An overview of the importance of purchasing and supply management in an organization

An example of these conflicts is the interrelation between the sale department desiring to have higher inventory levels to fulfill demands and the warehouse for which lower inventories are desired to reduce holding costs [9]. Origin of the term and definitions[ edit ] InKeith Olivera consultant at Booz Allen Hamilton introduced the term "supply chain management" to the public domain in an interview for the Financial Times. Supply chains were originally defined as encompassing all activities associated with the flow and transformation of goods from raw materials through to the end user, as well as the associated information flows.

An overview of the importance of purchasing and supply management in an organization

Modern procurement functions operate cross-functionally with a much larger array of activities than in the past, ranging from selecting suppliers, maintaining supplier relationships, developing company supply strategy and forging collaboration between suppliers and intra-company personnel to shape the overall organization.

Hence, this increased contribution towards an organizations competitive advantage signifies an increased importance of the procurement function; the success of the function is now more important to the success of the organization than it was in the past. While the procurement functions changing role has received plenty of attention by academia and industry over the past few decades, the purpose of this Blog posting is to identify whether this new role equates to a more important role and, this might be most interesting to business students reading this posting, if this more important role has had a positive effect on the salaries of procurement managers.

Two trends have emerged Throughout literature, two trends in the progression of the procurement function emerge that highlight the increasing importance of the function over the last decades.

Supply-chain management - Wikipedia

Interested in supply chain management and procurement? Social and environmental sustainability have become increasingly important in the last decade to both governments and consumers, increasing the importance of the sustainability strategies of organizations Giunipero, Hooker and Denslow, It does so by informing the organizations suppliers of requirements derived from corporate values, and consequently these suppliers will inform their suppliers, creating a compound effect throughout the supply chain Yamak et al, Further evidence of the importance of the procurement function for sustainability measures lies in the responsibility that CPOs have for sustainability.

War for procurement talent One additional and exceedingly interesting way to analyze the increasing importance organizations place upon skilled procurement professionals is by analyzing procurements wage growth as compared to other wage growth Feisel et al, For instance, salary surveys of procurement professionals in and showed an average 12 percent increase compared to a 3 to 4 percent increase in most other functions Feisel et al, All levels of procurement management, from director to junior manager, experienced strong wage growth in comparison to all occupations in the United Kingdom from to The salaries of all levels of managers in the area of procurement grew from below the national average to above the national average.

Wage growth of procurement managers has also shown strong growth in the United States throughout the past decade. Positions in Purchasing- and Supply Chain Management have enjoyed strong growth sincetotaling an increase of almost 38 percent over the last 14 years.

An overview of the importance of purchasing and supply management in an organization

This reflects the growing value that organizations place upon managerial-level procurement and supply chain management activities, and it agrees with the results by CIPS on UK procurement salaries.

The procurement functions importance will continue to grow Overall, an analysis of wage growth in the United States and the United Kingdom lends evidence for an increasingly valued procurement function. In particular, the higher-level, strategic roles are higher valued by organizations.

The procurement function has seen profound changes within the past decade. As the findings above indicate, these changes come with an increased importance within an organization.

Moreover, this multi-decade growth in importance has continued throughout the past decade, it is therefore fairly safe to assume that the growth of importance of the procurement function will also continue in the future.

Today, the procurement function is more strategic and contributes more to competitive advantage than in the past. It still focuses on costs as it did in the past, but because organizations purchase a higher percentage of their costs than in the past the benefit from cost reduction is greater.

Procurement has also gained involvement in product development, through its utilization of external resources to drive innovation. The procurement function is a pivotal tool in the balancing of supply rewards with supply risks. The increased value that organizations see in procurement is reflected by the increase in CPOs in the boardroom and by the above-average wage growth which strategic level procurement professionals have experienced in the past decade.

It is safe to say that the future holds additional changes for procurement. The drivers that have increased procurements importance in the past globalization, technology, sustainability and the development of the idea that procurement is now responsible for managing whole supply chains continue to shape the business world.

To meet these challenges organizations need a proactive, strategic procurement function and well trained procurement and supply chain management professionals.Purchasing management is a significant component for any business.

Companies recognize the significant cost savings that can arise from effective purchasing decisions and likewise how poor purchasing strategies may result in disaster: A vendor failing to deliver its purchasing order of beef to a hotel, for example.

CIPS serves the procurement and supply profession. Dedicated to promoting good procurement practice, CIPS provides a wide range of procurement services for the benefit of members and the wider business community. The authors of this Supply Chain Management book / manual have done a fantastic job with providing the basics of Supply Chain Management that beginners can grasp by almost going out of their way in explaining technical terms before going ahead and using them.

The procurement function is pivotal in implementing sustainable strategy because it has the ability to spread the values of its organization throughout the entire supply chain (Yamak, Souchon & . Bellevue University's Bachelor's Degree in Supply Chain and Logistics Management prepares you for a career in global supply chain management and logistics of purchasing, warehousing, and transporting goods.

Importance of Purchasing & Supply Management by Anam Ahmed - Updated November 21, In order for a product to go from the manufacturing stage and into the hands of a consumer, it must follow a long journey guided by purchasing and supply management professionals who make important decisions regarding cost, quality and scheduling.

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