Objective 1: Supply Continuity
Purchasing must perform a number of activities to satisfy the operational requirements of internal customers, which is the traditional role of the purchasing function. More often than not, purchasing supports the needs of operations through the purchase of services, raw materials, components, subassemblies, and repair and maintenance items. Purchasing may also support the requirements of physical distribution centers responsible for storing and delivering replacement parts or finished products to end customers. Purchasing also supports engineering and technical groups (such as IT), particularly during new-product/service development and outsourcing of key processes.
With the dramatic increase in outsourcing, enterprises are relying increasingly on external suppliers to provide not just materials and products, but information technology, services, and design activities as well. As a greater proportion of the responsibility for managing key business processes shifts to suppliers, purchasing must support this strategy by providing an uninterrupted flow of high-quality goods and services that internal customers require. Supporting this flow requires purchasing to do the following:
- Source products and services at the right price. 2
Source them from the right source.
Source them at the right specification that meets users’ needs.
Source them in the right quantity.
Arrange for delivery/service performance at the right time to the right internal customer.
Supply managers must be responsive to the materials and support needs of their internal users (sometimes also called internal customers). Failing to respond to the needs of internal customers will diminish the confidence these users have in purchasing, and they may try to negotiate contracts themselves (a practice known as backdoor buying).