Purchasing & Supply management
Purchasing & Supply Management
Defined as the design, initiation, control and evaluation of strategic, tactical and operational processes
aimed at acquiring products and services at the most favourable conditions.
Three disciplines:
- Operations Management (OM)
- Marketing (MA)
- Strategy and Organization (SO)
Forms of research involving multiple disciplines
Multidisciplinary research: working with several disciplines (uses different perspectives)
Interdisciplinary research: working between several disciplines (combining perspectives)
Transdisciplinary research: working across and beyond several disciplines (creating new persp.)
Two process types
- Strategic processes
- Tactical/operational processes
1
,Public procurement
Public procurement officers face structural issues as well as efficiency and effectiveness issues. State
governors have the ability to influence public procurement. Private sector procurement is practiced
under the sponsorship of each individual firm’s governance policies. Many public procurement officers
focus on best value procurement.
Best value procurement
Defined as a procurement method that looks at factors beyond just price, such as quality and expertise,
when selecting vendors. Five key performances according to The National Association for State
Procurement Officials (NASPO):
- Savings and cost avoidance
- Procurement action lead time
- Competitively awarded contracts
- Small, woman-owned, and minority-owned business
- Cost of procurement
Public procurement is managed trough two main types of purchasing agreements
Cooperative purchase agreements are created when one state creates an agreement with a vendor
that allows other states to also utilize the agreement to purchase goods and services.
Individual state-wide agreements is when the procurement team typically publish a request for
proposal, go through the vendor evaluation and selection process, then write an agreement between
the state or state agency and the vendor.
Individual state-wide agreements are most common by three reasons:
- Natural political forces push for procurement of goods and services that have a positive impact
on the social and economic conditions within the state.
- Many states have legal requirements that can put cooperatives at relative disadvantage in the
bidding process
- Each state has their own unique combination of industries where many goods and services are
readily available within a state so there is no need to search for additional suppliers.
2
,Business services and buyer-supplier interaction
Four types of business services
- Component services
- Semi-manufactured services
- Instrumental services
- Consumption services
Component services
Directly delivered to end-customers by the supplier to ensure a fit between the service being
purchased and the buying company’s existing offerings.
Semi-manufactured services
An input for the buying company’s offering to customers, and are usually integrated into the final
offering before being delivered to the end customer. It is to optimise the form and degree of processing
of the service with respect to the buyer’s application.
Instrumental services
Affect how the buying company’s primary processes are carried out to make sure that the services
have the desired effect on the buying company’s processes or the resources used within those
processes.
Consumption services
Concern the support processes of the buying company to ensure that the service supports various core
organisational processes in a way that facilitates the buying organisation and its employees in carrying
out their primary tasks.
Examples
- Station cleaning during the day -> component service
- Train cleaning during the day -> component service
- Train cleaning during the night -> semi-manufactured service
- Office cleaning -> consumption service
3
, Bilateral dependency and supplier performance ambiguity
Single source supply
When a firm doesn’t have a competent first-tier supplier base (for example only one supplier), it is
dependent on that supplier.
Hold-up problem
A situation where one exchange partner holds the other ‘hostage’ because the latter has made a
unilateral relation-specific investment of some kind.
Types of dependency
Unilateral dependency
One party is depended on the other party. The more powerful buyer sets the terms, and the supplier
either accepts them or walks away. The switching cost is consequential for one party.
Bilateral dependency
Both parties are depended on each other. The switching cost are for both parties. Bilateral dependency
and the need for relational contracting often arise from relation-specific investments.
Bilateral dependency in relationships
There are two approaches in a bilateral dependency relationship:
Muscular approach
Founded on unilateral decisions by the comparatively more powerful party.
Benign approach (more challenging)
Based on voluntary long-term cooperation, and mutual gains in an attempt to contract efficiently.
Supplier performance ambiguity related to the type of dependency
Is a critical complicating factor to bilateral dependency. It is a non-issue in unilateral dependency,
because they will not be incentivized to involve third parties for conflict resolution. The matrix below
will show four scenarios based on the relationship between supplier performance ambiguity and the
type of dependency.
TCE approach pertains to scenario 3 and 4, power approaches to scenario 1 and 2.
