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Purchasing versus supply chain management
Paul Larson
Supply chain management (SCM) remains a hot topic among purchasing and supply professionals. In business, government and academia, jobs and departments traditionally labeled as "purchasing" are being re-invented with the SCM label. Industry associations are altering and renaming their programs to reflect the trend.
But really, the frenzy to rename purchasing as SCM clouds the nature and scope of the profession. While there’s clearly a close relationship between purchasing and SCM, the nature of that relationship isn’t as obvious. Delving deeper, there are four different perspectives on the relationship between purchasing and SCM:
1) The traditionalist. To the traditionalist, SCM is a function within purchasing. It typically has an upstream, supplier-facing focus. "SCM is a procurement tool that…strategically integrates the whole procurement process," wrote Ronnie LaCourse Korosec, in an article for Public Performance & Management Review in 2003.
2) The re-labeler. With this perspective, managers simply change the name of purchasing to supply chain management. They issue new business cards, but there's little to no change in the job description. Purchasing managers are all of a sudden referred to as supply chain managers. But the idea actually narrows the scope of SCM, since most its focus is still purchasing.
3) The unionist. From the unionist perspective, purchasing is just one of several SCM components. "No one denies that logistics is part of a supply chain, but so is purchasing and operations management," said Bud La Londe in Supply Chain Management Review in 2004.
The Supply Chain Operations Reference (SCOR) model offers a framework to implement the unionist viewpoint. The SCOR model is both broad (multifunctional) and deep (spanning strategic and tactical elements of SCM). The five distinct management processes of SCOR—plan, source, make, deliver and return—cover purchasing, inbound and outbound logistics, and production/operations.
Some pundits, such as John Mentzer, propose a broader unionist concept, suggesting "all the traditional business functions should be included" in SCM. Their approach includes the following nine business functions: marketing and sales; research and development; forecasting; production; purchasing; logistics; information systems; finance; and customer service.
4) The intersectionist. Managers with this view consider strategic, integrative elements from several areas (logistics, purchasing, operations and marketing). However, they don't get involved in tactics, such as processing purchase orders.
Intersectionists see SCM as "an independent department that coordinates key functions within the individual organizations and links them into the wider supply chain," wrote Rachel Mason-Jones in Supply Management (2004). In this case, an intersectionist would implement SCM as a staff function, providing internal research and consulting support to the various departments, including purchasing.
The survey says
So how do purchasers in Canada view their role in SCM? In May 2005, a survey was handed out to a group of purchasers at the annual Purchasing Management Association of Canada conference. A total of 131 purchasers turned in completed questionnaires.
Experience of the respondents ranged from less than one year to 45 years, and averaged 17 years. The number of employees at respondents' organizations averaged 4,535 people. During 2004, average total spend for respondents was $658.6 million.
The survey showed the traditionalist perspective is the most popular. It was selected by 34.6 per cent of respondents, who view SCM as but one part of purchasing. The intersectionist view was a close second, at 33.9 per cent, followed by the unionist (19.7 per cent) and re-labeling (11.8 per cent).
What's a buyer to do?
With all the buzz around SCM, organizations are surely considering the idea of discarding the purchasing label in favour of SCM. It's difficult to decide what's best for the organization, and the profession as a whole. But it helps to diligently examine each option.
Of the four perspectives, the traditionalist and re--labeling scenarios are more narrow, since both are limited to a single functional area—purchasing. Unionist and intersectionist are broad perspectives due to their multifunctional nature. From the survey, it appears manufacturing purchasers tend to adopt a broad SCM concept, while government organizations prefer a more narrow approach.
As organizations continue to talk about SCM, purchasing professionals must participate in the discussion. Important suppliers should also be involved. An organization's perspective on purchasing versus SCM has profound implications. The broader an organization’s perspective, the more its purchasing people will need increasing breadth of knowledge and skill.
Paul Larson is a professor and head of the supply chain management department at the University of Manitoba. He is also a member of Purchasing b2b’s advisory board. He may be reached at larson@cc.umanitoba.ca
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