Similarities in industrial procurement across four countries

This article reports on a cross-sectional, longitudinal, and comparative study of industrial buyer behavior. The study points to clear similarities in industrial purchasing between buyers in two industries in four countries. It also shows similarities in results using the same instrument taken in studies several years apart and points to generalizations about the involvement of different departments in the purchase of a variety of product types in different international markets.     

Exploring purchasing integration in product development

With increasing outsourcing and the growing importance of product innovation as a means for creating competitive advantage, the integration of purchasing and product development processes has become a key issue for many firms. Although, consequently, the integration of purchasing and suppliers in product development has attracted growing attention from practitioners and researchers, most research on the topic remains limited to the context of single development projects. The integration with long-term issues such as technological alignment between supplier and manufacturer is often neglected. This limited conception and the lack of a coherent definition of what purchasing integration in product involvement is form a major impediment to the advancement of knowledge in this field. Therefore, this article develops a framework encompassing various activities across different management levels, which embody the alignment and integration of purchasing and product development processes.     

Motives behind purchasing consortia

Although purchasing cooperation between independent companies has been practiced for a long time, the phenomenon is not extensively researched. Especially purchasing consortiums formed by industrial companies have received relatively little attention in literature of the discipline. In this paper the key results of the larger study concerning industrial consortium purchasing are presented: the study was recently conducted and tested in Finnish machine manufacturing industry. The objective of this paper is to find out the motives behind purchasing consortia. As foundations for the empirical study, three theories explaining why companies form purchasing consortia are presented. The results of the study indicate that two main reasons for the companies to cooperate on purchasing are the expected cost savings and the collection of information on supply markets.     

Why integrating purchasing with marketing is both inevitable and beneficial

The shift away from manufacturing in Western developed economies has resulted in economies in which service industries are dominant. Marketing itself has undergone a paradigmatic shift from a focus on the exchange of goods to the provision of capabilities. This paper examines the relationship between marketing and purchasing as a result of the shift from product- to capability-focused commerce. We suggest that the marketing and purchasing departments will become closer due to two major reasons. First, as marketers increasingly become solution-oriented rather than product-focused, they will need to source products and services from third-party vendors and will require deeper involvement of the purchasing department. Second, with the emergence of customer-centric marketing coupled with build-to-order manufacturing, marketing and purchasing will have to be better aligned to deliver solutions to customers. These new dimensions in the marketing–purchasing interaction will also lead to changes in the selection, training, and recruitment of marketers and purchasers as well as their roles in the supply chain. We elaborate on these changes likely to occur in business-to-business organizations and along with implications for managers.     

Purchasing-driven sales: Matching sales strategies to the evolution of the purchasing function

The personal selling field has witnessed the emergence of various sales strategies, including relationship, value, key account, and solution selling. Despite claims about their effectiveness, recent work challenges the relevance of existing sales strategies across buying contexts. Specifically, emerging sales strategies often focus on the user in the customer organization, without being explicitly aligned with the increasingly important purchasing function. To define the critical role of the purchasing function for sales effectiveness, this study collects data from 32 firms in two markets; their purchasing departments reveal four stages of purchasing evolution: passive (price focused), independent (cost-focused), supportive (solution/innovation focused), and integrative (strategy focused). The research demonstrates that each stage of purchasing evolution then requires distinct sales strategies by selling firms and any mismatch of purchasing evolution and sales strategy may be detrimental to sales. This novel view and the supported findings offers several implications for both research and practice.     

Antecedents of functional integration during new product development: The purchasing–marketing link

In response to different economic and business trends, companies are becoming increasingly dependent on external resources and capabilities as they seek to cater for an ever more complex and challenging demand. Such dependence has led an important group of scholars to draw attention to the inevitable integration of the purchasing and marketing functions. We stress here the need for such integration during new product development, and seek the mechanisms that may promote purchasing–marketing integration. Accordingly, this study describes two essential components underlying the concept of purchasing–marketing integration, and tests the effect of different integration mechanisms gathered from the literature on these two components. The model is tested on a sample of 141 Spanish industrial companies. Our results show that each one of these integration mechanisms varies in its effectiveness in promoting each key component of purchasing–marketing integration. Taking these asymmetric effects into account is crucial for selecting the appropriate purchasing and marketing integration devices within companies.     

