Supplier consolidations along with reliance on existing procurement methods that have evolved over the years within the firm can lead to purchasing challenges impacting profitability.
Solution Path
Firms should establish their purchasing priorities and ensure they are used by those in the purchasing process. Supply management can be viewed in three stages.
Stage 1 is the traditional purchasing practices which is usually reactive, has limited cross-function participation, does not leverage potential buying power and lacks IT systems to support decision making process.
Stage 2 has some cross-function participation, has short- and long-term strategies, coordination of overall purchasing activities, and an IT system to support basic purchasing needs.
Stage 3 has a more complete approach for tactical and strategic purchases, strong IT support platform, cross-functional participation, supplier relationship management and strategic suppliers are involved with cross-functional teams.
One size does not fit all. Some items can be viewed as simple transactions. Others warrant a much higher level of strategic thinking and involvement by the supplier.