Describe the main differences between a traditional procurement approach and supply chain management approach to buying (25 points)

Describe the main differences between a traditional procurement approach and supply chain management approach to buying (25 points)

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Answer: The question is asking you to explain the following:

With this type of question you would be expected to discuss 3- 5 differences, giving examples. Example Essay Structure

Introduction C explain what is meant by ‘procurement’ and ‘SCM’ C procurement is the traditional way and is to do with purchasing goods, SCM is the new way which is a more multifaceted way of securing goods and is the result of longer, more complex and more globalised supply chains.

Paragraph 1 C the objectives of each approach (5 Rights vs added value) Paragraph 2 C the approach (reactive buying vs proactive ordering) Paragraph 3 – the way of working (silo working vs cross-functional working) Paragraph 4 C the relationships with suppliers (transactional vs collaborative)

Conclusion C There are many differences between the two approaches, and different companies may favour one over the other depending on their specific circumstances. E.g. small organisations that make low value and low risk purchases may take a traditional procurement approach and large multi- national organisations may require a SRM approach due to the volume of suppliers and com-plexities of the supply chains.

Example essay:

Procurement and Supply Chain Management (SCM) represent two distinct approaches to acquiring goods, reflecting the evolution of purchasing practices. Procurement, the traditional method, in- volves the straightforward purchase of goods. In contrast, SCM is a more intricate approach, born out of longer, more complex, and globalized supply chains. This essay explores the main differences between these two approaches, highlighting their objectives, methods, ways of working, and suppli- er relationships.

In the traditional procurement approach, the focus is on achieving the "5 Rights" C getting the right goods, in the right quantity, at the right quality, for the right price, and at the right time. This en- sures efficiency in the purchasing process. On the other hand, SCM goes beyond these basic objec- tives, aiming to add value to the entire supply chain. This might involve developing strategic rela- tionships with suppliers, ensuring sustainability, and aligning with broader organizational goals. For example, a company employing a traditional procurement approach might emphasize getting the lowest price, while an SCM approach could involve working with suppliers to enhance product in- novation or reduce environmental impact.

Secondly, the traditional procurement approach is often reactive, responding to immediate needs or demands. Companies using this method typically make purchases as required, without a long-term strategy. In contrast, SCM involves proactive ordering, anticipating future needs and trends. For instance, a company employing SCM might engage in demand forecasting, allowing for better plan- ning and inventory management. This proactive approach helps prevent stockouts, reduce costs, and enhance overall supply chain efficiency.

Moreover, traditional procurement often involves silo working, where different departments operate independently. The procurement team may not collaborate closely with other departments like pro- duction or marketing. In SCM, there’s an emphasis on cross-functional working, breaking down de- partmental barriers for a more integrated approach. For example, an SCM team might work closely with production to ensure materials are aligned with manufacturing schedules, fostering efficiency and minimizing disruptions.

Lastly, in traditional procurement, the relationship with suppliers is transactional C focused solely on the exchange of goods for money. Conversely, SCM promotes collaborative relationships, emphasiz- ing long-term partnerships. A company using SCM might work closely with suppliers to improve processes, share information, and jointly address challenges. For instance, an SCM approach might involve collaborating with suppliers to implement just-in-time inventory systems, leading to cost savings and improved responsiveness.

In conclusion, the differences between traditional procurement and SCM are substantial and nu- anced. While a traditional procurement approach may suit smaller organizations with low-value and low-risk purchases, larger multinational companies with complex supply chains often find SCM more suitable. Understanding these differences allows companies to tailor their approach based on their unique circumstances, emphasizing the importance of flexibility and strategic alignment with organizational goals in the ever-evolving landscape of buying and supply chain management.

Tutor Notes

-This question is taken from learning outcome 1.1.1 (p2 onwards). The new study guide has drasti- cally simplified the information on this topic compared to the old syllabus (the table above comes from the old syllabus). This may be good news for students in that you don’t need to know as much, but I do wonder if the study guide gives students enough ‘content’ to write an essay on the subject.

-If a question is to come up from LO 1.1 it would be likely be something like: definitions and dif- ferences between procurement and SCM, difference between a supply chain and a supply network, elements of SCM, or how to add value in the supply chain.