How does a company’s approach to purchasing affect its profitability?

Article- How Your Procurement Process Can Give You a Competitive Advantage. Clark, M. (2018, September 7).
Wisner, J. D., Tan, K.-C., & Leong, G. K. (2019). Principles of supply chain management: A balanced approach (5th ed.)

To a great extent, purchasing and materials management are becoming strategic business functions. Explain why this is true. Consider the following when forming your initial post:

How does a company’s approach to purchasing affect its profitability?
Why would a company choose to outsource materials or services rather than produce it themselves?
Can you think of a company that does materials management well? Why do you think so?

SAMPLE SOLUTION

To a great extent, purchasing and materials management are becoming strategic business functions. These two functions have a direct influence on a firm’s profitability. Good purchasing and materials management practices are major drivers of maintaining and fostering cash flow positive financial impact to the company by way of negotiating agreements and establishing relationships with suppliers. This establishes a positive cash flow for the organization. These practices also impact a company’s marketplace competitiveness via strategic sourcing strategies that secure the appropriate goods or services at the appropriate prices while keeping tabs on market fluctuations and business impacts (Wisner et al., 2019). When the company’s purchasing department secures better prices for materials through effective strategies, its margins are more attractive…