Purchasing Management Assignment 1: Literature Review and Orientation

This report provides a comprehensive overview of purchasing management, beginning with a literature review of key concepts such as strategic purchasing, supply chain management, and buying behavior. It explores the role of purchasing, decision-making processes, and the management of business services. The report then shifts focus to a practical application, analyzing the purchasing strategies of Walmart. It examines the importance of purchasing to the business, Walmart's specific practices, future challenges, and the added value of purchasing within the organization. The analysis includes Walmart's strategic sourcing, vendor relationships, and supply chain management, highlighting how these contribute to its competitive advantage. The report draws on various academic sources to support its findings, providing a well-rounded understanding of purchasing management principles and their application in a real-world context.

Purchasing Management Assignment 1

Table of contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Part 1: Literature Review.................................................................................................................3
Part 2: Orientation............................................................................................................................5
Importance of purchasing in business..........................................................................................5
Purchasing at Walmart.................................................................................................................5
Future challenges for purchasing.................................................................................................6
Added value of purchasing to Walmart.......................................................................................6
CONCLUSION................................................................................................................................7
REFRENCES...................................................................................................................................7

INTRODUCTION
MAIN BODY
Part 1: Literature Review
The role of the purchasing power as stated by the Gilboa and Mitchell, 2020, discussed in
the journal that the companies invest more than half of the revenue into purchasing the services
and products. The long term competitiveness of the company can be ensured by the constructive
as well as efficient relationships with the suppliers. The role of the purchasing is divided into two
parts that is strategic purchasing and order function. The purchasing in the company can be
defined as the management of resources that are external in such a way that the knowledge,
capabilities and goods are secured in all the favourable conditions. The procurement in the
company is defined as the activities that are included in the process of products to get to final
destination from the supplier.
Definition of sourcing by Van Den Brink, 2019, is managing the best source of supply on
the worldwide basis through selecting, finding and contracting. Along with this the definition of
the purchasing management is activities that help in aligning the relationships with the suppliers
to the strategies and interest of the business.
The definition of the supply chain management according to the Khan, Haleem and
Khan, 2018 is the management of all the activities that meet the expectations of all the end users
and the activities, knowledge, financial resource and information involved for transformation of
the products and services from raw materials suppliers to component supplier.
According to Kaufmann, Wagner and Carter, 2017, the decision-making in purchasing
and the process of purchasing involves the buying behaviour of the organisation that includes the
professional purchasing, inelastic, fluctuating demand, derived demand, and limited number of
customers, geographical concentration as well as the large order of quantities. The variables that
impact the buying process are strategic importance, degree of risk, purchasing effect on the
existing routines, product characteristics, collection of money involved and role of the
purchasing department. Montague, Gazal and Wiedenbeck, 2019states the aspects of the
purchasing process that consist of the process approach, combining different skills with the
knowledge and expertise and the business expertise. The three types of purchasing situations are
described are new task situation, modified rebuy and straight rebuy. The new buy situation has
totally new products from an unknown supplier and has highly uncertain with the outcomes. The

modified rebuy situation has new products from the known supplier and the outcomes have the
moderate uncertainty. The straight rebuy situation has the known product from the known
supplier and the outcomes are of low uncertainty.
According the Whitelock, 2019, the purchasing management processes primary task is to
purchase the goods and the services in secure time as well as undisturbed availability. The
responsibilities include the reduction of the purchasing related spend, reduction in the risk
exposure of the firm in the terms of the supply market along with the contribution I the
development task by the product and process of innovation. The cost of the risk value is balance
d by improving the value, purchasing the cost reduction and risk management. The development
of the purchasing over the time is indicated by integration of the final stage, organisational status
of the purchasing, management of supplier and relationships with the supplier. The drivers to the
development are company strategy, business context, commitment of the top management,
developed system and functioning of the leadership.
The six stage of purchasing the developmental model by the Hartley, 2017discussed in
the paper are: 1. The transaction orientation serving the factory, 2. Commercial orientation for
the lowest unit price, 3. Co-ordinated purchasing, 4. Internal integration by the cross-functional
purchasing, 5. External integration through the supply-chain management and 6. Value chain
integration.
Den Hertog and Bilderbeek, 2019, said that the increasing the importance of services in
the buying business services is done by increasing the importance of the business services,
improvement possibilities in the role of the purchasing department for building the relation
within the external service suppliers as well as the internal customers and the purchasing is
getting higher on the agenda of the executive officer. The service is the process of the tangible
activities that involve the interaction between the supplier employees and the customer, system
that is offering the solution to the customer solutions and the physical resources. The
classifications of the services based on the organisational activities are provided by the
Drobyazko, 2019, that are: facility service that is cleaning, security and maintenance, financial
services, operational services, human resource services, information as well as communication
technology services; research, development and technical services, healthcare services, catering
services and marketing services.

