The Evolution Of The Purchasing Function

It is commonly held in the purchasing related literature that the supply function must be strategic to benefit the overall firm performance. Sourcing strategies should be formulated in accordance to the corporate-level goals. In addition, purchasers should work more closely with vendors to seek mutual benefits from effective partnership relations, to ensure supplies in the future and pursue collaborative innovation.On the other hand, the actual macro-economic trends force the integration of the buying department with the other functions and companies along the supply chain. In fact, the increasing level of globalization and competition profoundly affects the decision making process, forcing the firm to achieve competitive advantages in terms of saving, innovation, speed and sustainability.Both the theory related to purchasing and the actual macro-economic conditions require the buying function to be strategic. However, a profound gap still exists between theory and practice, especially referring to the Italian situation. This study seeks to address this gap, aiming to understand whether the purchasing functions of medium-large Italian firms are truly strategic.The research compares the perspective of both Chief Executive Officers (CEOs) and Chief Purchasing Officers (CPOs) of medium-large Italian firms. The research framework is developed to study the market in which Italian firms operate, the importance of purchasing, the purchasing’s role and its organization. In addition, four specific industries were taken into account to study the evolution of purchasing.The analysis is descriptive. Data were collected through a survey, which identifies the trends affecting the market in which firms operate, the role achieved by the purchasing function and its organizational structure. Furthermore, several interviews were made to study the evolutionary path of the supply function in specific sectors (financial sector, fashion, food and beverage and automotive industries).The results show that the purchasing function still needs to evolve and grow, reaching a strategic position within the firm. In fact, from the research emerges that the role of purchasing varies across different industries. For example, in the fashion industry and in the banking system, the supply function performs mainly operational activities, while in industries such as automotive and food and beverage, the supply department has the responsibility to establish long-term partnerships with vendors, pursue innovation and make processes more efficient.To face the change and sustain the purchasing evolution, Chief Purchasing Officers still need to demonstrate the value added of the supply function to the internal client by aligning functional tactics with the company overall strategy. Chief Purchasing Officers should sponsor themselves and their activities, spending time with the internal clients and showing purchasing contribution to the success of their processes. Chief Purchasing Officers should become the engines of the purchasing evolution, defining their role as company value providers and sustainable advantage creators.On the other hand, Chief Executive Officers should continue to support purchasing in achieving its strategic goals. From the study emerges that, fortunately, today more that yesterday Chief Executive Officers understand the relevance of purchasing, sustaining its transitional process and giving incentives to lower cross-functional conflicts. However, Chief Executive Officers should take into account all the different aspects that characterize supply management. Of those, the most relevant are economics, financials, services, time, quality, sustainability, risk and people. Chief Executive Officers should be focused not only on savings but also on the total cost of ownership (taking into account also the internal costs) to make the supply function oriented to the business and aligned to the overall strategy.