The Infuence of Technology on Strategic Purchasing

Technology is the application of scientific knowledge for practical orientated usage. It encompasses a wide range of different fields of business. This book refers an insight on IT and its influence on strategic purchasing. In recent years, technology became one of the most predominant factors for efficiency and effectiveness of a firm. Grover and Kohli (2012) argue that IT can be a co-creator of value, and this effect appears in four different aspects. It can be relationship specific and used as an asset. Second, it can be based on knowledge sharing. IT can complement capabilities and resources of the firm and lastly, it can have an impact on the effectiveness of governance. Therefore, it is interesting to analyse the influence of technology on strategic purchasing because IT is transforming the way that business is conducted.

For instance, the internet changed the patterns of daily work. The spread of information, prices, offers, etc. affects the competitiveness and structure of each business. That is the reason why firm’s had to change their purchasing strategy due to rapid changes in the development of IT. The speed in how fast information spread all over the world changed communication channels, for instance, by using the internet for supplier contacts. The Korean case study is an example how by making use of Internet, a successful e-procurement system was launched nationwide, and acknowledged worldwide for its success. All these changes in the environment of strategic purchasing motivates us to investigate a deeper look on the influence of IT on strategic purchasing.

In addition, strategic purchasing will, throughout the book be defined as Talluri & Narasimhan (2004) argue it to be. They state that strategic purchasing deals with managing the supply base in an effective manner by identifying and selecting suppliers for strategic long-term partnerships, involving in
supplier development initiatives by effectively allocating resources to enhance supplier performance, providing benchmarks and continuous feedback to suppliers, and in some cases involving in supplier pruning activities. Implications which can be derived from this definition are at first that purchasing is more than just buying materials which the internal client needs. Strategic purchasing and therefore this book delivers insight into the most important fields of purchasing. (Global) sourcing strategies, contract management, risks management, sustainability, supplier relationships, service purchasing will all be elaborated upon. The interest of writing a book is based on fundamental changes within this field according to the input of IT, today.

However, in the past, purchasing was at the bottom of interest for a firm at the beginning of the last century, purchasing was just considered as less important topic within a company (McIvor, Humphreys & McAleer, 1997). Purchasing was only referred to by obtaining raw materials and to keep factories operating. In the 1960s and 70s the importance of purchasing departments increased by more integration with automatic processes and material orientated businesses (Spekman, Kamauff & Salmond, 1994; Ellram and Carr, 1994). Finally, the connection between purchasing strategy and firm performance began to establish as of the 1980’s due to its direct impact on the products’ final costs (Easton, Murphy & Pearson, 2002). Effective purchasing strategies seem to differ across industrial sectors (Pagell, 2004). Companies realized that when purchasing assumed a more strategic role in the organization, can guide them to a ompetitive position (Lamming, 1993; Gadde & Hakansson, 1994), of which the case study of Apple is a classic example of perfection (Monczka, Handfield, Guinipero, Patterson & Waters, 2010). Since then, businesses moved from industrial mass production in manufacturing to servitization and individual supply (Raddats & Easingwood, 2010; Vandermerwe & Rada, 1988). Additionally to this historical development in purchasing, the importance of technology on strategic purchasing also emerged in recent years. At the beginning of 2000 purchasing evolved into strategic sourcing.

Nowadays, firms continuously improve and re-evaluate their purchasing activities. Supplier contracts on a long-term basis are more efficient (Gadde and Snehota, 2000), structured supplier data bases emerge and building sustainable supplier relationship receives more attention. The first decade of the 21st brought an explosion of technologies and strategies. Firms recognize the importance of each expenditure, and its subsequent impact on value creation. Purchasing becomes a major source of increased profits for each firm. Today, it is more than necessary to understand that strategic purchasing is not an event, but an ongoing process that is interconnected with IT.

To download this book, please use the following link: PDF

Strategic Purchasing – On our way to sustainability

There is a growing awareness of Purchasing and Supply Preface Management contribution to a company’s competitive advantage. Over the past decades, the field of Purchasing has fundamentally evolved from a narrowly defined business activity into an area of increasing interest and strategic importance, for industries and academia. Consequently, the demand for highly educated and skilled managers with Purchasing knowledge has been growing also.

