Free Essay: Digitalization of the Purchase and Supply Management

For effective and efficient results in any facility, the purchase and supply management should evolve from the tradition linear system of connection of a purchase manager and supplier to an interconnected system of various parties that enhance the performance of an organization (Foerstl, Schleper, & Henke, 2017). Currently, the purchase and supply system should progressively change into a multidisciplinary field that intends to meet the timely challenges that affect an enterprise. It's here where scholars and research advocate for top managers to go for digitalization as an external link that would aid in the enhancement of the effectiveness of supply chain management system (Foerstl et al., 2017). With digitalization, the supply and purchase management places an enterprise in the best position against the competition and economic dynamics of the market environment. For sure, the digitalization of the purchase and supply chain will boost the connectedness of the managers, suppliers, and the consumer base.

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According to Carnovale, Yeniyurt, and Rogers (2017), the purchase and the supply chain is a system of connectedness and networking which suits best the market economy where all parties have mutual power between the purchase manager and supplier (67). However, most firms tend to hold more power as they have absolute control over their suppliers. Such a notion prevents them from enjoying the benefits of connectedness and networking; there is a degree of uncertainty among the parties in formulating new partnerships. But with digitalized platforms for communication between the supplier and the firm, the enterprise is assured of mutual working relation, which according to the networks theory aids in the yielding beneficial outcomes for individuals and groups (Foerstl et al., 2017). The connectedness helps in the understanding of the market dynamics such that the supplier, logistics manager, manufacturer, and marketing managers can reach a consensus. The digitalization provides a platform from where the parties interact and build the relationships.

With the digitalization of purchase and supply chain, firms are enabling enormous opportunities for integration of the internal functions and external supply chain functions (Foerstl et al., 2017). Here, the internal function becomes more transparent while the external function remains dynamic and complex. Such creates the interdependency of the internal function of a firm such as the manufacturing, stockpiling, logistics, and finance which eventually leads to an informed decision marking on the purchase and supply management. Equally, with digitalization, the firms will achieve the inter-firm relationship from where an enterprise can establish a loophole of gaining more market power as an added advantage over other enterprises (Foerstl et al., 2017). Therefore, the future needs of the purchase and supply chain in an enterprise need a common point of knowledge sharing that will be a reference point for all departments before a conclusion occurs with any department.

Currently, firms need to go beyond the horizon of the traditional purchase and supply chain management by amalgamating the manufactured product and the financial flow within the supply chain partners. According to Foerstl et al. (2017), the integration of purchase and supply functions with treasury/finance as well as involving external suppliers is essential (225). Such initiatives are beneficial; they support the short-term work capital optimization as such leveraging the financial credits among suppliers and enhance long-term lending programs to suppliers to improve their services to the firm. To fully achieve the above benefits, the evolved demand and supply management requires an IT technique, the cloud computing or the blockchain technique. Specifically, the blockchain technique offers a reliable, transparent, and accountable public registry for accounts that's readily available for review among partners. As such, the blockchain gives room to store entities, property rights and agreements, invoices, and receipts. The digitalization will ensure that the materials, financial statements, work records, and agreements are traced and identified without necessarily going to account books and files. In the end, the digitalization of the purchase and supply chain enhances the confidence and trust among parties at agreement.

The challenge in the integration of a digital platform in the supply chain networks lies in the organizational culture and structure. The structure and culture of an organization are hindrances since they prevent the top management from seeing the benefits of a digital platform as an advantage but rather as a loss that requires additional cost to implement and maintain (Foerstl et al., 2017). For traditional purchase managers, the digital system incorporation has a cost, and it depends on the vulnerability of the supplier. Therefore, the supply chain management gets perceived as a zero-sum game that lacks subsequent benefits apart from supplying goods to the firm. The perspective gives more power to firms over their suppliers, and it is high time a third-party, a digital platform is created to balance the power and bring the social difference in the reduction of the transaction cost. In the end, firms should put an effort towards digitalization of purchase and supply management to boost the benefits gained from power-sharing between the firm and the supplier.

In conclusion, purchase and supply management needs to evolve to meet the needs and trends of the current market. A firm's supply chain management should be non-linear such that departments in an organization such the manufacturing, marketing, supply, logistics, and purchase are included and amalgamated. A digital platform holds the best solution to conjoin the departments such that procurement and supply become critical in enhancing the benefits for both the firm and the supplier. As seen from the paper, digitalization will aid in improving connectedness and networking to help the firm to suit the market economy, and boost the internal functions of the firm.

References

Carnovale, S., Yeniyurt, S., & Rogers, D. (2017). Network connectedness in vertical and horizontal manufacturing joint venture formations: A power perspective. Journal Of Purchasing And Supply Management, 23(2), 67-81. doi: 10.1016/j.pursup.2017.01.005

Foerstl, K., Schleper, M., & Henke, M. (2017). Purchasing and supply management: From efficiency to effectiveness in an integrated supply chain. Journal Of Purchasing And Supply Management, 23(4), 223-228. doi: 10.1016/j.pursup.2017.08.004