Procurement and strategy in manufacturing firms

Abstract

The strategic role of the Procurement function in manufacturing firms has received increased attention in the literature over the past two decades. Before the 1970s, the supply environment was seen to be stable for most firms, with no particular strategic opportunities or threats. Procurement was treated as an administrative or service function. The oil crisis in the early 1970s changed the situation, bringing in its wake acute inflation and material shortages. The 1980s saw a revolution in manufacturing with the advent of JIT, increased automation and global operations. Theoretical researchers saw the potential for a proactive and strategic role for the Procurement function. This was, however, not reflected in empirical research, which failed to find consistent evidence of firms considering Procurement as strategic. This thesis addresses the gap between precept and practice evident in the literature. A major criticism of the empirical literature is the treatment of the strategic (value) activities on the supply side and the activities of the Procurement department as synonymous. This thesis questioned that view and made a distinction between the two activities. A theoredcal framework was built up from the literature to identify the contexts in which Supply considerations would be strategic. Propositions were generated which allowed for strategic Supply activities both through the Procurement department as well as outside it. The empirical work looked at 25 UK manufacturing firms through the case study approach. The cases were scrutinised for evidence of strategic activities on the supply side, as well as the strategic importance of the Procurement department. The results confirmed that (1) Supply considerations were strategic for a majority of firms. (2) Strategic consideration of Supply depended on a number of contingent variables.(3) Strategic Supply activities were not necessarily reflected in the strategic importance given to the Procurement department.