Levels of strategic purchasing: Impact on supply integration and performance

The growing importance of supply chain management has led to an increasing recognition of the strategic role of purchasing, which has recently evolved and expanded from “buying” to “procurement” and “supply management”. In this study, we chart our sample firms’ advance in strategic purchasing, characterized by the strategic focus, strategic involvement of the purchasing function and the status and visibility of the purchasing professionals, into three stages.This study provides strong empirical support for the importance of strategic purchasing by showing that, by moving towards the more advanced stages, firms at the nascent stage of strategic purchasing can achieve better supply integration, a second-order construct composed of four facets of relational, process, information, and cross-organizational team integration. Our analyses further reveal that strategic purchasing can have a profound impact on supply chain performance for both buyer and supplier firms.     

Implementing organizational change in supply towards decentralization

This paper presents the findings from research in large companies investigating implementation issues faced by chief purchasing officers as their supply organization changed to greater decentralization. Once the decision was made to decentralize, responsibility for implementation was given to the chief purchasing officer (CPO). Firms changing their supply organization to a more decentralized structure faced a number of implementation issues, including the business unit concerns, role of the chief purchasing officer, top management involvement, changes to existing purchasing staff and the involvement of consultants. In the nine changes studied across seven companies, the decentralization process also required the CPO to address a number of simultaneous activities, including cost reduction objectives and implementation of information technology systems. A surprising “purchasing paradox” was also uncovered as top management still expected decentralized supply units to provide additional savings.     

Networked creativity: a structured management framework for stimulating innovation

The effect of today's turbulent environment means that organisations need to improve their competitive advantage and swiftly respond to changing technology and markets. An organisation's ability to continuously innovate its products and business systems is essential to its future success. However, this ability to stimulate innovation is highly dependent upon the stock of potential ideas and problem solutions, which is available to feed the innovation process. These ‘seedlings of innovation’ are the product of the creative processes of an organisation. Whilst continuous, sustainable innovation is an essential competitive capability for future organisational success, to date the creative process has been allowed to operate in an ‘ad hoc’ and serendipitous fashion. Continuous innovation means that organisations need to be able to effectively manage their creative processes to ensure their innovation process has a plentiful supply of good ideas and solutions. To this end, a framework for enhancing networked creativity is presented as a means towards the effective management of the creative process within organisations.     

Impact of e-procurement: Experiences from implementation in the UK public sector

The advent of the Internet as a business systems platform has been a catalyst for major changes in the operation and status of organizational procurement. Early e-procurement literature forecast significant improvements in procurement costs, an improving status of the purchasing function, and changes to the structure of supply markets. Our study seeks to evaluate the validity of these forecasts through the development of a structural model of the ‘e-procurement effect’. This model is intended to define the dynamics of the e-procurement process in an organization and provide a foundation for a research stream into the transformational effect of e-procurement deployment.

The article presents the evaluation of e-procurement implementation and operation from an 18-month study of e-procurement deployment across nine UK public sector organizations. The article explores five key themes in e-procurement, namely system specification, implementation management, changes to organizational characteristics, changes in total acquisition costs, and changes to governance structures.

Our analysis suggests that the proposed structural model of the e-procurement effect is broadly applicable and that many of the previous claimed benefits in the literature can be realized. We also contend that an important variable for the success of e-procurement adoption is to address the internal service quality attributes of e-procurement processes—a topic which offers significant scope for future research.     

New competences enhancing Procurement’s contribution to innovation and sustainability

This research presents the results of a multiple method study exploring the future competence requirements for purchasing and supply management (PSM) professionals in the face of increasing demand for innovative and sustainable product and service solutions. Data collection consisted of four stages: first, a World Café was held to gather experts’ insights into PSM skills, which helped to refine a first survey round of eleven open-ended questions. A second survey round then followed, presenting four scenarios based on the results of the initial round. Finally, interviews were conducted to explore the results in detail. The participants in all stages were senior PSM experts from a variety of sectors, including manufacturing and service organisations, as well as academic institutions, consulting firms and non-governmental organisations. The results show that the expected changes in the future business environment mainly concern the application of digital technologies, increasing supply chain flexibility and transparency, sustainability performance and the need to build soft skills to support interpersonal relationships as well as hard skills to support supply chain design.     