The mediating role of key supplier relationship management practices on supply chain orientation—The organizational buying effectiveness link

The role of key supplier relationships and their link with purchasing performance are poorly recognized in current business-to-business marketing literature. Given the predominance of collaborative supply chain relationships, purchasing must be considered to be providing value, thereby implying its effective nature. This study introduces a conceptual model of the relationship between supply chain orientation (SCO) and key supplier relationship management (KSRM) with organizational buying effectiveness (OBE) as a measure of effective purchasing behavior. To extend the model's nomological network, we link OBE with firm profitability. We find that SCO and KSRM have a strong positive influence on OBE. Furthermore, KSRM is demonstrated to be a significant mediator in the SCO–OBE relationship. Finally, OBE significantly and positively influences firm profitability, suggesting that it adequately addresses the aspects of effective purchasing behavior. We also discuss theoretical and managerial implications as well as future research directions in light of the limitations of this study.     

The effects of purchasing proactivity on value creation and supply risk reduction in sourcing projects: Implications for marketers' capabilities

In many organizations, the role of purchasing is in a transition from a reactive order taker, into a proactive and internally integrated business partner. Building on a Resource-Based View and Capability-Based View, this study explores how purchasing professionals' involvement and proactive efforts in sourcing processes affect sourcing project outcomes, in terms of both value creation and supply risk reduction. The authors gathered data on 112 sourcing projects from a large, private financial services company with in-depth and structured interviews with key stakeholders. A structural model deploying the research hypotheses was analyzed using the Partial Least Squares technique. The results reveal that, driven by early involvement of and responsibility granted to the purchasing professional, purchasing proactivity enhances value creation and supply risk reduction sourcing outcomes. Specifically, proactivity mediates the effect of purchasing's involvement on value creation.This study empirically establishes the importance of purchasing proactivity, serving as critical capability of purchasing professionals. Following a dyadic logic, this impacts industrial marketers. More specifically, when purchasers build capabilities to show proactive behavior to enhance value creation and risk reduction, marketers need to develop capabilities to facilitate purchasers in their endeavors.     

Sustainable value propositions: Framework and implications for technology suppliers

Advances in sustainable purchasing put pressure on firms to evaluate and demonstrate the sustainability of their products and services. In this paper, we coin the term sustainable value proposition, develop a process framework for building sustainable value propositions, and illustrate its application with two technology-intensive offerings. By integrating the literature on sustainable marketing and customer value propositions with life cycle assessment methodologies, we build a process framework that can be applied to demonstrate and evaluate the economic, environmental and social benefits of industrial products and services. The framework comprises 1) identification of potential impacts, 2) identification of key value creation mechanisms, 3) choosing key indicators, 4) life cycle modeling, and 5) life cycle value demonstration. Through two case studies, we examine the development of sustainable value propositions in two industry sectors: metallurgical and automotive. The results highlight the value provided to customers through the combination of direct economic benefits and derivative benefits of reduced environmental and social impacts. Our paper contributes to the growing field of sustainable marketing by offering guidelines on how to integrate sustainability with the marketing and purchasing of technology-intensive offerings. In addition, we offer guidelines for how to construct sustainable value propositions that resonate with customers.     

Product profile analysis: A tool for industrial selling

The purpose of this article is to provide a step-by-step approach to how product profile Analysis (PPA) can be applied to industrial selling. Specifically, the sales representative can use PPA to help the prospective buyer identify the key criteria involved in the purchasing activity. The concentration on buyer-oriented criteria will aid in the development of the sales representative's role as a consultant to the client. The use of PPA will also help the buyer defend the purchasing decision that was made.     

