How Executive Procurement Decisions Can Affect Stocks (Cont.)

Companies which are close to their customers, especially those in services, tend to see purchasing as a staff function of marketing. That is why outsourced advertising and communication campaigns are generally left to product managers and the like. This kind of organization helps to grow market shares, but a plethora of inventory types also tends to push up working capital levels. Companies with generous current results may not worry about inefficiencies in purchase processes, and tend to be indulgent towards marketing executives with grand budgets, but investors should be wary of such set-ups because stocks may lose significant values in the process. Every function likes to independent, and purchasing is no exception: should there be places for the purchase people in Board rooms?

Best Practices in Procurement for Protecting Stocks

Backward integration is an extreme form of optimal purchasing organization. Stocks cannot always benefit by entering business lines of suppliers because investors get exposed to unmanageable risks of new segments of economies. A profitable and equitable alternative is to structure the purchase function with adequate strength in an organization to build strategic relationships with key suppliers (Baker, and Saporito, 2007).

A purchase executive should be able to liaise professionally between peers in manufacturing, finance, and customer relations, so that operating margins are kept stable, while customers are not lost at the same time.

Purchase executives should not be so tied up with current operations that they have no roles in strategic planning and new business development processes. Many of the most creative ideas may come from this function since they interact regularly with professionals from diverse industries. Purchase also has a crucial part to play in identify new vendors and helping them meet new product specifications and cost targets.

Baker, H, and Saporito, F, 2007, Saving Procurement from Itself, web site of strategy+business, retrieved October 2007 from: http://www.strategy-business.com/li/leadingideas/li00045.

Wincel, J, 2004, Lean Supply Chain Management A Handbook for Strategic Procurement, Productivity Press

Ukalkar, S, 2000, Strategic Procurement Management for Competitive Advantage, Oxford University Press

Using Spend Analysis to Help Agencies Take a More Strategic Approach to Management, 2004, Report to the Government Affairs, US Senate and the Committee on Government Reform, House of Representatives, United States Accountability Office, DIANE Publishing