Part 2: Orientation
Importance of purchasing in business
The acts of buying goods as well as services by Walmart for the operating and
manufacturing products are called purchasing. The 50 to 70% of the total revenue of the
company is used by the purchasing department on the raw materials and services. The focus is on
the purchasing meanwhile the firm is looking for lowering the operating prices. The purchasing
is done carefully by the company as it is able to improve the customer satisfaction. The goal of
Walmart is to provide the customer with the products they want at very low prices. The supply
chain management strategy of the company is highly enhanced as well as structured for
exploiting to get the competitive advantage and earn the leadership position in the market. The
supply chain management of Walmart contributed to the success (Martínez, Galván and Alam,
2017). The company work directly with the manufactures for cutting the cost along with efficient
management of the stores. The ‘Vendor Managed Inventory’ of the Walmart was the chain
initiative that made the manufacturers responsible for the managing the products at the Walmart
warehouse. This helps the company in enabling it to 100% order fulfilment on the merchandise.
Purchasing at Walmart
The Walmart innovate the inventory with the strategic vendor partnership. The company
has practised the strategic sourcing for long to find the products from the suppliers at the best
price and who are able to meet the demands of the company’s needs. After finding the vendors
the company make strategic partnership with the vendors for offering them with the long term as
well as high volume purchases and in exchange the vendors need to sell it on the lowest prices
possible. The company improved the flow of materials supplies along with the lower inventories
by streamlining the supply chain management through constructing the communication as well
as the relationship networks with the suppliers. The network of warehouses, supplier and retail
stores behave as a single firm. Walmart get the success in the purchasing through the
collaboration. The suppliers at the Walmart deliver the product at the distribution centres; the
products are then cross-docked there and then delivered to the Walmart stores (Walton). The
cross-docking helps the company keep the inventory as well as transportation costs down,
eliminates the inefficiencies and reduce the transportation time.

Future challenges for purchasing
The company can have challenges in the future for purchasing due to various reasons like
dark purchasing, strategic procurement and supplier related issues. The dark purchasing can be
defined as the procurement processes that are done outside. This type of spending that is
uncontrolled can lead to be expensive for the business. All the purchased items purchased using
the capital outlay are needed to be justified if the purchased items are not justified by using the
capital outlay results in loos of the revenue and become a challenge for the organisation to
handle. The procurement process of Walmart is strategic as well as collaborative and continuous
to be it as the company realizes benefits of having the strategic procurement in place. It is a
challenge for the company to understand as well as identifying ways for the implementation on
every step in all the functional units in the organisation. The issue with the supplier related issue
can be generated any time and the company have no control over that. The challenge for the
company in the procurement is of supplier management (Legenvre, Henke and Ruile, 2020). It is
always a challenge for identifying the right supplier and to keep track of their performance. It is a
challenge to maintain the stable supply of the products and the process is filled with
complications.
Added value of purchasing to Walmart
The technology in the Walmart is playing the key role in supply chain by serving as the
foundation or the strategy in the supply chain. Walmart is provided with the world’s largest
infrastructure for the information technology that helps the organisation to track the demand,
predict the inventory levels, manage customer relationships, track, create efficient transportation
routes and services response logistics. Walmart was the first organisation for implementing the
use of Universal Product Code that enables to store level information to easily be collected as
well as analysed. The approaches used by Walmart help it to have frequent, informal cooperation
with the stores, less centralised control as well as distribution centres and suppliers (Jindal and
et.al, 2021). The customer’s purchases and demand are tracked by the supply chain that allows
the customers to pull the merchandise to the store shelves through demand instead of the
company pushing the goods on the shelves.

CONCLUSION
REFRENCES
Books and Journals
Den Hertog and Bilderbeek, 2019. The new knowledge infrastructure: the role of technology-
based knowledge-intensive business services in national innovation systems. In Services
and the knowledge-based economy (pp. 222-246). Routledge.
Drobyazko, 2019. Entrepreneurship innovation model for telecommunications
enterprises. Journal of Entrepreneurship Education. 22(2). pp.1-6.
Gilboa and Mitchell, 2020. The role of culture and purchasing power parity in shaping mall-
shoppers’ profiles. Journal of retailing and consumer services. 52. p.101951.
Hartley, 2017. Concurrent engineering: shortening lead times, raising quality, and lowering
costs. Routledge.
Jindal and et.al, 2021. Omnichannel battle between Amazon and Walmart: Is the focus on
delivery the best strategy?. Journal of business research. 122. pp.270-280.
Kaufmann, Wagner and Carter, 2017. Individual modes and patterns of rational and intuitive
decision-making by purchasing managers. Journal of Purchasing and Supply
Management. 23(2). pp.82-93.
Khan, Haleem and Khan, 2018, April. Defining halal supply chain management. In Supply Chain
Forum: An International Journal (Vol. 19, No. 2, pp. 122-131). Taylor & Francis.
Legenvre, Henke and Ruile, 2020. Making sense of the impact of the internet of things on
Purchasing and Supply Management: a tension perspective. Journal of Purchasing and
Supply Management. 26(1). p.100596.
Martínez, Galván and Alam, 2017. Financial Analysis of Retail Business Organization: A Case
of Wal-Mart Stores, Inc. Nile Journal of Business and Economics. 3(5). pp.67-89.
Montague, Gazal and Wiedenbeck, 2019. Social media use in the wood products industry:
Impact on the consumer purchasing process. BioProducts Business, pp.27-40.
Van Den Brink and et.al, 2019. Approaches to responsible sourcing in mineral supply
chains. Resources, Conservation and Recycling. 145. pp.389-398.
Walton, History of Walmart.
Whitelock, 2019. Multidimensional environmental social governance sustainability framework:
Integration, using a purchasing, operations, and supply chain management
context. Sustainable Development. 27(5). pp.923-931.