Academic journal article Journal of Managerial Issues

Looking at Purchasing Development through the Lens of Small Business

Academic journal article Journal of Managerial Issues

Looking at Purchasing Development through the Lens of Small Business

Article excerpt

Buyer-supplier relationships can vary between organizations. In some organizations buyer-supplier relationships are predominately short-term and arms-length in nature. But in other organizations, buyer-supplier relationships have evolved to a more strategic level and primarily consist of long-term cooperative relationships. In such cases, it is difficult to determine where supplier activity and responsibility ends and buyer activity and responsibility begins (Khoja et at., 2010). As organizations progress strategically, I suppliers are no longer viewed as low cost sources of goods and services but as assets that can enhance the capabilities of the buying organization. The integration of key suppliers into the supply chain requires the formation of long-term, customized, partnering arrangements with suppliers (Anderson and Katz, 1998). To distinguish process of transformation from state of transformation, "purchasing development" is defined as the process of transitioning from short-term or opportunistic purchasing approaches to more strategic approaches, and "purchasing maturity" is defined as the level or level to which a firm has progressed in its purchasing development.

While there has been significant research on purchasing development and purchasing maturity in large firms and in businesses in general (for example, Ganesan, 1994; Jap, 1999), until recently, not much research has been directed at small business (Paik et ai, 2009; Paik, 2011). Practitioners and researchers often assume that purchasing processes and approaches that predominate in large organizations are also appropriate for, and used by, smaller organizations (Gibb, 2000). In many large organizations purchasing processes are often well developed, and levels of purchasing maturity are well defined and long-standing. But this may not be true for small businesses. Purchasing processes in the latter may simply not be as well-developed because the firms are smaller and therefore lack specialized organizational resources (Quayle, 2003; Ramsey, 2001). For example, small business organizations often lack purchasing power or the ability to influence suppliers to engage in strategic partnerships due to relatively small purchasing volumes, and they often lack the necessary internal resources, such as executive time and expertise. In particular, potentially informal management structures and lack of formal strategic processes in small businesses could imply a relatively ad-hoc approach to, for example, supplier relationship development, strategic thinking and planning, and use of technology as applied to purchasing among other disciplines. The uncertainty of how purchasing processes in small businesses develop and the apparent lack of research in this area provide an important opportunity to address the following research questions:

(1) Does the process of purchasing development, as it transforms from a transactional, short-term outlook function to one that is more strategic and long-term differ from that of large businesses?

(2) Are there identifiable levels or levels of purchasing development in small business and, if so, do they differ from those of large businesses?

(3) What are the implications of these issues for small businesses?

As will be discussed in this paper, most existing purchasing development and maturity research posit a purchasing development model that contains four levels or levels of purchasing maturity. This model, as developed in the literature, has been based primarily on purchasing in large enterprises. The focus in this study is to examine the development of the purchasing function in small businesses, compare that to the existing literature, and recommend a model for how purchasing develops and matures in small businesses. Therefore, the empirical data on which this research is based is obtained only from small businesses. Using a survey consisting of Likert-scale questions derived primarily from four well-established conceptual models of purchasing maturity in large businesses, a principal component analysis is performed to identify the key elements of purchasing development in small businesses. …

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