Strategic role of procurement
Today one of the questions at the exam concerning change management was dedicated to some Reck and Long model (1988). It says about turning purchasing into strategic function. Unfortunately, the majority of students and, most bitterly, your humble narrator, preferred to tell about the peculiar features of price formation policy rather than about this fine four-stage model. After having passed the exam I have been reproaching myself for giving my preference to the alternative to the only one (!) question relevant to purchasing to some extent.
Still feeling my guilt, I am filling in this gap. So, Reck and Long model...
As it is known, the main task of purchase executive is following 'the 5 rules' which are: supply of the right product, to the right place corresponding to the right quality , having the right price and in the right time period. Thereat, the price of feedstock and materials might be variating depending on the company from 30% to 60% of the full self-cost. (This is where I support Mrs. Kate Blackman giving these numbers in her book “Supply chain management”) which proves that the impact of purchasing activities on final company results is quite strong. Being the administrative function ( back office), purchasing turns into the part of operational strategy making an impact on strategy goals of a company.
In 1988, Reck and Long proposed a four stage model describing how purchasing turns into strategy tool.
The main point of model is in the pic.1.
Pic. 1. Four stage model of purchasing activity development (source: Reck and Long, 1988)
At the first stage (passive stage) the purchasing office performs mainly administrative function being a back office. At the independent stage it uses the strategy tricks which do not accord with the corporate strategy of an organization by no means. At the supporting stage the purchasing office renders assistance to the corporate strategy of an organization mastering all the necessary strategy techniques. At the integration stage purchasing becomes an indispensable element of the corporate strategy of a company working closely with other functions for bringing this strategy into life.
I am drawing your attention to the fact that this conception bears action- oriented meaning, as it may be used for evaluation of current state of purchasing function of a company, and determining the ways of its further development and improving when it is at one of the previous stages.