4
Purchasing & Supply Management
Defined as the design, initiation, control and evaluation of strategic, tactical and operational processes
aimed at acquiring products and services at the most favourable conditions.
Three disciplines:
- Operations Management (OM)
- Marketing (MA)
- Strategy and Organization (SO)
Forms of research involving multiple disciplines
Multidisciplinary research: working with several disciplines (uses different perspectives)
Interdisciplinary research: working between several disciplines (combining perspectives)
Transdisciplinary research: working across and beyond several disciplines (creating new persp.)
Two process types
- Strategic processes
- Tactical/operational processes
1
,Public procurement
Public procurement officers face structural issues as well as efficiency and effectiveness issues. State
governors have the ability to influence public procurement. Private sector procurement is practiced
under the sponsorship of each individual firm’s governance policies. Many public procurement officers
focus on best value procurement.
Best value procurement
Defined as a procurement method that looks at factors beyond just price, such as quality and expertise,
when selecting vendors. Five key performances according to The National Association for State
Procurement Officials (NASPO):
- Savings and cost avoidance
- Procurement action lead time
- Competitively awarded contracts
- Small, woman-owned, and minority-owned business
- Cost of procurement
Public procurement is managed trough two main types of purchasing agreements
Cooperative purchase agreements are created when one state creates an agreement with a vendor
that allows other states to also utilize the agreement to purchase goods and services.
Individual state-wide agreements is when the procurement team typically publish a request for
proposal, go through the vendor evaluation and selection process, then write an agreement between
the state or state agency and the vendor.
Individual state-wide agreements are most common by three reasons:
- Natural political forces push for procurement of goods and services that have a positive impact
on the social and economic conditions within the state.
- Many states have legal requirements that can put cooperatives at relative disadvantage in the
bidding process
- Each state has their own unique combination of industries where many goods and services are
readily available within a state so there is no need to search for additional suppliers.
2
,Business services and buyer-supplier interaction
Four types of business services
- Component services
- Semi-manufactured services
- Instrumental services
- Consumption services
Component services
Directly delivered to end-customers by the supplier to ensure a fit between the service being
purchased and the buying company’s existing offerings.
Semi-manufactured services
An input for the buying company’s offering to customers, and are usually integrated into the final
offering before being delivered to the end customer. It is to optimise the form and degree of processing
of the service with respect to the buyer’s application.
Instrumental services
Affect how the buying company’s primary processes are carried out to make sure that the services
have the desired effect on the buying company’s processes or the resources used within those
processes.
Consumption services
Concern the support processes of the buying company to ensure that the service supports various core
organisational processes in a way that facilitates the buying organisation and its employees in carrying
out their primary tasks.
Examples
- Station cleaning during the day -> component service
- Train cleaning during the day -> component service
- Train cleaning during the night -> semi-manufactured service
- Office cleaning -> consumption service
3
, Bilateral dependency and supplier performance ambiguity
Single source supply
When a firm doesn’t have a competent first-tier supplier base (for example only one supplier), it is
dependent on that supplier.
Hold-up problem
A situation where one exchange partner holds the other ‘hostage’ because the latter has made a
unilateral relation-specific investment of some kind.
Types of dependency
Unilateral dependency
One party is depended on the other party. The more powerful buyer sets the terms, and the supplier
either accepts them or walks away. The switching cost is consequential for one party.
Bilateral dependency
Both parties are depended on each other. The switching cost are for both parties. Bilateral dependency
and the need for relational contracting often arise from relation-specific investments.
Bilateral dependency in relationships
There are two approaches in a bilateral dependency relationship:
Muscular approach
Founded on unilateral decisions by the comparatively more powerful party.
Benign approach (more challenging)
Based on voluntary long-term cooperation, and mutual gains in an attempt to contract efficiently.
Supplier performance ambiguity related to the type of dependency
Is a critical complicating factor to bilateral dependency. It is a non-issue in unilateral dependency,
because they will not be incentivized to involve third parties for conflict resolution. The matrix below
will show four scenarios based on the relationship between supplier performance ambiguity and the
type of dependency.
TCE approach pertains to scenario 3 and 4, power approaches to scenario 1 and 2.
4
