Differences Between Traditional and Modern Purchasing Management

Today, with the globalization of competition and the increase in sector-independent costs, it has become very difficult for businesses to maintain their existence and grow, which is the main objective. In this context, an effective “Purchasing Management” is more important than ever in the tough competitive conditions of businesses. Because purchasing management has a strategic importance in providing competitive advantage for businesses.

Purchasing management, in its simplest terms, is the process of procuring the required product or service request at the desired time, at the optimum price and from a quality supplier. Purchasing management not only provides businesses with a significant cost advantage, but also provides significant contributions to businesses in terms of quality, timely delivery and stock control of goods and services to be procured.

You can take a look at our article named 3 Indicative Factors That A Procurement Management System Is Successful.
When all these situations are evaluated, the basic approach of the Purchasing Management System has also changed and had to switch from the traditional approach to the modern approach.

So what is this traditional approach? What changes in purchasing processes with the modern approach?

Traditional Purchasing Management Systems Modern Purchasing Management Systems
Purchasing process is a tactical issue. Purchasing process is a strategic issue.
Price is the main factor in the purchase decision Quality is the main factor in the purchasing decision.
The initial-final price is important. Life cycle costs are significant.
Quality is conformance to specifications. Quality has a much broader definition.
Purchasing is the cost center. Purchasing is the profit/expense center.
Errors are accepted.  Zero error is determined.
Quality is static. Quality is constantly improved in the organization and with the supplier.
The supplier is selected. The supplier is constantly monitored and evaluated.
Delivery can happen anytime. Delivery is carried out at the desired point on time.
A large number of suppliers make up the products. Preferably a single supplier creates products.
Products are simple. Products are complex.

                                                                                                                                                                                                                                                                       Source: Erdal, Murat, www.meslekiyeterlilik.com, Date of access: 09.12.2012

As can be seen from the table; In the traditional purchasing approach, it is thought that the company’s profit rate will be increased by providing the necessary consumables for the company in the cheapest way. According to this thought in the traditional approach, purchasing is only seen as an accounting approach. In other words, it is important to supply the cheapest of every product purchased. According to this approach, there are continuous bargaining and price reduction efforts with different suppliers within the traditional purchasing function.

Modern purchasing thinking is planned over different parameters compared to traditional purchasing thinking and focuses on profit appropriation from different directions. Competitive price-oriented supplier approach in the traditional thought has changed in the modern view, and it has brought to work with a win-win strategy with fewer suppliers. In the modern approach, since the supplier is a strategic business partner, instead of working with more suppliers, it is possible to work with fewer companies with open account negotiations when necessary.

Instead of working with more suppliers that will provide price advantage with short-term agreements in a modern understanding, it has turned into a strategic partnership that takes into account quality and performance characteristics rather than price, by giving importance to the profit of both parties with longer-term agreements. Instead of companies that do not care about the supplier, a more profitable understanding develops by developing their suppliers. (Filiz, 2008:126)

One of our solutions, EGPS Global Procurement System  & EGVN Global Vendor Network developed with a modern purchasing approach, offers end-to-end Purchasing and Supplier Network management by working in integration with each other.

EGPS Global Procurement System and EGVN Global Vendor Network with its user-friendly interface, provides end users with an easy-to-understand flow created similar to the practical nature of the construction industry, while providing better management of their equipment to avoid sudden surprises on the project site.