In line with the developments of the field of Purchasing, we have decided to approach Master Course Purchasing in a new way for the second time in a row. Differently to ‘regular’ lectures and tutorials, students were challenged to plan and execute a book writing project engaging them in active learning by doing.

We proudly present the resulting E-book of this project – Sustainable Strategic Purchasing – written by 23 international students in Management Science between February and April 2014. Based on literature reviews as well as case studies and examples the students have worked on different themes with the joint ambition to describe and discuss the state of the art of Purchasing today. While the book focuses on the developments in sustainable strategic Purchasing and Supply Management it might also provide a presentation of a coming generation of purchasing professionals.

The course and the book could not have been realized without the support of the companies and people who kindly contributed their time for guest lectures and further information: Sander Koopmans (Adjust), Ad Weterings (Gasunie Groningen), Michiel Aarts (Unilever), Hans Wortmann (University of Groningen) and Hans Bax (UMCG).

Finally, we would like to thank all students involved. Your enthusiasm, curiosity, eagerness, cooperation and perseverance made it possible to carry out this book project (and in only 7 weeks)!

Groningen, April 2014,

Dr. Kirstin Scholten and Drs. Ing. Henk Faber

Department of Operations, Faculty of Economics and Business

to read the book, please download it here: PDF

Reflections on first international tip (Benjamin Maclean)

Last year I visited the Maersk workshop on talent management during the YPP Change Management Conference at Shell. I was inspired by the approach of the Danish. And now a study trip to Maersk Group Procurement in Copenhagen is being arranged. What a great idea! I signed up and booked my flight to Copenhagen. My expectations were to take home ideas and innovations I can use at work, to meet the Danish corporate culture and become inspired by peers. In this article you can read about my personal reflections on this trip.

On Monday evening I arrived in a youth hostel and the next day I explored the city of Copenhagen. The weather was great and the city treated us with hospitality. We checked into our hotel early in the morning and this was a fantastic luxury, what a contrast with my hostel the night before. In the evening there was a welcome dinner in the Maersk Group Procurement office. The group of participants seemed like an interesting mixture. After dinner we all headed back to the hotel bar for a local drink.

Wednesday was fully planned with interactive presentations. Henrik Larsen, the VP of Sourcing and Indirect Procurement, kicked it off with an overview of Maersk Group Procurement and how they use the synergy between the different business lines. It was inspiring to hear how Maersk sees procurement not only as procurement, but as (continuous) project change agents. “It needs to be sourced and sourced, and sourced, and sourced again… so you know you are beating your competition in the market”. And the Danes remain realistic, their philosophy is to be better than the competition, not better than the best. When a bear is chasing you and someone else, you just need to outrun the other person. You do not need to run quicker than the bear. We were also given an insight on talent management for procurement within Maersk. A competency I take home as to what identifies talent is Learning Agile; knowing what to do when you don’t know what to do. This is of importance to Maersk. Both Maersk and the participants agree that communication to employees, regarding identifying talent or future career options, needs to become more transparent.

The Maersk e-Sourcing strategy and how it is executed by the 550 procurement employees is very mature in my perception. They have an e-Sourcing support team in Mumbai, creating and executing the approximately 1.000 e-tenders, if I remember correctly, on a yearly basis. The future step for Maersk in Sourcing is to tackle and control the tale spend, an ambitious exercise. When discussing Sourcing within Maersk, it was a wake-up call to hear how personal competencies are used within the sourcing process. It is beneficial to realize and know what you are good at, so you can improve focus on the non-comfort zones during the different sourcing phases. Supplier workshops, internally and externally, are coordinated by procurement together with internal stakeholders, as part of the sourcing process. It was inspiring to hear about the way this is organised.

Many other presenters followed, and continuous questions were fired at all presenters as to why and how details and experiences were organised. When you place 16 motivated Dutch procurement professionals in one room you are ensured of positive group dynamics. I feel all of the participants have generated many personal ideas from these sessions to take home and to explore these thoughts within their own organisation or personal development. For myself, I found it to be interesting to hear from some of Maersk’s lessons learned when doing mega Capex projects. First get the basics right, gain the trust of the stakeholders and know what we are talking about. It seems simple, but when actual transformations within your organisation occur with such a speed, it is mature to acknowledge this afterwards, with the goal to get better in future.

