The term Shopping referring in Business Administration initially to the operational activities for supplying a company with goods and services needed to carry out the production process or the trading function needed and are not manufactured by this company itself. With the increasing importance of the corporate function of purchasing, strategic tasks are increasingly summarized under this term.
Definition of terms
Due to the late arrival of business research with the function of purchasing, there is no final agreement, neither in theory nor in practice, on the exact definition of the terms materials management (analogous in trade: merchandise management ), supply chain management , procurement , and procurement logistics and purchasing. The prevailing opinion in the business literature sees purchasing as a sub-area of the operational function of procurement. Purchasing represents the operational and strategic activity of purchasing itself. In contrast, the procurement starts earlier by consumption planning , planning of delivery times , or the provision of storage facilities and logistics . However, this hierarchy of terms is usually not reflected in the company's organizational structure. Krokowski and Lorenzen have formulated a proposal for delimitation. According to this, procurement in a broad sense has the task of providing all input, e.g. B. to provide personnel, capital, material and immaterial services for a company. Since the procurement of personnel and capital are subject areas of human resources and finance, the procurement of material and immaterial services remains for procurement in the narrower sense. These procurement objects are the subject of purchasing and procurement logistics. The task of procurement logistics is the management and execution of the processes that compensate for space and time disparities ( transport , storage , handling ) between external sources of supply (suppliers) and internal consumers (e.g. production ). Purchasing is defined by the two authors as "that part of procurement that is active and oriented towards long-term corporate goals and that shapes the relationships between, in particular, internal company customers and external sources of supply (suppliers), in order to provide (contractual) agreements with the provision or control over procurement objects guarantee." In the sense of a system-oriented approach, the tasks of purchasing relate to "the design
- the demand (the consumer / the "sales" market),
- the offer (the suppliers in the procurement market),
- the "connecting" processes (material, information, cash flow),
- the (contractual) agreements and
- the purchase itself. "
In this context, the design of the demand or the need in the company is of particular importance for modern purchasing, as it is the central lever for achieving the entrepreneurial goals.
The corporate function purchasing includes - depending on the characteristics in the individual companies - the following sub-functions:
- Purchasing management
- Human Resources Management
- Design of the organizational structure of purchasing
- Design, if necessary, digitization of the purchasing processes
- Purchasing controlling
- Representation of purchasing within the company
- Project purchasing
- Involvement in project for new product developments
- Processing of purchasing tasks in z. B. Investment projects (e.g. building a new manufacturing facility)
- Optimization of the procurement program
- Implementation of value analyzes
- Standardization and modularization of procurement objects
- Planning and control of material cost development
- Procurement market research
- Analysis of the purchasing behavior of competitors
- Design of the purchasing strategy (number of suppliers, allocation strategies, make-or-buy , dual sourcing, etc.)
- Coordination of different parts of the company to bundle purchasing power
- Standardization (unification of components) for volume bundling
- Influence on technology decisions from a cost perspective
- Supplier development
- Supplier evaluation
- Negotiating prices and payment terms with suppliers
- Management of prices and conditions
- Tenders for new contracts
- Examination and comparison of offers
- Drafting and conclusion of contracts with suppliers
- Order processing
- Complaint processing.
Instruments of purchasing
Various instruments are available for purchasing to carry out the tasks. Some examples:
- Different award methods (e.g. auction , reverse auction, expressive bidding, concept competition)
- Linear Performance Pricing (LPP)
- Regression analysis of cost drivers and prices
- Cost analysis
- Evaluation of purchasing key figures
- Considerations of the total cost of ownership
- Specification analyzes and adjustments
- Risk management
- Strategic partnerships with suppliers
- Purchasing groups
- Value chain management
- Demand management
- Cost planning
- Value analysis
- ABC analysis
- XYZ analysis
Which levers are used depends on the individual supplier-customer relationship. Modern purchasing also follows the classic approach of supply and demand . Depending on the supply power of the supplier and the buying power of the customer, the balance of power allows different purchasing levers. For example, with low supply power and high buyer power, one can work with target prices, while in the opposite situation the aim will be to change the nature of the demand, for example by changing specifications or targeted innovations.
Based on the Kraljic Matrix founded in 1983 by Peter Kraljic, every purchasing or procurement situation can be described in 4 quadrants along the dimensions of supply chain risk or complexity and the influence on the profitability of the company:
Materials that are important to the company in terms of both economic impact and delivery terms from complex and / or high-risk markets. I.
Components that have little economic impact on the business, but where delivery continuity is at risk.
Materials that have little impact on the business and that can be found in abundance and / or in low risk markets (e.g. office supplies).
Materials that are important to the company but are sourced from low-risk, abundant markets. As the name suggests, the optimal management of these purchasing categories is essential to ensure a satisfactory business result.
