The Role of Purchasing in the Agile Enterprise

BACKGROUND Agile competitive strategies require a market-focused, total-systems, strategic orientation that results in the ability to rapidly respond to changing customer demands and market conditions. Specifically, four dimensions of agile competitive strategies have been identified: (1) being a solution producer; (2) having collaborative production systems; (3) being knowledge-driven; and (4) maintaining an adaptive organization.[1] Successful implementation of these four dimensions allow firms to develop their people, information, processes, and management into coupled and dynamic systems. The result is long-term value-added relationships with key constituents characterized by shared trust, mutual commitment, and long-term cooperation. These long-term, value-added organizational relationships are viewed as a strategic source of competitive advantage and further recognized as a focal point of contemporary agile practice.[2,3] For example, Texas Instruments' "Two Up, Two Down Philosophy" focuses relationship efforts over five firms. These include the subject firm and two levels of interactions to the customer and the customer's customer as well as the supplier and the supplier's supplier.[4] Along with traditional customer relationships, supplier relationships and the technologies required to integrate business processes are crucial to the overall process of creating value for the firm and its customers. THE "INTERPRISE" MODEL The Interprise Relationship Model[5] depicted in Figure 1 (see page 40) illustrates the three dimensions of interorganizational relationships among firms and their suppliers and customers. The three axes in this model (Enrichment, Reward, and Linkage) identify key management decisionmaking areas for facilitating mutually profitable interorganizational relationships. A line at a forty-five degree angle represents the ideal relationship between these three axes. Any growth or development on one axis should be equalized by endeavors on the other two axes. Thus, optimal relationship development endeavors must be concurrent along all three axes to achieve enhanced levels of performance. The Enrichment axis highlights value-added activities that enrich the customer. Comprehensive customer enrichment comprises both the technical product quality and interpersonal process quality attributes.[6] Technical product quality includes the technical/tangible product attributes such as physical features, price, warranties, product performance, and reliability. Interpersonal process quality includes all buyer/seller interaction processes such as: using experience and knowledge in responding to buyer requests; furnishing information; processing orders and invoices in a timely fashion; resolving problems and complaints; and collaborating with buyers to pursue mutually-beneficial goals (e.g., assisting buyers in the development of production schedules and inventory control systems related to products supplied by the selling firms). The Linkage axis depicts both technical and human resources that describe how - through what means - organizations interact to enhance the integration of business processes. This axis is a means of describing the nature and number of interfirm linkages used for competitive advantage. Thus, firms can be described as relatively disconnected, using only mail and fax communications, to highly coupled, with electronic data interchange and shared network resources. The Reward axis represents a continuum of what the customer offers of perceived value to its suppliers. Traditionally, this was the payment for products and services rendered. This basic form of Reward has evolved through value-based and variable pricing structures to the sharing of information and risk associated with true strategic partnering and implementation of joint efforts. An example of a higher level of Reward would be customer providing specific information regarding production schedules or materials specifications to assist a supplier's strategic planning and management efforts. …