The empirical determination of technology and expectations: A simplified procedure

This paper makes three principal contributions to the growing body of empirically oriented research on dynamic factor demand systems that are based on the adjustment cost model of the firm. First, a simplified procedure is described for deriving demand and supply functions which are amenable to empirical estimation and which are consistent with intertemporal expected profit maximization and a general expectations formation process for future prices. Second, it is pointed out that estimation of a complete system of demand and supply functions permits the empirical identification of both the firm's technology and its expectations formation process. Finally, the procedure is applied to aggregate annual U.S. manufacturing data for the 1947-1977 period and the consistency of the data with the theoretical framework is investigated.     

Sex and salary: A survey of purchasing and supply professionals

The purpose of this paper is to test a series of hypotheses, derived from compensation theory, on predictors of purchasing and supply management salaries. One of the hypotheses, on the effect of sex on salary, assesses competing theories, i.e. human capital versus discrimination. These hypotheses are tested using the results of a survey on purchasing and supply management salaries in Canada. Six variables were found to be significant predictors of salary. Purchasers with a professional designation, more education, more experience, greater spend responsibility, at larger organizations, and with greater share of compensation coming as a bonus reported larger salaries. In addition, after controlling for these human capital and organizational context variables, sex had a significant impact on salary. Male purchasing and supply managers reported earning significantly higher salaries than their female counterparts. The paper concludes with implications for purchasing employees and employers, along with discussion of future research opportunities.     

The cultural embeddedness of professional service purchasing—A comparative study of German and Swedish companies

Research on professional service purchasing generally takes a culturally universalistic approach, implicitly assuming the generalizability of research findings and normative models to different cultural contexts. However, research in related disciplines points to the influence of national culture on managers’ decisions, thereby questioning the culturally universalistic approach. The purpose of this paper is to explore differences in professional service purchasing in different cultural contexts. Based on a survey of large organizations, we analyze how the purchasing process for a specific type of professional services – management consulting services – is organized in two cultural contexts (i.e. Germany and Sweden). The results indicate that organizations in Germany and Sweden differ in the way they approach key aspects of the purchasing process. These differences are discussed in relation to two central cultural dimensions – uncertainty avoidance and masculinity–femininity – in which Germany and Sweden take very different positions. It is proposed that uncertainty avoidance mainly influences the first steps in the purchasing process (specify, select and contract) whereas masculinity–femininity mainly influences the remaining steps (order, expedite and evaluate). The paper contributes to the purchasing and supply management literature by empirically illustrating differences in purchasing practices in different cultural contexts and developing theory-driven propositions for the influence of national culture on the professional service purchasing process.     

Change within purchasing and supply management organisations – Assessing the claims from maturity models

It is a wide-held assumption that professional development and change within purchasing and supply management (PSM) organisations can be explained and guided by a maturity model. In this paper the guidance which the maturity model concept offers to understand a PSM organisation's performance is assessed. The methodology is based on the outcomes of a literature review of PSM maturity models, development of an organisational change framework and the learning from three qualitative case studies. An alternative understanding of the development of the PSM organisation is offered through an organisational change framework, composing 1) movement transitions, 2) scalability of change, 3) acceptability of change, and 4) the substantive element of change. The research found that extant PSM maturity models are too rigid for PSM managers to apply, and although maturity models are commonly accepted in PSM literature, in practice, they may produce the opposite effect of what is promised. The PSM maturity models suggest that their application will lead to increased status and influence of PSM within the organisation; expectations that may not be met. PSM organisations’ change processes are subjected to a range of situational and contextual power relations which must be considered in order to advance the specific PSM organisation roles and responsibilities.     

