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Discussion about Purchasing and influence of digital on it will be framed depending 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 variously 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 it'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 it's 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 for a company to successfully cope with velocity and scope of digital environment changes the role of purchasing function should perform an Integrative function. Of course given that it is equipped and enabled to perform such 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"1) Increased Share of Strategic Purchases
There is and there will be a rising share of digital tools, programs, softwares that companies need and will need use to function. As environment becomes increasingly digital, firms ability to interact with that environment, will increasingly be technology dependent and technology enabled. After all, the digital transformation, as a business transformation enabled, supported through and by digital technologies, means and will mean an increased level of technology that defines how company performs it's core functions. If one takes 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 will use and organisations will use definitely constitutes a strategic action - anyone who was ever faced with a legacy software and or was introduced to a new software knows both individual, but also organisational constraints digital technology purchases and implementation entail if done improperly. 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
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 key questions for management and purchasing functions and departments are whether they have needed 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 reversibleIncreasingly 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 increased number of competitors and decreased easy 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 digitisation has enabled horizontal entries to markets and industries by non-incumbents. One of key task 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 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.