The New Purchasing and Supply Management Workplace: Procurement : A Tutorial

The New Purchasing and Supply Management Workplace

Social and Workplace Changes
Sourcing Organizational Structures
Key Sourcing Organizational Features
Integrating the Supply Chain
Procurement’s Changing Role
Separating Purchasing Authority
Sourcing’s New Look

Social and Workplace Changes

The need to pursue strategic sourcing will create instability within purchasing and supply organizations.

Movement of purchasing professionals between organizations often results in compensation discrepancies as new hires arrive with higher pay and benefits.
The need to elevate the level of purchasing professional often results in “buying” talent in the open market at a premium price.
New employees are increasingly demanding to work from home or remote sites, presenting communication, coordination, and organizational challenges.
Professionals from other functional groups will increasingly accepting assignments in procurement.
These professionals often arrive from groups that historically pay more than procurement, creating pay differentials.

h2. Sourcing Organizational Structures

Developing the right organizational structure will become “more chaotic” because of the convergence of many factors…

Commodity sourcing experts will increasingly be dispersed around the globe at business unit or geographic buying locations (with coordination).
Sourcing personnel will increasingly have dual reporting relationships.
Greater use of global commodity teams adds to organizational complexity.
Increased global sourcing requires the coordination of worldwide purchasing activities.
A shared services model requires an umbrella organization to oversee activities across business units.
An integrated supply chain perspective will result in new executive positions with responsibility for overseeing and coordinating supply chain activities.
E-procurement systems will place purchasing authority at different levels and locations throughout the organization.

Key Sourcing Organizational Features

Integrating the Supply Chain

Future organizational designs must recognize the need to achieve integration across the supply chain.

  • IT systems that facilitate information sharing
  • Cross-functional project teams with supplier and customer involvement
  • Shared risk and reward projects with appropriate measures of success
  • Customer Advisory Boards with supplier involvement
  • Buyer-supplier councils
  • Supply chain strategy development involving key customers and suppliers

Procurement’s Changing Role

Higher-level outsourcing will begin to shift how procurement and supply organizes its activities and responsibilities.

h2. Separating Purchasing Authority

A separation of purchasing activities will occur as organizations structure themselves to pursue strategic sourcing.

Strategic Sourcing Activities

  • Manage strategic relationships
  • Develop company-wide electronic systems
  • Develop and manage alliances and partnerships
  • Develop company-wide contracts
  • Manage critical commodities

Transactional Activities

  • Execute transactions with strategic suppliers
  • Use e-systems to obtain standard or indirect items through catalogues
  • Source items that are unique to the operating unit
  • Generate and forward material releases
  • Manage accounts payable and material control

Source: Monczka, Trent, and Handfield, Purchasing and Supply Chain Management, Southwestern College Publishing, 2002

Sourcing’s New Look

The design and structure of the sourcing group will change significantly.

  • Smaller professional staff
  • Minimal involvement with day-to-day operations or transactions
  • Act as an internal consultant and problem solver
  • Responsible for managing alliances and other critical relationships
  • Greater responsibility for non-traditional purchasing
  • Involvement with cross-enterprise negotiations
  • Manage integrative activities with suppliers and the rest of the organization
  • Become process managers that oversee strategic and tactical responsibilities
  • Segment sourcing strategies to match requirements with an appropriate strategy