The effect of ethical leadership on purchasers’ unethical behavior in China: The moderating role of ethical ideology

This paper examines the role of ethical leadership in managing purchasing agents’ unethical practices. By focusing on the manager-purchasing agent relationship within a firm's purchasing function, we investigate the effect of the manager's ethical leadership on purchasing agents’ unethical behaviors, and explore the moderating role of purchasing agents’ ethical ideology in this relationship. Our scenario-based experiment and survey-based empirical study show that a manager's ethical leadership in a purchasing team plays a critical role in reducing purchasing agents’ unethical behaviors. More importantly, the results reveal that the negative impact of ethical leadership on unethical behaviors is strengthened when the level of purchasing agents’ idealism or relativism is high. In addition, we found that ethical leadership has the strongest negative effect on the unethical behavior of purchasing agents when the agents have high levels of both idealism and relativism.     

Managing the global supply base through purchasing portfolio management

‘How to source globally’ has become a critical strategic decision for companies competing on a global basis. Despite an increased focus on global sourcing and supply chain management, little is known about the challenges and solutions surrounding such sourcing practices. Extant literature points at the critical importance of developing and sharing knowledge in multinational companies (MNCs). However, little work has been undertaken to examine the organizational mechanisms used by MNC headquarters for knowledge leveraging across subsidiaries, especially in the area of purchasing and supply management. Based on an in-depth case study, focusing on a chemical company, the actual buying systems for managing the global supply base are explored. Kraljic's purchasing portfolio approach appears useful, both for developing effective purchasing strategies as well as for managing a global supply base.     

A processual analysis of the purchasing and supply organization in transition: the impact of offshoring

Many companies have resorted to offshoring in order to reduce costs and grow their global market presence. Yet it remains unclear what impact the offshoring strategy has on the purchasing and supply organization (PSO) of these companies. In this paper the nature and type of changes offshoring organizations make within the PSO are examined, i.e. how new purchasing and supply management (PSM) structures and practices emerge, are maintained or are discarded as production operations are relocated. The processual perspective is used to analyze empirical data from a rich, in-depth case study within a global engineering company. Results suggest that in line with the law of requisite variety the PSO changes thoroughly when the company relocates its production activities through the captive offshoring mode, but does so in a more disjointed and non-linear manner than the current stage models would suggest. The offshoring process provides momentum for PSO change and influences where and how the change happens. We present five propositions for further research and conclude that offshoring provides managers with opportunities to: (i) change and influence the strategic direction of PSM in their organizations, and (ii) build viable strategies of retaining and managing knowledge and PSM competencies in global operations.     

Researching the future of purchasing and supply management: The purpose and potential of scenarios

Drawing on prior research, the value of scenario planning as a methodology for researching the future of purchasing and supply management (PSM) is explored. Using three criteria of research quality – rigour, originality and significance – it is shown how developing scenarios and analysing their implications present new, important research opportunities for PSM academics, practitioners, and leaders of the profession. Researching the future of PSM supports the identification of uncertainties and anticipates change across many units and levels of analysis of interest to PSM scholars and practitioners, such as the profession/discipline, markets/sectors, or organisations. Scenarios are particularly effective for: considering how the complex interaction of macro-environmental factors affects the PSM context; avoiding incremental thinking; surfacing assumptions and revealing significant blind spots. PSM research using scenarios aligns with Corley and Gioia's (2011) call for prescience-oriented research in which academics aim for more impactful research, enhancing sense-giving potential and theoretical relevance to practice, to better perform their adaptive role in society.     

The impact of digitalization on the future of the PSM function managing purchasing and innovation in new product development – Evidence from a Delphi study

Bringing innovative products to markets is essential for companies, especially in competitive environments. One of the driving forces for successful new product development (NPD) is the inclusion of the functions that form part of the process such as purchasing and supply management (PSM). While extensive research has been conducted on the role of procurement in promoting innovation, insufficient research on the future of the PSM function in NPD has been conducted. This study addresses this gap, considering increasing digitalization and its effect on the future PSM function managing purchasing and innovation. To explore the future of PSM in NPD, a Delphi survey with 91 experts from industry, academia, and politics or associations was performed. The results reveal that digitalization will influence the PSM function in NPD across different time horizons and forms depending on the subject area. While in many areas, an interplay between digital technologies and human PSM professionals is expected, in certain domains the PSM function is likely to lose added value compared to digital technologies. Furthermore, digitalization is expected to be a potential enabler of a stronger key innovation role for PSM in NPD but to also introduce new requirements such as data science capabilities.     

