PURCHASING AND SUPPLY MANAGEMENT

Özgür SAYIN
UGM SUPPLY CHAIN AND PURCHASING DIRECTOR

Purchasing management is the process that "ensures that the right products and services are supplied at the right quality, in the right quantity, at the right time, at the right costs, and from the right source." A company's competitive advantage in the market is directly related to "how well it implements purchasing management." For effective purchasing to occur, working with suitable suppliers is necessary. Supplier performance evaluation is strategic in increasing a business's competitiveness.

Today, with increasing customer demands and competition, businesses have had to develop competitive strategies that include "quality, cost, and performance elements." Considering these factors, purchasing management is "one of the most important issues" for a business and is directly proportional to its "competitive power."

BUYING CONCEPT

Purchasing "bears the responsibility of activities related to the supply of all kinds of materials, equipment, products and services needed for production" and constitutes the "relationship of material management with the market." However, purchasing also provides the best services that businesses use to meet their own needs. In short, it is the function of obtaining materials, equipment, products, and services for purchasing, supplying, renting, or reselling through other legal means or for use in production.

The main purposes of the purchasing function are "determining the features of the products and services that need to be purchased, determining the most suitable supplier, negotiating with the supplier, placing an order with the agreed supplier, tracking and controlling the order, monitoring and evaluating the purchasing process."

PURCHASING MANAGEMENT

Purchasing management is the process that "ensures that the right products and services are supplied at the right quality, in the right quantity, at the right time, at the right costs, and from the right source." A company's competitive advantage in the market is directly related to "how well it implements purchasing management."

The objectives of purchasing management can be summarized as follows:

-To use the limited resources and opportunities of the business efficiently and effectively.

-Purchasing the right products, in the right quantities, at the right time and cost, from the right supplier.

-To act with ethical values to ensure trust among all departments.

-To provide services that will meet the needs of businesses optimally.

It clearly shows that purchasing activities are strategic for businesses in a global competitive environment. Therefore, it is more important than ever for businesses to have qualified purchasing management.

SUPPLIER PERFORMANCE EVALUATION

Supplier evaluation is a process "a company uses to measure and evaluate supplier performance." This process includes "supplier selection, performance monitoring, quality control, and relationship management." Companies generally conduct this process by evaluating their suppliers' quality, reliability, financial situation, and service level. Supplier evaluation is essential for increasing supply chain efficiency and improving business processes.

With the widespread implementation of supply chain management in businesses, the role of suppliers becomes clear. Nowadays, many suppliers' materials, products, and services are of different quality. Buyer businesses want to know whether their needs can be met adequately in long-term relationships with suppliers. Businesses can only determine this by objectively evaluating the performance of the supplier and determining the strengths and weaknesses of the supplier business. Data about the supplier's performance is systematically obtained and measured on quality, cost, and delivery axes. The new period has added sustainability, ethics, and innovation KPIs. In addition to all these, there is a customer satisfaction indicator in service sectors.

Supplier performance evaluation is strategic in increasing the competitiveness of a business. Businesses spend a significant portion of their sales revenue on purchased materials. In many industries, the cost of raw materials and sub-parts accounts for 50-70 percent of the cost of the main product. Therefore, to make a practical purchase, it is necessary to work with suitable suppliers. Thus, supplier selection and evaluation are vital for businesses. In supplier performance evaluation, evaluating the performance of each member in the supply chain separately provides realistic information about the performance of the supply chain.

SUPPLIER SELECTION

Let's take a closer look at the purchasing business environment. Let me start with the concept of a supplier and choosing the right supplier. A supplier is a person or organization that provides a good or service. Suppliers provide materials, products, or services that businesses need. Businesses often need reliable suppliers to continue their business and grow. Supplier selection can significantly impact businesses' competitive advantage and operational efficiency.

In this context, the following factors should be taken into account for a good supplier selection:

-The supplier must be expert, skilled, and responsible in its field of activity.

The supplier must provide timely information on price changes to maintain the competitive price level.

-The supplier should research and understand how to best meet the market's needs.

-The supplier must consistently provide products of the correct quality and quantity.

-The supplier must constantly provide information about new and improved products and how to use these products.

-The supplier must be professional, quickly follow the problems, and be a solution producer.

-The supplier must be competent in terms of financial control. Due to the increase in competition, businesses spend more effort maintaining their market shares than increasing them. Customers' demands and needs are changing depending on technological developments, improvements in economic conditions, increased quality awareness, and other internal and external factors.

Supplier selection affects the business in almost every field and activity, from operation costs to production quality, from introducing new products to the market to customer satisfaction. This is an indication of how vital supplier selection is.

SUPPLIER EVALUATION

Supplier evaluation is a critical process "for the effective and efficient management of supply chain operations." Traditional supplier evaluation methods use only financial criteria in the decision-making process. In the methods developed in the following years, it was stated that "the price/cost criterion alone is not sufficient for the supplier evaluation and selection process" and that "in addition, basic criteria such as delivery/logistics, quality/specifications, innovation, and sustainability should also be taken into consideration."

Regular evaluation of supplier performance helps businesses increase their competitive advantage. Additionally, supplier assessment allows businesses to select suppliers that align with their sustainability goals. Therefore, supplier evaluation is critical for businesses' success.