Question lesson Business & Management
The role of the Purchasing Function
Discuss the roles of the purchasing function in any organisation, giving practical example.
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Answer Internal Staff
An organisations purchasing or procurement department supports the strategic and operational goals of that firm by managing the purchases of input goods/services needed (Baily et al., 2015). The role includes the purchase of the right goods and services, at the right price/quality, delivered to the right place and being on time (Booth, 2010). This role is complex, and can be broken down into three stages; pre-purchase, purchase, and post-purchase which reflects the 5 stage consumer purchase making model of need recognition, information search, alternative evaluation, purchase, and post purchase behaviour (Kotler and Keller, 2011), but with some additional complexities.
The pre-purchase stage starts with need recognition, which is likely to originate with a different department (Baily et al., 2015). The departments role starts by collecting all information regarding the need, such as specification, schedule requirements, and budget (Booth, 2010). The department will then define the procurement strategy to identify and assess potential suppliers (Booth, 2010). This process may include ethical and diversity management considerations as seen with firms such as Starbucks (Schultz and Yang, 1998), as well as price and quality assessments. eProcurement identifying international suppliers may leverage comparative advantages (Mendoza, Chua and Melchor, 2015). For example, Apple and Nike use international suppliers to constrain input costs (Lashinsky, 2012; Mahdi, Abbas, Mazar and George, 2015).
Purchase occurs following evaluation; the department selects the optimal supplier using the predetermined procurement strategy, and agrees contracts; this is the purchase stage, where goods will be delivered by the supplier (Baily et al., 2015). Post -purchase, the department works will also require assessment of the suppliers’ fulfilment of the contract, including evaluation of quality and terms, and then determining whether to use the supplier again, adjust the terms, or seek out new suppliers. Therefore, the purchase department fulfils an essential strategic role within an organization.
ReferencesBaily, P.,, Farmer, D.,, Crocker, B.,, Jessop, D., and Jones, D., 2015. Procurement, Principles & Management. Harlow: Pearson.
Booth, C., 2010. Strategic Procurement: Organising Suppliers and Supply Chains for Competitive Advantage. London: Kogan Page.
Kotler, P., and Keller, K., 2011. Marketing Management. 14th ed. Harlow: Prentice Hall.
Lashinsky, A., 2012. Inside Apple: How America’s Most Admired--And Secretive--Company Really Works. London: Business Plus.
Mahdi, H.A.A.,, Abbas, M.,, Mazar, and George, S., 2015. A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research, 6(3), pp.167–177.
Mendoza, R.U.,, Chua, K.C., and Melchor, M., 2015. Revealed Comparative Advantage, International Production Chain and the Evolving ASEAN-China Trade Linkages. Journal of Asian Development Studies, 4(1), pp.23–37.
Schultz, H., and Yang, D.J., 1998. Pour Your Heart into it: How Starbucks Built a Company One Cup at a Time. New York: Hyperion.