 

The entire programme was professionally organised. We had quick breaks in between and well organised lunches. At the end of the day we were presented a case and we split up into smaller groups. Friday morning we had to present the result of our strategic sourcing project to a fictitious board. In the in-between-hours we worked on this case, and it was actually quite fun to do the analyses, put our thoughts into practice, divide tasks within the teams and to prepare for the presentation. During our dinner we could let all new information sink in, discuss everything and get to know each other better. After enjoying the exquisite Danish cuisine we did a self-organised sightseeing and drinking tour throughout Copenhagen.

Thursday morning, we started job shadowing. After the first day we had a very positive impression on Maersk Group Procurement and how they have chewed its way through the internal Maersk organisation. During the job shadowing programme we were given the possibility to verify this first impression and I was curious to see how all these strategies and tools are put into practice, how the true working culture is and to experience this diverse character on a peer to peer basis. We all signed an NDA, which gave the impression there was confidential information to disclose. But as we were having enthusiastic engaged discussions, these were very much open. You can discuss many things without disclosing confidential information by sharing experiences and for example talk about how you performed stakeholder management and many other things. It felt reassuring that I was doing the right thing in my own daily job and that in similar branches we have identical internal challenges. Of course there are differences too. I feel Maersk is well focused on their internal customers and is supported top down in its procurement philosophy. As an example, in some business units Procurement has adjusted their 6-step strategic sourcing process to fit the internal stakeholder process better and re-engineered it to a 4-step process to get quicker and easier acceptance from the business. It is this embeddedness and synergetic approach where Maersk distinguishes from other organisations. When being empowered in such a way as a professional you can drive change continuously and “every dollar will be spent more professionally”.

Finally there was a negotiation workshop and role play. The role play was fun and we all learned to not restrict a negotiation by limitations of our own view. Noticing changes in body language is a skill where I see room for improvement for myself. When asked about cultural differences, the Danes did not see themselves as more fact based than other cultures. I was reminded that making assumptions will not benefit a negotiation. I agree that determining national characteristics is treading a minefield of inaccurate assessment and surprising exception. However, i feel there is such a thing as a national norm too. A working knowledge of the basic traits of other cultures will minimize unpleasant surprises, give us insights in advance, and enable us to interact more successfully. In the evening we deepened our field research with respect to these cultural differences, and many of us also became more aware of our own cultural blind spots.

Friday morning, the last day, all groups presented their cases and we exchanged feedback from our new experiences. We concluded with a tour through the Maersk museum, which was a pleasant activity as some of us had turned into no-brainers from our nightly cultural field research. All involved were positive about the past days. I have definitely gained new inspiration I will use on a daily basis, and I better understand the Danish working ethos. In addition, and unexpectedly, I gained some self-confidence, met many like-minded peers and thoroughly enjoyed myself. As winning is perception, to me this trip has definitely been a win-win journey. It was hygge and I want to thank all participants and the Maersk Group Procurement organisation: “Tusind tak til deling!”

Aldrig op med at spørge! Benjamin Maclean

Looking back at a great experience – APP study trip 2014 @ Maersk

We were unsure what would happen if we would connect 16 procurement professionals from our YPP network in The Netherlands for 3 days with Professionals from Maersk in Copenhagen.

As board we now look back at a great week full of learning experiences. The energy and engagement felt over the past 3 days from all participants was great. We broadened our horizons and were able to learn from Maersk and each other. We all return home with something new, being new people to collaborate with, new views on purchasing and procurement, better negotiations skills or insight into specific categories. Most of all we return back energized and enthusiastic about our great profession .

We would  like to thank the participants who made this first  study trip into a success and Maersk who made us feel so welcome by being extremely open in showing us their organisation and views on professional procurement.

We hope this study trip was the first of many more and that in the years to come more of our members will be able to join such a unique event.

YPP visits APM terminal

On the 1st of April YPP travelled down to the APM terminal in Rotterdam. After gathering in Rotterdam to board a bus, the YPPers drove to the tip of the port of Rotterdam. This in itself already brought for most the realization how large the port of Rotterdam is and the influence Rotterdam has on the Dutch economy.

