Nature of embbedded purchasing
activities within SMEs
Geoffrey Hagelaar, Anne Staal, Richard Holman, Gert Walhof
Competitive Paper (131) for the 24rd Annual IPSERA Conference
Amsterdam – March-April 2015
This presentation
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About this paper
Theory: SMEs and purchasing within SMEs
Theory: Transaction Costs and Resource-based View
Framework for purchasing oriented patterns (POPs)
Research methodology
Case study design Case study findings - purchasing oriented patterns
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POP1
POP2
POP3
POP4
 Conclusions
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Embedded in three years research
Yr 1
Yr 3
Yr 3
programme Yr 2
Determine
external &
organisational
variables in
purchasing
coordination
* Discover
patterns in
purchasing
activities and
label these as
governance types
Identify points in
the purchasing
patterns to
support
governance
Induce contextbased
management
instruments for
a governance
type
Test & validate
management
instruments
• Build draft
context-bound
management
instruments
• Intended
improvements
of activities in a
Governance
Type
• Improve
purchasing &
SME
performance
About this paper:
Setting with a purchasing function which is practically interwoven, merely unexplored
for its applications, and less researched.
Practice-oriented scientific research:
Research topic originates from and results in added-value for industry practice
based on theoretical underpinning and sound methodology
System approach:
To get insight into practice: conceptual model should reflect practice orientation
Relevant broader context of research topic is explicitly part of conceptual model
Results in:
Added-value for industry: evidence-based purchasing instruments
Added-value for science: insight in and explaining of governance of purchasing
and support of that governance within SMEs
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Theoretical preparation: how to recognize and classify purchasing activities
SME organizational characteristics
Integral organization, functions interwoven, upstream and downstream
dependency (e.g. Ellegaard, Morrissey)
Purchasing-oriented activities
The purchasing oriented activities are embedded from sales to supply
Purchasing Oriented Patterns
Organized collection of activities for realising the value proposition up to the
activities towards the supplier
Abstraction reflecting company’s activities from customer to supplier from the
perspective of purchasing
Recognizing the role of purchasing during those company activities
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Governance structure
 For managing purchasing activities (Rozemeijer, Van Weele, 2007)
 Governance structure is a structure in which different parts of the
company operate and act as one
Identification of two complementary theories
 Transaction-cost theory (TCT) and Resource Based View (RBV)
 Both give insight into the level of integration within a company and
between company and e.g. supplier
 TCT focusses on the costs of transactions; RBV on the added value
of resources
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Major factors within selected theories
 TCT: recognized in literature as predominant (Adams 2005; Hoffman 2011;
Noordewier, ...., Brewer, 2014): level of asset specificity
 RBV: key is gaining added-value via purchasing resources (Barney1991,
2001, 2012): level of the resource position
Defining
 Level of asset specificity: the extend to which a FC needs specific
investments in his supplier to realize value proposition (low-high)
 Level of resource position: the extend to which a FC needs precious (VRIN valuable, rare, non-imitable, non-substituble) resources from supplier to realize the
value proposition (weak-strong)
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Framework identification of POPs
High
level of
asset
specificity
Low
Crossfunctional
purchasing
Coordinated
purchasing
Negotiated
purchasing
Serve the
value
proposition
Weak
Strong
level of resource position
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Research Methodology
Deductive theory approach
Theoretical frame for identifying POPs in reality
Inductive grounded theory
Increase insight in how POPs are managed in practice
Case studies
11 SMEs based in the Northern part of the Netherlands
Data gathering
Stepwise approach via process mapping, building a flow chart (operational
activities, involved parties, managerial activities) (Jacka et al., 2011)
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Inkoopproces FlevoICT
Case study design
Describing 10 Focal Companies
from the purchasing perspective
Scope: the goods and services to be purchased
are essential for the FC final product or service offering.
Selection: based on Treacy & Wiersema (1997)
business proposition.