Changes in supply leadership

The chief purchasing officer (CPO) plays a critical role in ensuring the supply function contributes effectively to organizational goals and strategies. Furthermore, the executive in the organization to whom the CPO reports, the executive report (ER), plays a vital role in breaking down corporate roadblocks, setting priorities and ensuring the proper profile for supply within the organization. This research focuses on supply leadership changes in which an incumbent CPO is replaced and/or the CPO reporting line is changed. Using a case-based methodology in 30 large North American and European organizations a total of 41 CPO replacements and 43 reporting line changes were documented. Data collection and analysis covered drivers, CPO background, key decision makers and tenure for both the outgoing and incoming CPOs and reporting line. The potential implications of these research findings for supply executives are discussed along with opportunities for future research.     

Supply chain analysis of e-tailing versus retailing operation – a case study

The swift growth of e-commerce or e-tailing as a consumer retail channel has made it a serious competitor to traditional retail channels and is changing consumers’ purchasing behaviour. The purpose of this case study, based on Target and Amazon.com, is to analyse the attributes of traditional retailing, e-tailing, and hybrid supply chain models to form conclusions about the feasibility of an idealised supply chain model for the future. An integrated and generalised modelling framework is used that incorporates Six Sigma – define, measure, analyse, improve, control methodology leveraging various tools, including process flow maps, cause and effect diagram, performance efficiency metrics, failure mode and effects analysis (FMEA), and Monte Carlo simulation. Based on this analysis and research, the conclusion is that the idealised supply chain of the future may evolve into a hybrid supply chain, which includes both e-tail and retail channels. The main recommendations from this study include assessing the risks of migrating to such a hybrid supply chain and to leverage the recommended actions provided in the hybrid FMEA. To facilitate more effective and mature processes, this study can guide researchers in exhaustive empirical evaluations of hybrid supply chains, gather experiences and lessons learned for practitioners.     

Commercial mortgage underwriting: How well do lenders manage the risks?

Loan-to-value ratio and debt service coverage ratios have long been viewed as the two most important quantitative measures of the default risk of commercial mortgages. Option-based models of default provide strong theoretic support for the importance of original loan-to-value ratio. The same theoretical predictions have found strong empirical support in residential single-family mortgage analyses. However, recent empirical studies of commercial mortgage default have raised questions about the role of loan-to-value ratio in assessing the riskiness of commercial mortgages. These studies generally either find no relationship or a puzzling negative relationship between loan-to-value ratio and default. This paper uses a very large database of commercial loan histories to thoroughly investigate this issue. It finds strong evidence that loan-to-value and debt service coverage ratios are endogenous to the underwriting process. Lenders react to other—unmeasured—risk factors with credit rationing and pricing. As a result, unusually low loan-to-value ratio loans appear to have above average risk in other dimensions and their default probabilities are equal to or higher than average. The results show that the pricing spread that lenders establish as part of the underwriting process serves as an excellent summary measure of the riskiness of the loan. A test of lenders’ ability to appropriately price loan-to-value risk finds that, while there is some unpriced effect of loan-to-value ratio after controlling for the lender’s pricing, introducing lender pricing into the model removes the otherwise puzzling negative loan-to-value and default relationship previously observed in the literature.     

Towards a common understanding of the differences between purchasing, procurement and commissioning in the UK public sector

This paper recognises that commissioning has now become an important term in the lexicon of UK public policy but the term ‘commissioning’ is taking on a different meaning than that traditionally used within the purchasing and supply management community. The frequent inter-changeability of the terms ‘commissioning’, ‘procurement’ and ‘purchasing’ is now causing confusion and means different things to different people. Therefore the academic community needs to help practitioners understand the differences and implications. A document analysis of various UK Central Government departments’ commissioning frameworks was used to establish the key themes and compare commissioning, procurement and purchasing. This paper discusses the similarities and differences, and argues that commissioning is different from procurement, but that commissioning offers major opportunities for Procurement practitioners to make a strategic contribution.