Buying and Supply Management Trends in the Past, Present, and Future

Buying and Supply Management

Buying and supply management is a core procedure shared by all enterprises. The topic of logistics/purchasing and supply management has changed and will continue to evolve over time because it is not yet considered a mature practice. Despite the fact that it is not a mature practice, most businesses have recognized supply-chain management as a potent source of competitive advantage. According to Spina et al. (2013), supply chain management encompasses all integrated actions targeted at delivering items to market in order to produce delighted customers. It is crucial for companies to provide products to their clients on schedule since faster product availability enhances sales. Moreover, there is always a considerable profit advantage for the extra time a company is in the market, and the competitor is not (Spina et al., 2013). Supply chain management plays a major role in organizations and is, therefore, a powerful source of competitive advantage. This paper aims to explain the past, present and future trends of purchasing and supply management.

Past Trends

In the early 1900s, purchasing was considered a clerical work. However, during the WWI and WWII, the purchasing function increased in importance since factories and mines needed to obtain raw materials, supplies and services to keep their operations running (Spina et al., 2013). Besides, before the 1950s, many people thought of logistics in military terms. During this time, logistics had to do with transportation of military personnel, procurement and maintenance of military facilities. In the 1960s, purchasing and supply management continued to gain importance as processes became more refined (Spina et al., 2013). During the early times, logistic activities were organized into marketing, finance and production.

In the 1970s and 80s, most companies discovered new strategies and manufacturing technologies. This allowed them to reduce costs, and as a result, they were able to better compete in different markets (Spina et al., 2013). The advent of just-in-time (JIT) production made purchasing and supply management a cornerstone of competitive advantage. Additionally, strategies such as total quality management and lean manufacturing became very popular, and companies invested a lot of resources implementing such strategies since they had realized that effective supply management was the next step they needed to take in order increase market share as well as profits (Ballou, 2007).

Essentially, in the early times, certain logistics activities were managed jointly. For instance, companies managed activities such as inventory control and transportation jointly since these two activities were in cost conflict (Spina et al., 2013). In as much as companies embraced physical distribution during this period, little attention was given to issues of product flow. Consequently, there was little coordination among the areas of purchasing, physical distribution and production. Therefore, the problem of coordination was to become the dominant theme to be addressed in the later years.

Present Trends

A new name for logistics has emerged – Supply Chain Management. The name has emerged mainly as a result of the globalization of manufacturing, which has forced companies to improve their internal processes so that they can remain successful. For instance, due to the growth of manufacturing in China, the US imports grew substantially thus accenting the need for logistics strategies to deal with the complex networks (Ballou, 2007). Therefore, currently, purchasers are not only interested in “lower prices” as was the case before. Instead, they are interested in sharing information, collaboration with their suppliers about life-cycle costs among other things. This does not require short-term relationships and price reductions but requires a focus on process improvements.

Additionally, it is true to say that logistics is now being viewed as part of SCM. As a subset of supply chain management, logistics is concerned with activity administration, which was not the earlier view (Spina et al., 2013). Other functions of logistics include planning and controlling the efficient and effective flow and storage of goods and services to meet customer’s requirements (Spina et al., 2013). Moreover, production and purchasing activities are now included within the scope of SCM. Consequently, SCM is responsible for almost 75% of the cost of sales for most organizations. Importantly, SCM promotes collaboration and coordination throughout the entire supply channel.

Future Trends

Understanding the past and present trends in SCM gives us the opportunity to see what might be in store for supply chain management. With increased information technology, free trade and increased globalization, the future of supply chain management looks bright. Notably, information technology and customer service focus are the two major trends which are currently benefiting SCM and will continue to do so even in the future. For this reason, organizations need to be excellent in both of these areas (Spina et al., 2013). Since the 1980s, computer technology has played a significant role in the field of SCM. The advancement in computer technology will provide tremendous value in addressing transportation, warehousing and distribution issues. Furthermore, companies will continue to expand internationally, outsourcing operations, and be doing business in a global economic environment (Ballou, 2007). Consequently, supply chain management will continue to grow.

References

Ballou, R. H. (2007). The evolution and future of logistics and supply chain management. European Business Review, 19(4), 332-348.

Spina, G., Caniato, F., Luzzini, D., & Ronchi, S. (2013). Past, present and future trends of purchasing and supply management: An extensive literature review. Industrial Marketing Management, 42(8), 1202-1212.