Purchasing is increasingly evolving towards “Resources Management”

Have you ever been asked what you do for a living ? If yes and you have answered truthfully – I’m in Purchasing – you have probably earned a moment of uneasy silence followed by a – oh I see – meaning that the person you talked to had probably not the faintest idea what you were talking about. You might, by the way, have received a similar reaction when addressed in a professional environment, although the recognition and understanding of Purchasing has greatly improved in many organizations during the most recent years.

Everybody is buying in an organization, but only a professional Purchaser can add true value. Purchasing is not simple Negotiation, it is a full–blown profession of its own, with basic and advanced techniques and methods. But Purchasing is also still an “orphan function” – it is nowhere and everywhere, and that makes it so difficult to grasp.

Purchasing brings, by nature, Change to organizations and therefore disturbs. It is also in itself one of the most rapidly changing responsibilities as it has evolved in just two decades from an execution function at the end of the process (just fill the order, Joe and see whether you can get a few extra points out of it ...) to the role of Super-negotiator (we need to drive cost down by 30%, and now...), which now needs to move on to a global business responsibility of managing two thirds of a company’s resources and innovation capacity (supplier relationship management...).

The Purchasing volume of global Fortune 500 Companies today represents over 70% of their revenue, trend increasing. The Purchasing volume has become by far the biggest cost factor in an average company’s P&L. It is key to control this cost element by professional methods and techniques. It is even more important to use these same skills proactively to drive a company’s way to market, thereby improving its margins and competitiveness.

Strategic Purchasing or “Resource Management” means making adequate make or buy decisions, sourcing and selecting internal and external resources, and continuously working with these resources to reach the company’s objectives. Through effective cooperation with suppliers you can either increase your capacity of bringing innovative products and services faster to market than your competition, or you can drive down the cost thereby allowing you to sell more aggressively. (to be continued...)

In the extended enterprises of tomorrow, Purchasing will play, together with Supply Chain, a key role. Put in a very simplistic way, People in Purchasing will be responsible for finding and selecting the right skills and partner companies. They will also be responsible for making sure that these partners are motivated to work with and fully commit to your business (Relationship management).

If you look at these responsibilities and combine them with the typical profiles that will work in such areas – very international, business understanding, communicators and leaders – you will understand that People in Purchasing and Supply Chain are set to become the entrepreneurs and General Managers of tomorrow’s modern business organizations.