Introduction
Contemporary business environment places a lot of pressure on the organization with regards to their ability to respond to the changing market conditions and evolving demands of the clients. The reality shows that cost and productivity are becoming more and more critical for the sustainable development of the organization, which outlines the focus of the Research and Development (R&D) activities. The evolution of the purchasing function is a complex and deep process of transformation of the way, organization conduct their business in general and understanding of the stages in the development of the purchasing function help building on the contemporary scope of this element of the business (Sadler, 2003).
The purpose of this document is to explore the evolution of the purchasing and outline the core stages of this process, understand the role of purchasing in contemporary business and get an insight into the roles, which outline the scope of purchasing and supply activities in the modern company. Additionally, the research paper will look at the trends in the sector and potential elements, which will build on the function in general.
Evolution of Purchasing
The evolution of the international business is evidenced through the development of international mobility, growth of the companies and their international expansion. Analyzing the contemporary business environment, one could argue that one of the most fast-paced developments in organizational environments is evidenced in the supply chain and purchasing practices, which outline the complexity of the entire business and the model of operation. The reality shows that the increasingly multifaceted and complex environments demands organizations look for new and innovative ways to reduce the costs and increase organizational productivity. With that in mind, the issues and challenges of managing the logistics, purchase and supply operations become paramount for the companies (Peng, 2014). Already back in 1983 Kraljoc in his article on the Purchase Must Become Supply Management argues that purchasing in many organizations was wedded to routine and the tradition always was beyond the business logic, where annual contracts and relationships were prioritized to actual benefit and cost-effectiveness of the company. The author already at that stage outlined the direction of the evolution and the needed change in supply and purchasing practices and demonstrated the weaknesses of the companies, which rely on immediate purchasing solutions or long-term contracts, based on the history of the relationships. The contemporary business environment illustrates that a comprehensive strategy to manage supply can solve the issues of supply weaknesses and under planning.
Monczka, Handfield, Giunipero and Patterson (2011) note that to understand where the contemporary organizations are today in terms of supply chain management, it is important to have an insight into how they arrived there and what this evolutionary path involved over the past years. Purchasing history, according to the authors, dates back to 1850. When we look at the history of industries and their purchasing practices, it is possible to observe that the major shift was from purchasing as a sales function. As such in thetextile segment, sales agent was solely responsible for the output, quality and availability of the product. Moreover, the concept of purchasing function and supply in general did not exist and was absorbed by the variety of other organizational elements. Only back in the late 19th century, purchasing, in some ways, started to shape in a similar way to what it is today. One of the major drivers in developed and developing economies for purchasing industry was the growth of urban infrastructure and the railroads in general. Some of the main examples of the countries, which heavily rely on this mode of transportation, are the United States and Russian Federation, where the railroad coverage allowed nationwide purchasing practices at the early stage of the business relationships development. With the above in mind, it is possible to argue that the railroad development dominated the first years of the purchasing history and outlined the score and scale of the operations in supply area for the majority of the businesses.
Moving down the line of the purchasing history, it is important to outline the second largest milestone, which occurred as a result of the industrial purchasing function growth back in the middle of the 20th century, when the role of purchasing became paramount in obtaining the war materials and shipment of goods across the borders. Ever since, purchasing started its development as a separate function and the second half of the 20th century is characterized by the development of traditional practices in the area and specific ethical standards, which determine the modern purchasing function.
Purchasing Management and Organization
There is a common belief that the core role of procurement is to obtain goods and services as a response to the internal organizational needs. The reality shows that contemporary purchasing function has changed dramatically and to better understand its current scope, one should have clear understanding of the purchasing concept in the modern business setting. When analyzing purchasing today, it is possible to outline four main objectives of this function. First of all, purchasing aims at supporting operational requirements, building on the purchasing decisions at the right timeframe, price and quantity. This objective also includes a focus on the right partnerships and relationship management. Secondly, the function focuses on the effectiveness and efficiency of the purchasing operations, meaning that it aims at enacting accurate management of internal operations, bringing new opportunities to the organization and reaching financial targets of the company. Thirdly, the procurement function will only be effective if it exists as part of thelarger whole. With that in mind, it is an objective of the purchasing department in a contemporary organization to bring forward strong partnership and cooperative relationships with other organizational functions. Planning and prediction process in the organization are highly dependent on the ability of procurement to understand the way other elements of the organization function (Rushton and Walker, 2007). Finally, procurement and supply have to be built and integrated in the organization to support the strategic goals of the company by monitoring the supply of the markets, identifying the critical materials, which will be required to support the organizational growth and operations, developing different supply options and contingency planning to secure the operations of the company and, finally, develop a procurement operation, which Is able to build on organizational competitiveness in the international and national markets.
With the above in mind, purchasing function plays a critical role for the company. One of the exemplary companies, which demonstrate the role, which procurement function can play in the organization is the Starbucks, which build on cooperative and partnership relationships, not only internally between the function, but also across its supply chain, helping and developing their suppliers (Baer, 2013). This role is twofold. First of all, purchasing aims to solve some immediate issues, such provide quality and accurate supply solutions to other organizational functions. Secondly, purchasing a strategic element of the company that makes part of the long-term planning and goal-setting of the company In fact, purchasing is responsible for building on collaborative environment across the functions and building on internal operations. Such elements as planning and forecasting of demand, sourcing management, leadership of procurement of the organization, communication of purpose and pay off and process, outline just part of the scope of the daily concern of the company´s purchasing function (Senge and Prokesh, 2010). Moreover, the nature of the purchasing function determines its contribution in the company as a “window” to the external environment. As such, engineering, commercial and operational functions contribute to the procurement decisions and the department, in return builds on the opportunities, develops the cost-effective purchasing solutions and helps to predict and plan the demand for specific materials and goods in the organization.
The Skills in Purchasing Management
An analysis of the purchasing function outlines various skills and capabilities, which are required and demanded from the professionals in the field. The reality, however, shows that in many situations the skills, which are searched for in procurement and supply management depend on the company and the industry it operates in. At the same time, one can argue that there is a certain set of skills, which characterize effective procurement professional. One of the essential skills includes the negotiation capability. In other words, the procurement professional should have a good ability to talk about price and be comfortable about it. Secondly, it should be well-position on the market in terms of understanding the suppliers and building contacts with them. Finally, it should possess such qualities as attention to details and patience in conducting the negotiation process. Another important attribute of an effective procurement professional is the ability to understand the sensitivity of the data and be able to manipulate it in a manner, which will be beneficial for the company. Moreover, professionals, working in procurement, should be extremely agile and long-term versioned to be able to identify and capture the opportunities, arising on a daily basis in theexternal environment.
When it comes to the procurement profession, it is also important that a major share of success in this profession depends on the ability of individuals to work with other departments and understand their needs. With that in mind, such elements as financial acumen, project management and category management are critical for the procurement professional. Additionally, as part of the strategic function, the procurement professional should be able to recognize and understand the ways in which he can contribute to theachievement of the high-level goals of the company.
Conclusion
Procurement has evolved dramatically over the past century and even decades. Contemporary procurement function is one of the most complex and important strategic elements, which enables competitiveness and agility of the companies in the contemporary business environment. There are many ways in which procurement can contribute towards achievement of organizational goals, including cost-efficiency, capturing the opportunities of the external market, development of the relationships across the functions and within the supply chain and many others. With the above in mind, professionals, working in procurement should possess various skills and capabilities to succeed in the profession, such as negotiation skills, understanding of the financial element, long-term vision and many others.
References
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