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The impact of collaboration with a purchasing organisation and its affiliated organisations on purchasing performance : an empirical case study based on an installation company in The Netherlands

Wilmer, R. (2021) The impact of collaboration with a purchasing organisation and its affiliated organisations on purchasing performance : an empirical case study based on an installation company in The Netherlands.

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Abstract:A purchasing organisation seems to be a cost-effective and well-organised link to the supply chain of an organisation. However, what is so interesting, unique and attractive about a purchasing organisation that makes organisations keen to collaborate with them? Also, why do larger organisations tend to leave purchasing organisations and start leveraging the benefit of purchasing themselves? In this study, the relationship between affiliated organisations, supplying organisations and purchasing organisations has been investigated. More specifically, to what extent should organisations collaborate with purchasing organisations and affiliated organisations. This study indicates that purchasing organisations bundle purchasing volumes of affiliated organisations to demand cost-saving advantages from supplying organisations. For this reason, organisations can get a hold of good market-based primary and secondary conditions, which organisations would not manage to get based on their purchasing volume alone, according to literature. Interestingly, however, this research indicates that organisations with large purchasing volumes can achieve better conditions from supplying organisations if they purchase independently, which contradicts volume bundling literature. In almost all cases, organisations within a purchasing organisation can purchase for the same conditions from supplying organisations. Providing the same conditions for affiliated organisations means that supplying organisations have to ‘deal’ with smaller organisations with small, infrequent, inefficient and sometimes few annual purchases resulting in many processes and operational costs for supplying organisations regarding, e.g. logistics, administration & sales. In short, organisations with large purchasing volumes are likely to place larger orders, resulting in less overhead costs for supplying organisations and thus eventually lead to better conditions. Besides, larger organisations feel unsatisfied with the allocation of cost savings advantages and undermine purchasing organisations to achieve better conditions. So, why do not all organisations with large purchasing volumes leave their purchasing organisation? Because purchasing organisations add value to their organisations and not only in terms of cost-saving advantages but also in other ways. For instance, purchasing organisations can support organisations with purchasing processes regarding legal and contractual terms, innovations, information sharing, economies of scale, et cetera. Organisations that lack overall (purchasing) efficiency are not expected to leave a purchasing organisation since they do not efficiently master previously mentioned concepts. Concluding, organisations start to reconsider affiliating or even leave a purchasing organisation if the disadvantages start to outweigh the advantages in terms of their interpretation of the concept of ‘added value’.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/88321
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