Umazon Blog

The traditional role of purchasing is to purchase materials conforming to specifications such as physical dimensions and the lowest bids. Most organizations still view purchasing as a tactical one with a short sighted approach. The tactical role of purchasing is underlined by the fact that most firms don’t have purchasing function in the corporate boardroom.

Purchasing as a tactical function is confined to clerical processes such as bid invitation, order management and payment. But purchasing is a complex function that manages suppliers for operation, new product launches and market planning. The strategic role envisages supplier involvement for increasing the efficiency of the business itself. This transition from tactical to strategic to engage suppliers is a long term process and therefore considerable change management processes.

The objective of strategic purchasing is to manage suppliers to reduce cost of materials and engage them in downstream processes and also to reduce the cost of purchasing. The implementation of IT in purchasing enables automation of many of the processes such as bid management and evaluation, order management and payment processes such as handling of invoices. The automation reduces errors in the purchase to pay cycle and increases process efficiency.

With increased competition and globalization, strategic purchasing involves sourcing supplies at the global level to reduce costs, better quality products. The global sourcing enables a firm to forge long term relationships with vendors who have the synergy and to share best practices and solutions. By having the supplier closely work with the firm, more products are launched quickly in the market and fewer inventories of finished products unsold are stored in warehouses.

Strategic purchasing enables firms to enter the ecommerce arena to source supplies online. According to Porter’s five forces theory, suppliers are seen as a force in the success of a product or firm and they are classified as either weak or strong. A chain is as strong as its weakest link. Strategic purchasing integrates suppliers into the network and collaborates to develop them.