Purchasing management
Week 1 - Fundamentals in Purchasing Management I
Purchasing management = All activities for which invoices are received. Design, initiation, control and
evaluation of strategic, tactical and operational processes within/between organizations, aimed at
acquiring products and services at the most favourable conditions. Core activity: managing supplier
relationships.
2 views of defining PSM research:
• As discipline: focus of a set of researchers who might perform research in varied
paradigms/theoretical perspectives.
• As application: research field is composed of studies originating from various disciplinary
backgrounds.
3 disciplines that made contribution to PSM: Marketing, Operations Management, Strategy &
Organization. 2 trajectories: Intradisciplinary (via differentiation), Interdisciplinary (in between
disciplines). 3 forms of multiple disciplines: Multidisciplinary (several disciplines), Interdisciplinary (in
between disciplines, Transdisciplinary (across and beyond disciplines).
2 processes PSM: Strategic (focus on relationship etc.), Tactical/operational (invoice handling etc.)
Recommendations multidisciplinary nature:
1. Understanding/acknowledging that PSM research is multidisciplinary field
2. Define more precise contribution for studies
Week 2 – Fundamentals in Purchasing Management II
Purchasing process models:
• Decision-making → buying decisions (make-or-buy)
• Linear → Sourcing
• Strategic → supplier management
• Cyclical → continuous
• Hybrid linear-cyclical
Purchasing process management elaborates 6 steps of linear model. Result: cost savings. Problems:
Overspecification, Supplier/buyer specification, Inadequate supplier selection, Insufficient
contracting expertise, Too much emphasis on price, Administrative organization.
Procurement spending is important for stakeholders → impact on economy and users. Volume goes
up means efficiency needs to go up (to save costs). Public procurement = Formal way how to go
about government contracts. Private procurement = within the context of privately-owned
organizations. Differences:
, • Public procurement is unique and dynamics in stakeholders and laws, which makes it difficult
to standardie, innovate and digitalize (bad for efficiency)
• Public procurement is funded by taxes.
• Other goals than only commercial (support local economy, sustainable investments
Best practice in public procurement is to be very transparent in terms of criteria, evaluation of
bidders, awarding contracts, and following terms and conditions of the contracts.
NASPO emphasizes 5 key performance metrics for public procurement National Association of State Procurement Officials:
1. Savings and cost avoidance
2. Procurement action lead time
3. Competitively awarded contracts
4. Small, woman-owned, and minority-owned business
5. Cost of procurement.
What public procurement must do in the future: Create a common set of codes for goods and
services (resulting in more detailed analysis); Use taxonomy (helps researchers evaluate how
suppliers and CPOs respond to specific situations); Apply strategic choice theory perspective (explore
performance metrics and key factors affecting performance).
Service procurement = process for requisitioning people-based services at an enterprise-level with an
agreed-upon scope and deliverables. Important: Growth through specialization, performance,
outsourcing; ‘Servitization’ of goods; More focus on NPR. Pitfalls: Scarce resources, Bad outsourcing,
Complex models, Decentralized spending, Increasing supply base. Difficulties: effectively organizing
transactions and relationships in service procurement (which is important for business-to-business
services); Managerial challenge is continues contact between buyer-supplier.
Content service: Input, Throughput, Output, Outcome.
3 types of business services:
Best Value Procurement = Procurement method that looks beyond price, so also quality and
expertise, when selecting vendors. Compare costs and benefits. 4 stages:
1. Preparation
2. Tender selection
a. Past performance
b. RAVA plan (Risk Assessment/Value Added plan = Used to identify how suppliers
identify/minimize risks, Add value to project, What degree of control, Where
differences are between supplier)
c. Planning
d. Interviews (Most important step of tender selection)
3. Pre-award (Buying process in which the supplier has opportunity to plan project in detail)
a. Kick off
b. Pre-award period