Strategic cost management across boundaries of firms

In recent years, increasing attention has been placed on how purchasing strategies may contribute to the efficiency of firms. In this paper, a case study illustrates how one firm implemented a supplier base reduction to enable a high involvement strategy in relation to appointed key suppliers. The effects of this change in purchasing strategy were extensive cost rationalisations. The main change in this process was a redefinition of the unit of analysis from individual transactions to buyer-supplier relationships. However, the costs in the relationship are driven not only by internal factors on the two sides of the relationship but also by how the focal relationship relates to other relationships. Therefore, the ways in which the costs are affected by other parties, such as the supplier's supplier, the supplier's other customers, the customer's other suppliers, and the customer's customers, need to be included in the analysis.     

Understanding the role of marketing-purchasing collaboration in industrial markets: The case of Russia

This study aims to investigate the role of interfunctional collaboration between marketing and purchasing functions in industrial companies. Interfunctional collaboration is considered as a measure of the internal alignment and partnership between departments in the firm, which in turn contributes to the creation of sustainable advantages via improved external partnerships and facilitating demand chain integration. We test the impact of customer orientation as well as the interactions between departments (specifically marketing and purchasing) as collaboration antecedents, and analyze the direct impact of marketing-purchasing collaboration on business performance. The model is tested on a sample of 148 industrial companies in Russia with two key respondents in each firm, incorporating the purchasing as well as the marketing perspective. The results show that marketing-purchasing collaboration mediates the effects of interfunctional interaction as well as customer orientation on business performance. Alternative model testing shows that the direct effects of these antecedent constructs on performance are non-significant in the context of Russian industrial companies.     

Changes in industrial buying: Implications for industrial marketers

Some of the most dramatic changes in organizational buyer behavior have occurred and continue to occur in the industrial purchasing function. Purchasing is becoming less and less a lower-level staff function and more and more a top-level management position. This article examines some of the major changes in the purchasing function and the reasons for those changes. The article concludes by considering some of the major implications of these changes for the industrial marketer.     

Impact of purchasing trends on industrial marketers

Purchasing departments have undergone dramatic changes during the past decade. This article examines key characteristics that changed during the 1970s including the purchasers' view of effective salespersons and women in purchasing. It is important that industrial marketers better understand these changes and subsequently implement marketing efforts that compliment the purchasing environment of the 1980s.     

The component procurement problem for the loss-averse manufacturer with spot purchase

This paper studies the purchasing behaviour of a loss-averse engineer-to-order manufacturer, who purchases a key component for his final product from a supplier under a single-wholesale-price contract with spot purchase opportunities, where both the product demand and the component spot price are uncertain. Through newsvendor type of models, we analyze several key issues, including the effects of the manufacturer's loss aversion, and the effects of demand and spot price uncertainties on the manufacturer's decision behaviour. We find that the purchasing behaviour of the loss-averse manufacturer differs from those of the risk-neutral and risk-averse ones. Specifically, we identify some sufficient conditions under which the loss-averse manufacturer may purchase a larger order quantity in advance when demand becomes more uncertain or when the price becomes more uncertain. We also discuss the two-wholesale-price contract and show that fixing the emergency supply price may lead to a smaller order quantity.     

Provider involvement in business service definition: A typology

This paper proposes a typology for provider roles in defining business services. The starting point of the study is the underlying rationale of much of the service purchasing literature that buyers have or can easily access the necessary know-how to procure business services. If this does not hold, the implication is that buying firms would shy away from buying complex services. An alternative perspective recognizes that purchasing business services requires its own set of sourcing capabilities, which may be lacking. Buying firms may have limited know-how in terms of defining and articulating their requirements or not be fully aware of them in the first place. However, the buyer's lack of sourcing capabilities need not be an injunction to internalize the service. In these circumstances, service providers step in, help buying firms specify their requirements and play a key role in defining what is procured and how. We build on this interactive view of service definition to undertake a comparative case analysis of four business service contracting situations arrayed along two dimensions — buyer perceived uncertainty and provider's buyer-specific experience. We conclude that service providers play different roles in each case. These are classified as translating, re-engineering, developing, and fine-tuning roles.     

