Global Impact on Purchasing and Supply Management

Introduction

Purchasing and supply management entails the selection and coordination of suppliers to ensure that a business receives products on time. It also involves the procurement and management of advertising, marketing, and information technology-related services. Barney (2012) claims, “Companies exist by selling, but earn profits by purchasing” (p. 4). Therefore, the purchasing and supply department is critical to an enterprise. According to Barney (2012), globalization poses significant opportunities and challenges to purchasing and supply management (p. 5). The ability of businesses to exploit the global market has resulted in an increase in the number of customers as well as competition. Furthermore, it has enabled organizations to reach new suppliers and resources. On the other hand, it has become hard for purchasing and supply managers to make informed decisions due to limited data and complexity of the supply chain. Indeed, globalization has posed significant challenges to purchasing and supply management.

Global Influence

The elimination of national boundaries has enabled purchasing and supply departments to source products internationally. The agencies can outsource functions to foreign supplier networks. Barney (2012) argues that globalization has enabled manufacturing companies to outsource services to different vendors (p. 6). The companies manage numerous product lines that depend on raw materials from various suppliers and they coordinate logistics. The companies require knowing when and where to purchase or collect supplies. The growth in the global market has made it hard for purchasing and supply managers to streamline operations. The purchasing and supply leaders no longer have control over their operations as the provision of goods has become quite volatile. Today, purchasing and supply managers rely on multiple companies distributed across the globe. Thus, they are unable to anticipate changes in demand and supply.

Giunipero, Hooker, and Denslow (2012) maintain that global expansion has made it hard for purchasing and supply leaders to make sound operational decisions (p. 259). The leaders are unable to gather adequate information from the numerous suppliers operating overseas. At times, they make decisions that subject an entire organization to risks. The absence of accurate, real-time information inhibits the managers’ ability to make prompt decisions. In the event of a natural disaster such as flood, it is hard for the managers to identify new suppliers or coordinate shipment of supplies from the affected regions. Globalization has hindered the visibility of the supply chain, and thus it is hard for managers to deal with cases of delayed supplies.

Recommendations

The success of purchasing and supply management lies in the ability of the managers to coordinate the suppliers working in different geographical regions. One strategy that the managers can use to mitigate global influence on purchasing and supply management is an investment in technology. Giunipero et al. (2012) argue that investing in technology would enhance supply chain visibility (p. 263). It would be easier for managers to liaise and communicate with suppliers across the globe. Communication is paramount in purchasing and supply management because it ensures that suppliers understand the required products and deliver them on time. Moreover, it keeps the managers informed of what is happening in the global market. According to Hultman, Johnsen, Johnsen, and Hertz (2012), investing in technology would help an organization to gather real-time data that would be invaluable in decision-making (p. 11). As a result, the managers would quickly make valuable decisions in times of disasters, which would go a long way towards minimizing risks in the purchasing and supply department. Moreover, investing in technology would streamline processes and reduce delays.

Hultman et al. (2012) allege that investing in technology would help the purchasing and supply department to identify the right suppliers without difficulties (p. 17). Consumer demands are changing rapidly, and the purchasing and supply managers have a duty to meet the changing needs through the identification of the appropriate products or services. Investing in technology would help managers to detect and exploit consumer demands as they arise. Technology enables purchasing and supply leaders to combine all the activities of the supply chain (Hultman et al., 2012, p. 19). In return, they can easily manage and coordinate the delivery of supplies and control inventory. Technology would help the leaders to cut down on shipping time, thus enhancing organizational efficiency. Technology, such as radio frequency identification device (RFID), would not only contribute to tracking inventory but also detecting errors, thus enabling the purchasing and supply personnel to take the necessary action.

Purchasing and supply managers should adopt a flexible management approach. Purchasing and supply management varies across the globe. For companies with foreign subsidiaries, it is imperative to guarantee flexibility. Embracing a universal mode of operations may compromise processes in some countries. Hultman et al. (2012) posit that it is difficult to predict the demand and supply across the globe (p. 20). Moreover, purchasing and supply policies vary globally. Thus, it is imperative to adopt a “think global, act local” principal to ensure efficient management of the purchasing and supply department. Allowing individual subsidiaries to work autonomously would facilitate decision-making as purchasing and supply managers would make decisions based on their needs.

Conclusion

Globalization has both positive and negative impacts on purchasing and supply management. Organizations can source products or raw materials from many suppliers across the world. As a result, it is hard for the purchasing and supply managers to coordinate operations. The managers cannot get real-time information regarding the delivery of supplies. Thus, it is hard for them to make sound decisions. Purchasing and supply managers should invest in technology to facilitate data collection and streamline operations. Additionally, they should allow individual purchasing and supply departments to operate autonomously.

References

Barney, J. (2012). Purchasing, supply chain management and sustained competitive advantage: The relevance of resource-based theory. Journal of Supply Chain Management, 48(2), 3-6.

Giunipero, L., Hooker, R., & Denslow, D. (2012). Purchasing and supply management sustainability: Drivers and barriers. Journal of Purchasing and Supply Management, 18(4), 258-269.

Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal of Purchasing and Supply Management, 18(1), 9-21.