1a). Information is one of the flows in SCM. Describe the role of purchasing in the information flow. What is the impact of the information flow on purchasing activity and performance? Supply chains are made up of activities that are interrelated within and without organizations boundaries. Organizations develop supply chains by simply being connected to each other by virtue of the upstream and downstream activities involving their business flows (Monczka et al 2009). Supply chain Management (SCM) is a process that ensures effective management of the business flows right from the suppliers of raw materials, to the production process through to the end user (Jones & Riley 1985).
This process therefore, calls for proper and holistic management of the business flows which extend from one organization to the others in the supply chain. Forrester (1958) identified five business flows which are; information, money, manpower, capital equipment and materials. In SCM, the running of information flows is very critical since the movement of the other business flows is highly dependent on how the associated information flows are managed (Sweeney 2006).
The supply chain business processes that are connected through intra and inter-firm boundaries are developed from the business process. According to Sweeney (2002), most businesses can be described in regard to the five functions of; purchasing and procurement (buying), production planning and control (making), warehouse management (storage), transport management (moving) and customer relationship management (selling). This definition by Sweeney is further supported by Monczka et al (2009) who argue purchasing involves five functions which are; acquiring the right quality, in the right amounts, at the right time, for the right value and from the right supply.
Monczka et al (2009) further indicates that purchasing is a functional activity and a functional group that is part of the product development team in an organization. This group carries out a number of activities driven towards achieving maximum results for an organization. Purchasing acts as the link between suppliers, manufacturers, distributors and retailers and plays an important role in the product development and improvement process (Lambert and Cooper 2000). Purchasing plays an important role in the information flow when it functions as an organizational entity that supports the strategic goals of an organization (Cousins et al 2008).
This purchasing function of an organization achieves its functions once it is integrated into the organizations decision making process. In this regard, the purchasing function is highly concerned with supply chain management and in this case. According to Quayle (2006), purchasing is involved in the establishment and management of a commercial relationship. Quayle further ascertains that this relationship should be maintained and the parties involved (suppliers, purchasers, customers) need to work together for them to achieve competitive advantage. On the other hand, a growing number of firms make efforts to scrutinise their suppliers thereby reducing expenses at their supply phase (Van Weele 2005). Lambert and Cooper (2000) argue that operating an integrated supply chain requires continuous information flows which later assist to create the best product flows.
The customer is the main focus of the process. Realising a good customer-centred system requires processing information both accurately and in a timely manner for quick response systems that require frequent changes in response to fluctuations in consumer demands (Zhao et al 2002).
Monitoring uncertainty in manufacturing processes, customer demand, and supplier performance are critical to effective SCM. For example, to facilitate the growth of commercial relationships in the financial institutions, the supply managers are integrated within the strategic business unit and they are primarily a contact point between the organizations and suppliers (Monczka et al 2009). In this role they are able to identify problems and create solutions to them. All these processes highlight the important role of purchasing in the information flow.