Competitor analysis: Some practical approaches

Analysis of the intentions and capabilities of key competitors is an essential component of effective business strategy. This article places major emphasis on the often neglected area of competitive cost analysis. An overview of secondary and primary sources, including competitors themselves, is provided. Case examples illustrate the use of these sources in analyzing key strategic cost differentials between a company and its competitors. New approaches to competitor cost analysis are reviewed: 1) statistical techniques estimate fixed and variable components of cost; and 2) an analytical “force-out” technique estimates categorical costs (materials, wages, selling costs, etc.).     

Putting the 2007/2008 global food crisis in longer-term perspective: Trends in staple food affordability in urban Zambia and Kenya

Staple food prices in cities in eastern and southern Africa rose sharply between late 2007 and early 2009, leading to estimates of massive increases in food insecurity and hunger. However, in assessing the impacts of soaring food prices on urban consumers’ access to food it is important to consider food price changes relative to changes in per capita incomes. In this study, we use the case studies of Zambia and Kenya, where data are available on food prices, wage rates, incomes, and other indicators of urban purchasing power to answer two main questions: (i) how did staple food purchasing power at the height of the food price crisis compare to levels over the last 15 years? and (ii) did the food price crisis exacerbate an already declining trend in staple food purchasing power, or did it reverse a trend of stable or improving staple food affordability? Results indicate that staple food purchasing power in urban Zambia and Kenya improved markedly in the 10–12 years prior to the food price crisis. Most measures of bread and maize meal affordability at the start of the crisis in 2007 were at levels 1.0–4.3 times higher than in the mid-1990s. These gains for urban consumers were slashed but not completely reversed during the food crisis. Between 2007 and 2009, maize meal and bread were still more affordable in urban Zambia than all periods between 1994 and 2003. In urban Kenya, staple food purchasing power as of 2008/2009 was comparable to levels in 2000/2001–2004/2005 according to some indicators, while other measures suggest that the food price crisis reduced staple food purchasing power to levels lower than any other year in the period 1994/1995–2007/2008.     

From catalog to Web: B2B multi-channel marketing strategy

The literature on catalog buying is heavily skewed to the business to consumer (B2C) area and increasingly is orientated to the multi-channel world of shopping choice, including online, catalog and store options. Previous studies have primarily been single equation explanations of catalog decisions, whereas the current study takes a hierarchical or systems approach to decision making in B2B marketing. A two-equation structural equation model (SEM) has been designed and a large sample (n = 1809) of business customers used to test the model. Price and catalog layout were seen to play a particularly important role in explaining buyer behavior. Additional multiple regression analysis was carried out to understand why purchasing agents who currently use one channel (catalog), would make use of a second, new channel (Web) in the future. The study identifies five key motivating factors for consumers in adopting a new (Web) channel for purchasing purposes. The study also identifies the switching costs that act as a barrier to adopting a Web channel.     

Managing customer share in key supplier relationships

Supply base consolidation is an important issue in many business markets. Against this background, the allocation of purchasing budgets across vendors becomes an area of vital interest to suppliers. In the present research, we argue that customer share is a key decision variable in business marketing settings and investigate how a supplier can proactively manage the share of its customer's business. We report the results of a cross-sectional study among purchasing managers in U.S. manufacturing industries. Our findings confirm the role of customer value as an antecedent to customer share in business relationships. The study further shows that customer share influences the stability of key supplier relationships. Rather than displaying a direct impact, our results suggest that trust mediates and dependence moderates the link between customer share and search for alternative suppliers. Based on these findings, we propose a framework for managing customer share in key supplier relationships. Four approaches of how industrial vendors can proactively manage customer share are discussed.