Deriving the 4 key strategies of purchasing
This classification by Kraljic is the basis for the derivation of 4 so-called guiding strategies in purchasing. The guiding strategy fulfills the function of providing orientation and orientation when developing the individual purchasing strategy of a product group. It should also be noted that the positioning of a material or a group of goods within the Kraljic Matrix is not a permanent status, but can be changed by internal and external influences and can therefore also be actively shaped by companies. (See also: Classification of product groups in the key strategies of purchasing)
Partnership and SRM
For strategic materials in this area, the horizon is medium-term and within the guiding strategy should include continuous observation of the economic situation of the market, technical developments, the evaluation of "make-or-buy", the creation of alternatives and the development of stable relationships and maximum cooperation with suppliers, the risk for the company is minimized and the profit contribution secured.
Secure procurement & change demand
The guiding strategy for the management of these materials should be to create medium-term relationships of collaboration between the customer and supplier to ensure supply, with less focus on costs. Alternatively, by changing your own demand, alternatives can be created and a procurement risk can be reduced.
Demand management & process efficiency
For non-critical materials, the goal of the guidance strategy should be to maximize the efficiency of the procurement process in order to reduce the administrative burden, e.g. B. by delegating purchasing to local managers or using catalogs and e-procurement software
With this type of materials, the company tends to make the most of its bargaining power and abundance of supply with frequent negotiations.
Purchasing levers to design a purchasing strategy
In order to develop an individually suitable purchasing strategy, various levers should be combined in a purchasing strategy in order to optimize the negotiating position with the supplier. The literature and current practice do not agree on a clear classification and the number of levers.
One possible classification is the distinction between supply-side and demand-side supplier levers. For example, OCM Management Consultants describes 16 purchasing levers along the supply and demand side.
Below are some examples of levers in strategic purchasing
Determination of the number of suppliers
Depending on the strategic situation, the amount of fixed costs and the number of units, it may make sense to award the contract to more than one supplier. The advantage of a multi-supplier strategy is that the buyer can contact the supplier in the event of differences, e.g. B. with regard to future pricing, keeps the option open to shift volumes to other suppliers at short notice. The disadvantage compared to a supplier strategy is the multiple incurring of fixed cost blocks (e.g. development or tool costs).
Linking various items to be negotiated
In many cases, different items can be negotiated, e.g. B. Link award of new product projects and price development of the old business in one negotiation. For this purpose, all possible demands on the supplier are researched and compiled before a negotiation. Particularly in large and globally organized corporations, close cooperation between the various parts of the purchasing organization is necessary.
As the company grows, so do the strategic purchasing options. Centrally controlled cooperation between different parts of the company (lead buying) enables better negotiating positions to be established with suppliers that are often also globally active.
Purchasing can be organized internally according to suppliers, product classes (including material groups, raw materials ) or internal customers (e.g. plants). In some companies, there is a division into project purchasing and series purchasing, i.e. In other words, there are different organizational units for new assignments and ongoing series business. In smaller companies, purchasing and scheduling are sometimes organizationally combined.
Purchasing in the company organization
The classification of purchasing in the company organization depends on the size and structure of the company as well as on the importance of purchasing for the company. B. can be measured by the ratio of the purchase volume to total sales. In manufacturing companies, the share of externally purchased goods and services regularly amounts to more than 50 percent of the total costs. In practice, however, this importance is not always reflected in the design of the purchasing organization.
In global companies with high purchasing volumes (e.g. in the automotive industry), purchasing is usually a corporate division organized under the CPO ( Chief Procurement Officer ) that purchases centrally for all of the company's plants or branches in order to bundle purchasing power ( central shopping). The CPO is not always a member of the board of directors; he is then regularly subordinate to the COO, CFO or CEO, sometimes also to the production director. For companies with less importance of purchasing, individual plants or branches can also have purchasing departments that are directly assigned to them (decentralized purchasing). The current trend in the industry is the centralization of purchasing.
As part of this centralization, compliance with purchasing guidelines is an important aspect in order to promote the standardization of purchasing processes and their control. Today, fully automated approval processes ensure that, particularly in large companies, a technical approval is given before the actual ordering process and a commercial approval is given before the order is placed. Purchasing can be centralized, but the necessary competence decisions can be decentralized. The business processes and rules required for this are specified centrally and can be followed worldwide.
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- Werner Hug - Jürgen Weber: Purchasing value driver - Purchasing value lever as a controlling task. Wiley-VCH, Weinheim 2011, ISBN 978-3-527-50577-7
- Gerd Kerkhoff: Purchasing Agenda 2020: Procurement in the future - secure and expand competitive advantages through visionary purchasing. Wiley-VCH, Weinheim 2009, ISBN 978-3527505012
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- Klaus Dieter Lorenzen, Wilfried Krokowski: Purchasing . Springer Gabler, Wiesbaden 2018, ISBN 978-3-658-07221-6
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- Christopher Jahns, Supply Management , 2005, p. 26
- Carsten Körfer, Procurement Controlling , 2011, p. 10
- Klaus Dieter Lorenzen, Wilfried Krokowski: Purchasing . Springer Gabler, Wiesbaden 2018, ISBN 978-3-658-07221-6 , pp. 10 .
- Strategic purchasing of product groups & category management. Retrieved May 25, 2020 .