi.org/10.1016/j.pursup.2004.09.005

Bhat, K. (2009). Materials management. Mumbai [India]: Himalaya Pub. House.

Hirschinger, M.(2015). Essays on supply chain management in emerging markets.

Karpak, B., Kumcu, E., & Kasuganti, R. (2001). Purchasing materials in the supply chain: managing a multi-objective task. European Journal Of Purchasing & Supply Management, 7(3), 209-216. http://dx.doi.org/10.1016/s0969-7012(01)00002-8

Kern, D. (2011). Essays on purchasing and supply management. Wiesbaden: Gabler Verlag.

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