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.

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