Purchasing control, compliance and the box: purchasing management based on hard data

Purchasing management is often approached as a qualitative art. Experience, insight and managerial qualities may indeed make useful contributions. However, in addition to this, the possibilities of an approach based on hard data and figures should not be underestimated. This does not only apply to purchases dealt with by the Purchasing Department, but in particular, also to purchasing activities outside of the Purchasing Department. Correct application of quantitative approaches provides additional insight and contributes to a valuable role of the purchasing function in the entire business process

Revolution through electronic purchasing

Automation is finding its way in the world of purchasing. This development could evoke dramatic effects in the long term, not only on purchasing but even on the market place itself. Nowadays, EDI and CD-ROM are examples of automation applications that purchasing departments use frequently. Internet and other global communication systems are not yet perceived as major added value applications for purchasers. Nevertheless this medium could change purchasing in a revolutionary manner, provided that the information such global media present, is structured in an easily accessible way. At that point major elements of traditional purchasing will be automatically shifted to the end user. As a consequence the marketplace for these products will become completely transparent, creating a new fundamentally different reality. This will allow new competitors to enter and will demand new services to be rendered

Effects of full transparency in supplier selection on subjectivity and bid quality

In this paper, we highlight a number of problems arising with a commonly used supplier selection method: the weighted factor score method. We discuss the behaviour of this method with respect to weighting, scaling issues, and relative scoring. Assuming that there is no convex dominance, we formally prove that with the same supplier selection method, we can make any supplier win by judiciously choosing the right parameters of the awarding mechanism. This means that any supplier can win if certain parameters are not published in a request for a proposal. This result applies to both absolute and relative scoring methods. Also, we prove that the buyer should fully disclose all details of the awarding mechanism to suppliers in order to receive better bids. The practical\ud implications of our results are far reaching for procurement, both public and otherwise: full transparency and disclosure of all details regarding weights and awarding schemes is not only required to avoid subjectivity in supplier selection, but it also leads to better bids from suppliers

Electronic purchasing: determining the optimal roll-out strategy

Electronic purchasing (EP), also known as electronic ordering through catalogs is the most established form of e-procurement nowadays, yet still in its infancy. Theoretically, changing from the "traditional" way of purchasing to EP can lead to huge cost savings. However the implementation (roll-out) of EP including many commodity groups and many departments is a large and costly task. In addition, not much experience on good roll-out strategies is available yet. This paper contributes to the solution of this problem, by presenting a mathematical model for determining the optimal EP roll-out strategy into an organisation based on maximisation of the cost savings. Results from this model suggest that the optimal order of commodity groups and departments for which EP is implemented can contribute considerably to the possible savings that can be realised and is therefore an important factor for a successful implementation strategy of EP

Supplier selection requires full transparency

In this paper, we highlight a number of problems arising with a commonly used supplier selection method: the weighted factor score method. We discuss the behavior of this method with respect to weighting, scaling issues, and relative scoring. Assuming that there is no convex dominance, we formally prove that with the same supplier selection method, we can make any supplier win by judiciously choosing the right parameters of the awarding mechanism. This means that any supplier can win if certain parameters are not published in a request for a proposal. This result applies to both absolute and relative scoring methods. Also, we show that the buyer should fully disclose all details of the awarding mechanism to suppliers in order to get better bids. The practical implications of our results are far reaching for (public) procurement: full transparency and disclosure of all details of weights and awarding schemes is not only required to avoid subjectivity in supplier selection, but it also leads to better bids from suppliers

Implications of a classification of forms of cooperative purchasing

Our main objective is to classify different forms of cooperative purchasing, i.e. purchasing groups. Based on a literature review, empirical findings, and new institutional economics we employ a classification: the highway matrix. In this matrix we distinguish five forms of cooperative purchasing according to the ‘influence by all members on the group activities’ and the ‘number of different group activities’. The classification can serve as a guideline for (potential) purchasing groups when a suitable form needs to be chosen. Managerial implications of a classification include an emphasis on differences in organisational structure and critical factors. Research implications include an emphasis on the importance of using a classification, as different forms of cooperative purchasing imply different models and mechanisms

Possible kinds of values added by the purchasing department

Value-based purchasing focuses the decisions of purchasing professionals on the creation of value, rather than on the traditional objectives of cost savings and efficiency. Most of the purchasing researchers see purchasing as a strategic contributor to the added value of the organizations. But only a few contributions discuss the possible kinds of values that the purchasing department could actually add to the organization. This paper tries to fill this gap and reviews the traditional and strategic concepts of values added by purchasing and the factors affecting value added. Furthermore the paper presents a conceptual model of factors affecting value added by the purchasing department. In order to discover the influence of these factors on the capacity of the purchasing department to add value to the organization, we conducted an empirical study. The preliminary findings of the empirical research are presented at the end of the paper

How to Solve an Allocation Problem?

Game theory proposes several allocation solutions: we know (a) fairness properties, (b) how to develop (c) methods building on these properties, and (d) how to calculate (e) allocations. We also know how to influence the perceived fairness and realization of allocation solutions. However, we cannot explain properly that theoretically fair allocation methods are rarely used.\ud To obtain more insight into these issues we solved an allocation problem in a purchasing cooperative case study by confronting theory with perceptions. We find large theoretical and perception differences and inconsistencies between and within the five steps from a to e. We note that theoretically fair methods tend to be more complex than theoretically unfair methods. In addition, the allocations of some simple methods are perceived fairer than the allocations of complex methods in our case study. To improve theoretical solutions the focus should be on a and c. To influence perceptions the focus should be on b, c, and d. Finally, all five steps are modeled into comparable fairness measures and a general model. Using this model implies that both theory and perceptions are considered in solving allocation problems

Buying bundles: the effects of bundle attributes on the value of bundling

We consider the situation in which a buyer has to find the optimal degree of bundling for buying goods and services. From a review of the literature we develop attributes associated with bundling. Each of these attributes has an effect on the value of a bundle. Combined, the attributes determine the value of a bundle. We describe how the various attributes of a bundle contribute to the value of a bundle given the context of the buying situation. Based on interviews, a further analysis of bundle attributes and their effects on the bundle value is provided. The results of this analysis can be used to assist in finding the optimal degree of bundling