Purchasing more than just cost savings

“Most companies spend more than half of their sales turnover on purchased parts and services, efficient and constructive relationships with suppliers are key to the company´s short-term financial results and long-term competitive position” (Van Weele, 2018).

Purchasing is always about money. Understanding a concept like total cost of ownership (TCO) is crucial. Using an iceberg metaphor, purchase price is only the tip of an iceberg and often the hidden costs under the water are forgotten. These hidden costs could be e.g., logistics and transportation, quality, or R&D related costs. We can only imagine what happens to our profit margins if TCO is not understood.

Purchasing is always more than just cost savings. It is about adding value and being more competitive. Being competitive means understanding the market position and understanding one’s operations capabilities (Greasley 2018). It is about finding ways together with internal and external stakeholders to win in the markets. In a best-case scenario, purchasing is in the middle helping a company and its suppliers to succeed and win the deals.

Couple of weeks ago I interviewed my colleague Sanna Nieminen who has an extensive background in purchasing education. She has educated tens of companies, hundreds of students and has written a book about purchasing (Hyvä hankinta – parempi bisnes). After all these years Sanna shows never ending enthusiasm towards purchasing. When I asked how it is possible to stay motivated and inspired about the topic, she immediately answered “potential to develop”. As she described, purchasing has changed from a purely operational function to a more strategic partner for the whole company and its stakeholders. As Sanna said, usually companies have already thought about the cost management side but have not thought about the added value purchasing could bring for the company. That is something we are focusing on our education.

What is purchasing then about? We explain purchasing through a process with 6 steps from defining ”what we want” to ensuring ”we get what we want”. These include strategic steps from defining specifications and selecting supplier to managing contract negotiations. Operative purchasing is then about placing the orders, doing follow-up and evaluating the process at the end. All these steps provide opportunities for purchasing to add value for a company.

Since JAMK introduced its first purchasing online course in 2006 the need for purchasing education has steadily increased. Currently we provide purchasing related courses for bachelor and master level students (in English and Finnish) both in classroom and online. We have also a bachelor´s degree programme in “Purchasing and Logistics Engineering” that is conducted in English.  On top of these we provide tailored education packages for companies and purchasing studies through JAMK Open University of Applied Sciences (e.g., Hankintaosaajat).

Purchasing education is all about increasing individuals´ competencies and through that increasing the competitiveness of the business (Nieminen 2020).

 

References:

Greasley, A. 2013. Operations management. 3rd ed. Chichester: Wiley.

Nieminen, S. 2020. Interview.

Weele, A. J. v. 2018. Purchasing and supply chain management. Seventh edition. Andover: Cengage Learning.