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How to organise a purchasing department in line with the purchasing strategy?


Doctor Karim Bouarfa

Promotion DBA à distance, n°4

Business Science Institute


 

Introduction


Why do some purchasing departments perform so poorly? Undoubtedly because their organisation and resources are not aligned with their strategy. The observations made in the field over the years raise the problem of the inability of many purchasing departments in large Moroccan companies to align their organisation with the desired purchasing strategy. The purpose of this research is to identify and explain how a purchasing department aligns its organisation with the purchasing strategy in order to contribute to the company's competitive positioning. By addressing purchasing managers and directors, it will attempt to answer the following question: How can a purchasing department be organised in line with the desired purchasing strategy?


Purchasing departments have become an essential part of the management of businesses (Tréhan and Falcy, 2022): the share of purchasing turnover can represent up to 80% of sales turnover. To help create value, purchasing, like information systems, must be aligned with the company's strategy. However, these purchasing departments are not all at the same level of development, and this lack of maturity can act as a brake on their alignment. This paper will look at purchasing departments in large companies in Morocco, where the purchasing function is still relatively immature.


The literature review enables us to propose four types of organisations aligned with the desired purchasing strategy, namely Operational Purchasing, Price Purchasing, Internal Process Purchasing, and Innovation Purchasing Organisation. For each type of organisation, it is important to align three organisational dimensions: (1) the purchasing information system; (2) the indicators for measuring purchasing performance; (3) the competencies of buyers; and two structural dimensions: (4) the position of the purchasing department in the organisation chart and (5) the type of managerial interaction between the purchasing department and other departments and the company's management.

 

Research impact(s)


There needs to be consistency between the way a purchasing department is organised and the strategy assigned to it. For example, if the strategy is to seek low prices, then buyers will need to have strong negotiating skills in order to be "cost killers". Our research has enabled us to identify the 4 possible types of purchasing strategy and the characteristics of the 5 dimensions that need to be aligned with them (table 1).



Table 1: The 4 purchasing strategies and their aligned dimensions

 


By way of example, to align with a purchasing strategy that meets operational needs, the organisation of a purchasing department relies on the following resources: internal automation of purchase requests, compliance with purchase request processing times and the buyer's administrative skills, and on the following structural elements: integration in another function and internal responsiveness.


At a high level of maturity, to be aligned with an innovation purchasing strategy by capturing supplier knowledge, the organisation of a purchasing department relies on the following resources: information systems shared with certain suppliers, an evaluation of the supplier relationship and the buyer's leadership skills, and on the following structural elements: a department at the top of the decision-making pyramid and integration into cross-organisational teams.


It emerges that the purchasing departments studied align their organisation well with rather tactical and simple purchasing strategies, i.e. responding to operational needs and reducing purchase prices through competitive tendering. These strategies remain relatively unintegrated at an organisational level, and are still effective in the context of less complex supplier contracts.


There is no single best way to organise a purchasing department: the best way to organise a purchasing department is to align its organisational and structural aspects coherently and harmoniously with the desired purchasing strategy. And, of course, it is possible to combine different strategies and thus mix resources and structures. Here, only 4 archetypes have been presented.

 

Research foundations


This study is based on several theories. The starting point was the application of Henderson and Venkatraman's (1993) strategic alignment model, not to information systems, but to purchasing. This model emphasises the importance of alignment between the organisation's strategy and its information systems. This model was applied to purchasing. The Resource Based View was also used, which indicates that differences in company resources mean that some companies perform better than others (Barney, 2001; Prévot et al., 2010).


Concerning structural elements, Mintzberg (1982) defines the concept of structure as the sum total of the means used to divide work into distinct tasks and then to ensure the necessary coordination between these tasks. Similarly, in the context of the present typology and as Mintzberg (1982) points out, no organisation is the best, and each must take account of its environment and strategy in order to determine its advantages and disadvantages.


Alongside the above literature on organisational theory, the research also drew on the literature on purchasing management. Kraljic's matrix (1983) remains the benchmark for work on purchasing strategies and made it possible to define 4 types of strategy. By also drawing on Keough, 1993; Van Weele et al, 1998; Calvi et al, 2010; Monczka et al, 2021; Potage, 2016, it was possible to specify the characteristics of the dimensions of the typology.

 

Research methodology


A qualitative data collection and processing methodology, with content analysis, was used to test this typology of purchasing department organisation. 20 respondents (11 purchasing managers and 9 company directors) from 15 purchasing departments of large Moroccan companies were interviewed (from April 2021 to January 2022) using a semi-directive interview guide that focused on purchasing strategies and their structural and organisational dimensions.


Further reading…


Barney, J. B. (2001). Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Journal of management, 27(6), 643-650.

Calvi, R., Paché, G., & Jarniat, P. (2010). Lorsque la fonction achats devient stratégique : De l’éclairage théorique à la mise en pratique. Revue française de gestion, (6), 119-138.

Henderson J. C., Venkatraman H. (1993), Strategic alignment: Leveraging information technology for transforming organizations, IBM systems journal, 32(1), 472-484.

Keough, M. (1993). Buying your way to the top. The McKinsey Quarterly, (3), p.41.

Kraljic, P. (1983), Purchasing must become supply management, Harvard Business Review, 61(5), 109-117.

Mintzberg, H. (1982). Structure et dynamique des organisations. Ed. d'organisation.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2021). Purchasing & supply chain management. Cengage Learning.

Potage, J. (2016). Maturité des services achats et relation client-fournisseurs. Maxima.

Prévot, F., Brulhart, F., & Guieu, G. (2010). Perspectives fondées sur les ressources. Revue française de gestion, 204(5), 87-103.

Tréhan, N., & Falcy, S. (2022). Comment devenir un client plus attractif et plus performant grâce à l’évaluation inversée, un mode de contrôle singulier générateur de confiance. Finance Contrôle Stratégie, (25-2).

Van Weele, A. J., Rozemeijer, F. A., & Rietveld, G. (1998). Professionalising purchasing organisations: towards a purchasing development model. In conference; 7th international annual IPSERA conference, April 5-7, 1998, London (pp. 513-523). IPSERA.

 



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