THE TRADITIONAL PURCHASING PROCESS

The traditional purchasing process involved several stepsrequisition, soliciting bids, purchase order, shipping advice, invoice, and paymentthat have come to be increasingly regarded as unacceptably slow, expensive, and labor intensive. Each transaction generated its own paper trail, and the same process had to be followed whether the item being purchased was a box of paper clips or a new bulldozer.

In this traditional model, purchasing was seen as essentially a clerical function. It was focused on getting the right quantity and quality of goods to the right place at the right time at a decent cost. The typical buyer was a shrewd negotiator whose primary responsibility was to obtain the best possible price from suppliers and ensure that minimum quality standards were met. Instead of using one supplier, the purchaser would usually take a divide-and-conquer approach to purchasingbuying small amounts from many suppliers and playing one against the other to gain price concessions. Purchasing simply was not considered to be a high-profile or career fast-track positionwhen surveys were taken of organizational stature, purchasing routinely rated in the lowest quartile.

That attitude has changed in recent years, in part because of highly publicized cases wherein companies have achieved stunning bottom-line gains through revamped purchasing processes. In addition, increased competition on both the domestic and global levels has led many companies to recognize that purchasing can actually have important strategic functions. As a result, new strategies are being used in purchasing departments at companies of all sizes.

Analysts observe that in this new purchasing environment, a guideline known as the total cost of ownership (TCO) has come to be a paramount concern in purchasing decisions. Instead of buying the good or service that has the lowest price, the buyer instead weighs a series of additional factors when determining what the true cost of the good or service is to his or her company. TCO calls for closer attention to what else should be counted in addition to price. Categories include freight, warranty requirements, financing costs, tooling requirements, storage/inventory costs, disposal costs, and the likebut netting out scrap values.

Question:

Critically examine the managerial activities involved in the purchasing process.

Answer should be between 2500 3000 words