Digital has brought about upheaval in many branches, industries and functions. I focus in my Digital Brand Discussions, on topics and questions around Brands and Digital. What are Digital Brands, Why Should your Brand be a Digital Brand, What is a Digital Brand Expression are just some of the topics I will be tackling.
This time I wanted to discuss changes Digital has been bringing and will continue to do so to Brand's Purchasing Function and Brand's Purchasing Operation. I think it is especially important to look at how Purchasing Function can act as an Enabler or Inhibitor of Digital Brand Transformation and Organisational Digital Brand Change.
Discussion about Purchasing and influence of digital on it will be framed depending on how you set your initial point of view on Purchasing itself. Interestingly enough, there is no single definition of Purchasing. In literature and business it is varyingly and sometimes even interchangeably (although wrongly) referred to as Buying, Procurement, Materials Management, Supply Chain Management and Sourcing Management. One can view Purchasing as a Function, Purchasing as a Process, Purchasing as a Supply or Value Chain link, Purchasing a a Relationship and Purchasing as a Profession. In discussing influence of Digital on Purchasing I take the view of Purchasing as Function.
Purchasing Function: Passive, Independent, Supporting or Integrative?
Evolutionary view of Purchasing also uncovers that Purchasing and it's Role in an Organisation can vary from Purchasing as a clerical routine activity, to a commercial stage in which emphasis is on cost savings and finally to a proactive strategic function concerned with materials or logistics management. Purchasing function's role evolves from Passive (no strategic direction, primarily reacts to the request of other functions), to Independent (adopted the latest purchasing techniques and processes, but its strategic direction is independent of the firm's competitive strategy), Supporting (function supports the firm's competitive strategy by adopting purchasing techniques and products which strengthen the firms competitive position), Integrative (Purchasing strategy integrated into the firm's competitive strategy). I believe that for a company to successfully cope with velocity and scope of digital environment changes the role of purchasing function should be Integrative. Of course, assumed that it is equipped and enabled to perform such an important and strategic role.
Digital Changes and Impact on Organisation's Purchasing
"Strategic action is consequential; it involves resource commitments that cannot easily be undone and moves the company in a direction that is not easily reversible."
Increased Share of Strategic Purchases
There has always been and there will always be a rising share of digital tools, programs, softwares that companies need and will need to use to function. As environment becomes increasingly digital, firm's ability to interact with that environment will more and more be technology-dependent and technology-enabled. After all, the digital transformation, as a business transformation enabled, supported through and by digital technologies, means an increased level of technology that defines how company performs its core functions. If one considers the fact that all technologies take time to implement as mostly they require organisational and behavioural changes, sometimes even cultural changes, then it stems that any technological purchase and implementation is a strategic one. The impact of this action is consequential and as my Stanford Graduate School of Business professor, Robert A. Burgelman writes in his book "Strategy is Destiny": "Strategic action is consequential; it involves resource commitments that cannot easily be undone and moves the company in a direction that is not easily reversible". Purchases and implementation of technologies, digital tools that people and organisations will use definitely constitutes a strategic action - anyone who was ever faced with a legacy software or was introduced to a new software knows both: individual, but also organisational constraints, that digital technology purchases and implementation entail if done improperly. Every technology purchase is a strategic one - it involves resource commitments that cannot easily be undone and moves the company in a direction that is not easily reversible.
Purchases of digital technologies, software and hardware definitely constitute strategic purchases and share of those will just rise across all departments.
Purchases of digital technologies, software and hardware definitely constitute strategic purchases and share of those will just rise across all departments. For purchasing as a function that means both an opportunity and also a commitment to be ready and equipped for such purchases both organisationally, but even more importantly - (human) resource-wise. One of the key questions for management and purchasing functions and departments are whether they have required capabilities to tackle this increase of strategic purchases.
Every technology purchase is a strategic one - involves resource commitments that cannot easily be undone and moves the company in a direction that is not easily reversible
Increasingly Congested Digital Supplier Market Perspective
One impact Digital has had on the business is that it made it much more competitive and dynamic. Increased competition was brought about both with growing number of competitors and decreased ease of entry to a single market. Cost of starting, building and operating a company has never been this low (thus the increase in number of competitors) and digitisalition has enabled horizontal entries to markets and industries by non-incumbents. One of the key tasks and responsibilities of Purchasing as a function is to provide a relevant supplier market perspective, enabling other departments to find 'best suppliers under best terms'. With exponential rise of digital technology suppliers and players this has never been harder to do. One of the great examples of this increasingly congested digital supplier market perspective is Mar-tech market. One look at Marctech 5000 Marketing Technology Landscape Supergraphic (2017) is enough to be empathetic of either a CMO or Purchasing Department situation where one needs to discern which supplier to choose.
With exponential rise of digital technology suppliers and players providing relevant supplier market view have never been harder to find.
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