An empirical illustration of the transformation process of purchasing. An application of the system dynamic modelling approach

• Date: 09 May 2016
• Pages: 167-187
• Published date: 09 May 2016
• DOI: https://doi.org/10.1108/IJLM-06-2012-0041
• Author: Yamen Koubaa
• Subject Matter: Management science & operations,Logistics

An empirical illustration of the

transformation process

of purchasing

An application of the system dynamic

modelling approach

Yamen Koubaa

Department of Business Environment, Brest Business School, Brest, France

Abstract

Purpose –The purpose of this paper is to highlight the strategic role of purchasing and model its

transformation process based on a case study of a military firm.

Design/methodology/approach –The paper reviews the existing literature to highlight the

strategic role of purchasing and put forward the transformations the function is undertaking.

The model system dynamic approach is then detailed and applied to model the transformation of the

purchasing function of a military firm. The modeling software Analytica is then used to run the model

and get to results.

Findings –The shift of purchasi ng toward a more strat egic function is comp lex and

multidimensional. Implementing these transformations requires flexible designing approaches such

as the system dynamic modeling that incorporates both quantitative and qualitative variables to model

the function’s changes. The paper details the methodology of applying the system dynamic approach.

It recommends a new structure of the purchasing function as well as new and upgraded indicators of

purchasing performance and suppliers’management.

Research limitations/implications –A single-case study research. Even though, the objective is

not to generalize the findings but to enrich the existing literature as regard the system dynamic

modeling in a specific domain, the one-case research setting can be seen as a limitation against

generalizeable findings.

Practical implications –A clear step-by-step action plan of conducting the transformation of the

purchasing function using the system dynamic modeling approach. The paper gives ways to upgrade

existing measures of purchasing and policies of suppliers’management.

Originality/value –The application of the system dynamic modeling approach to the specific domain

of military purchasing.

Keywords Purchasing, Measurement, Suppliers

Paper type Case study

Introduction

The transformation process of purchasinghas mostly been studied in common industries

such as the automobile (Lösch and Lambert, 2007) and the retail industries (Hsuan-Lien

et al., 2011). The process in the military sector has been under-investigated despite the

pivotal role purchasing plays in determining its performance and the remarkable

evolution the function has had in military organizations (Lawson, 2006; Holger, 2007;

McWhirt et al., 2011). Following the end of the cold war, the focus in military industry

shifted toward the economic effectiveness and efficiency of thesector. Consequently, the

private sector gained more importance (Marie and Correll, 2003).

The shift from public to private has pushed military firms to operate in a more

commercial way; not only taking into account security and fighting constraints but also

economic and business ones. And to fit an increasingly commercial environment any

The International Journal of

Logistics Management

Vol. 27 No. 1, 2016

pp. 167-187

©Emerald Group Publis hing Limited

0957-4093

DOI 10.1108/IJLM-06-2012-0041

Received 26 May 2012

Revised 4 June 2012

12 October 2012

14 January 2013

8 October 2013

15 May 2014

12 August 2014

17 November 2014

Accepted 16 February 2015

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

167

Transformation

process of

purchasing

transformation must include changes to how the military acquires and supports its

systems, to include heavier reliance on commercial practices and equipment (National

Defense Panel, 1997).

Traditional analytical models have been used to describe and understand the

transformation process of purchasing and to assess its effects on the function’s

performance (Göron, 2009). These models attempt to identify a cause and effect

relationship between purchasing guidelines and then link those actions together to

form an exemplary process. Although these examples can describe the transformations

and their relative impacts, they suffer from parsimony. The links are studied linearly

and apart from one another, which may omit possible direct and indirect remote effects.

As Thomas (1974) states “You cannot meddle with one part of a complex system from

the outside without the almost certain risk of setting off disastrous events that you

hadn’t counted on in other, remote parts. If you want to fix something you are first

obliged to understand […] the whole system […]”(p. 90).

Real world purchasing processes are complex given that transformations do not

always create linear effects. Traditional analytical models are not always capable of

capturing allthe hidden aspects of these transformations andtheir respective impacts on

performance.A more robust modelingtechnique that allowsa better understandingof the

interactionsbetween the various components and of theirrespective evolutionis required.

This paper presents and applies the dynamic modeling approach, looking at the

transformation process of the purchasing function within a military firm. The objective

is twofold: first, to describe via real case analysis how the dynamic modeling approach

is used to steer the purchasing function transformation process. Second, to discuss the

merits of the new approach compared to the traditional analytical models by capturing

the complexity of the system and how it evolves. This discussion will cover the

system’s structure and the performance assessment metrics.

The purchasing function in military firms

Paramount to strategy development and implementation in military firms is the ability

to rely on a procurement function that ensures the sustained optimal military

functioning and superiority (Tuttle, 2005). The procurement strategies complement

one another and are intertwined with ongoing transformations and modernizing

programs that are initiated by the changes in the international security environment

(De Waard and Kramer, 2008). These restructuring operations paved the way to

introduce purchasing innovations such as the leasing of militar y equipment,

privatizing units for maintenance and repair, performance-based logistics and

private-public cooperation (Detomasi, 2002; Catasus and Gronlund, 2005).

Consequently, the function does not stop evolving to cope with the ongoing changes

and transformations.

Moreover, in the military industry many components are purchased from a

multitude of local and international suppliers. The supplier network is very complex.

The technical requirements are different across components as well as the national

regulations overseeing these requirements. Cultural differences and confidentiality

issues must also be considered. Furthermore these variables interact with one another

and the effects of the links created must not be ignored. Hence, to succeed in today’s

military supply environment where purchasing is more and more strategic, the

interface of the purchasing function should be properly structured (Bickel, 2003). This

includes the organizational design of the function, the management of suppliers and the

performance assessment.

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