Process mapping
From customer to supplier – who does what
Purchasing process
1
Contact
klant
2
Inventariseren
wensen klant
3
Verwerken tot
offerte
4
Controle van offerte
5
Offerte opsturen
naar klant
6
Order Bevestiging
van klant
7
Bestellen van
onderdelen
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Afspraak met klant
over installatie
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Installatie bij klant
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Nazorg eerste week
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Facturering
12
Eventuele
storingen/vragen
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Case study findings: empirical details on theoretically derived POPs
Purchasing-oriented patterns
based on description from literature and our research :
1. Customer value: Operational Excellence (OE); Product Leadership (PL); Customer Intimacy
(CI)
2. Chain activities: alone or in collaboration, standard or extra requirements
3. Classify purchasing-oriented activity
Value chain purchasingoriented activities
Realised
customer value
Driver business model
Value chain
organisation
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Pattern 1: serve the value proposition
Seamless chain – checklist ordering
Supplier of
standard
commodities
FC
design
product
assemble
product
Realise customer value
OE
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POP
characteristics
FC: ICT turn-key company
VP
ICT Design and assembly of offices at a high quality level and at a
reasonable price
party added
value
FC: designs and assembles
Added value
supplier
Standard ICT software and hardware
Internal
integration
Low; ICT designers design on the bases of the regular offerings of
suppliers
Internal
coordination
Standardization: checklist standard soft- and hardware
External
integration
Low: general market conditions for ordering commodities
External
coordination
Standardization: use checklist on the website of the supplier
VP in terms BM
Operational excellence: standardization in commodities, low transaction
costs internally and externally
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Pattern 2: Negotiated purchasing
Threshold purchasing – exhaustive purchasing
Specific requirements
delivery
Supplier of
standard
commodities
Specific product
requirements
FC
design
product
assemble
product
Realise customer value
OE-plus or PL
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POP
characteristics
FC: horse shoes manufacturer
VP
Standard horse shoes assortment at reasonable prices in a competitive
environment
FC: manufactures and delivers to equestrian (horse) sector
Party added
value
Added value
supplier
Internal
integration
Standard quality iron, reliable delivery
Higher: internal exchange between marketing, production, procurement to
be able to order right amount
Internal
coordination
External
integration
External
coordination
Mutual adjustment
VP in terms BM
Operational excellence plus: price is negotiated for (periodic) reduction and
stability; low transaction costs because of ordering within contour of
agreement
Lower: agreement on price for a longer time
Mutual adjustment on the bases of negotiation; standardization
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Pattern 3: coordinated purchasing
Matching chain – checklist purchasing
Specific
requirements
delivery
Supplier of
standard
commodities &
know-how
and skills
Realise customer value
PL or PL excellence
Supplier + FC
design
product
assemble
product
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POP
characteristics
FC: IT innovation-driven company
VP
Developing innovative software made applicable for practical usage at a
reasonable price
FC + supplier: developing the overall product in cooperation
party added
value
Added value
supplier
Delivering applicable solutions on the bases of regular soft- and hardware,
to enable the companies’ innovative software function in practice
Internal
integration
High: internal exchange between marketing, production, procurement to
be able to develop software and relate to the supplier
Internal
coordination
External
integration
External
coordination
Professional knowledge exchange
VP in terms BM
Product leadership: joint development of innovative IT equipment
High: external exchange matching regular soft- and hardware to
innovative FC’s software
Professional knowledge exchange
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Pattern 4: cross-functional purchasing
Adaptive chain – dedicated purchasing
Specific
requirements
delivery
Supplier
know-how
and skills
Realise customer value
CI or CI excellence
Supplier + FC
design
product
assemble
product
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POP
characteristics
VP
Party added
value
Added value
supplier
Internal
integration
FC: designer and manufacturer of trailers
Designing and manufacturing custom-made trailers for specific
requirements of customers
FC + supplier: developing the overall product in cooperation
Designing and manufacturing axles which align to the specific requirements
of the customer
High: internal exchange between marketing, production, procurement to be
able to develop software and relate to the supplier
Internal
coordination
External
integration
External
coordination
Professional knowledge exchange
VP in terms BM
CI: custom-made trailer for specific customers’ requirements
High: external exchange matching regular soft- and hardware to specifically
customized trailer
Professional knowledge exchange
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Conclusions from the purchasing-oriented patterns
1. Purchasing role varies: ordering, specifying, supporting cooperation
2. Purchasing responsible: engineer, owner, sales-rep, additional purchasing task
3. Cost minimalisation: standard (products / delivery), stability with suppliers, low
purchasing specialisation, low degree of coordination
4. Customer value: focal company realises customer value alone, or with supplier
5. Supplier role: supplier influences design of product / service, and the delivery
conditions of purchased goods.
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General conclusions
1. The purchasing-oriented activities are determined by:
a) The specific business model
b) The governance (internal & external organisation)
c) The value of products and processes versus the customer value
2. We need more research
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? Any suggestions ?
! Thank you !
? Interested in this SME research ?
! We need more experts for our Delphi study !
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