Fitting Purchasing to the Strategic Firm: Frameworks, Processes, and Values

Fitting Purchasing to the Strategic Firm: Frameworks, Processes, and Values In today's economy, successful firms must be strategically poised to take advantage of constantly changing market opportunities and to defend against competition. Much has been written about the transistions organizations undergo to become strategically oriented and about strategic marketing, distribution, production, and upper-management processes. However, few of these sources examine purchasing as an ingredient in what are considered necessary survival and success approaches for contemporary firms. (1) The world marketplace is dynamic, to say the least, considering continual changes in product availability, prices, and competition. The "strategic firm" concerned with producting quality products in a timely manner must include purchasing and supply considerations in its planning, development, and operation. A review of firms across the country today reveals a myraid of purchasing organization structures that exhibit varying degrees of effectiveness, corporate impact, and human talent. In many firms these purchasing groups have evolved slowly, in response to a variety of immediate pressures, with little planned design. From this point forward, this evolutionary process must be planned carefully and must be structured so that purchasing's roles, human skills, and resulting organization are congruent with the evolution of the firm itself. Failure to do so can make purchasing extremely vulnerable during periods of downsizing and reorganization, since only those functions that are perceived to contribute significantly to the welfare of the firm stand to remain intact. By staying in step with the strategic development of the organization, purchasing can capitalize on its uniquely important position at the inbound side of the firm. It can serve as a source of information about suppliers, the status of supplier industries, economic conditions, market conditions, and developing international trends - and thus provide critical inputs to the firm's strategic planning processes and its operations. This article discusses the phases of corporate strategic development - then it explores the characteristics of purchasing departments that are consistent with each phase. The theoretical foundation for corporate evolution is found in the work of Gluck, Kaufman, and Walleck entitled "Strategic Management for Competitive Advantage. "(2) This Harvard Business Review article continues to be regarded as the classical analysis of the developmental phases through which an organization progress as it evolves toward a formal system of strategic management. The purchasing input comes from interviews conducted by the authors with selected personnel in over 140 corporate purchasing departments in the United States and Canada during 1987 and 1988. The interviews included firms in a wide range of industries and geographic locations, as well as a variety of organization structures and department sizes. STRATEGIC MANAGEMENT FOR COMPETITIVE ADVANTAGE Strategic management is defined as "a system of corporate values, planning capabilities, or organizational responsibilities that couple strategic thinking with operational decision making at all levels and across all functional lines of authority in a corporation. "(3) It is this type of system that enables a large corporation to capitalize on its innovations and outspace its competition. By studying 150 companies, authors Gluck, Kaufman, and Walleck determined that most companies follow a standard path in their evolution to strategic management. This path "can be segmented into four sequential phases: (1) basic financial planning, (2) forecast-based planning, (3) externally oriented planning, and (4) strategic management. Each phase is marked by clear advances over its predecessor in terms of explicit formulation of issues and alternatives, quality of preparatory staff work, readiness of top management to participate in and guide the strategic decision process, and effectiveness of implementation. …