At APM the YPP were welcomed by Kasper Kropman and John Arkestijn. An introduction was provided in what AP Moller Maersk does and the sheer size of the company was highlighted.  Via an interactive presentation, Kasper was able to give insights into how Maersk organizes its procurement activities, with as biggest motto: “every dollar spent, needs to be spend professionally.” The centralized procurement organization faces and is able to deal with the challenges that arise from operating in a truly international organization, a broad range of business organizations, decentralized vs centralized activities and continually changing market dynamics. But the overall priorities remain dealing with safety, adding value and keeping local stakeholders happy

After the presentations, the YPP were given a tour over the APM terminal by bus. From up close the YPP got to see the complex logistical operation and processes of loading and unloading containers from large container ships.

 

Next stop: Maersk Kopenhagen (8 – 11 April)

Students write e-books on purchasing (event 11th of april)

On the 11th of April students from the university of Groningen will present their books on the state of the art of Strategic Purchasing: Sustainable Strategic Purchasing and The influence of Information Technology on Strategic Purchasing.

There are 20 places for YPP members to join the presentation, if you wish to join please send an email to Prof. Kirsten Scholten k.scholten@rug.nl

 

When: Friday the 11th of April

Time: 14:00 – 16:30 followed by a get-together

Location: RuG, Paviljoen 5433-0005 (Red Room), Nettelbosje 2,  9747 AE Groningen

 

Deadline registration: Monday the 7th of April

You can park in car park P2

YPP is glad to announce 2 new events

YPP Conference 2014 hosted by DSM and FrieslandCampina

On the 3 of October this year the 4th YPP Conference will be held. This year we will have two hosts, being DSM and FrieslandCampina. With this set-up the interesting and suitable topic “Co-creation” was selected. On the 18th of March the hosting team had their kick-off at the office of FrieslandCampina in Amersfoort.

 

Photo: @ FC – Amersfoort (photo from left to right: Annemiek van Ittersum (YPP member), Dirk Muilwijk (YPP Board), Timothy Buijsse, Frank Dekker (FrieslandCampina), and Sofie Blom (DSM))

 

> Back2School

Missing your study books, academic articles, lectures and tutorials? On June the 25th YPP is organizing another Back2School event, this time together with TU Delft. During this event you will have the opportunity to get the latest updates with regards to developments in the academic world.

 

The upcoming months more information and registration details will be posted on our website.

Event-year kicked off @ Stedin

On the 23rd of January YPP kicked off the new event-year at the office of Stedin Netbeheer B.V. in Rotterdam. After enjoying an Italian buffet, the attendees were introduced to the company Stedin, a distribution network operator, responsible for the safe and reliable transport of electricity and gas to a big part of the Randstad with nearly 2 million private, public and business customers.

Fred Kemper presentingWith a better picture of the core business, Fred Kemper, Manager Procurement at Stedin, continued the evening with an interesting story about the Direct Procurement department. In 40 minutes Fred gave the group a glimpse of the organization of the department, some important achievements and adjustments in 2013, and the goals and resolutions for the year 2014. Especially the focus on category management was pointed out in several slides, showing a clear path regarding ‘people’, ‘visibility’, and ‘tools’ on the ‘Stedin Yellow brick road’. (see PDF)

After several last questions concerning Stedin, the evening continued with the focus on YPP. In the first place the board shortly introduced itself, after several shifts in the composition of the team in 2013. Secondly a short summary was given of the events in 2013, followed by the ‘event-resolutions’ for this year. Finally, the attendees, at this point a rather exclusive group of 12 people, continued with the interactive part of the evening. Starting at the Stedin office and continuing in a bar in the ‘Oude Haven’ the group, amongst other things, discussed the following topics:

  • How to reach and involve the YPP members?
  • YPP Congress 2014 @ DSM/FrieslandCampina – topic: Co-creation & Partnership – what do you expect of this day?
  • First International event @ Maersk – what do you expect of this event?
  • In general, what would you like to see from YPP? (And what can you offer YPP?)

With a lot of interesting ideas and suggestions regarding  reaching existing and new members, how to deal with ‘no-shows’,  and possible new events, the first event of 2014 was concluded with a last drink.

Please, find the presentation of this event attached below. In case of questions or input regarding the mentioned interactive topics contact us via email: yppyoungpurchasing@gmail.com