Strategic approach to purchaisng management in small and medium size enterprises : focus on supplier selection and supplier development functions

Historically small and medium size enterprises have been playing a major role inwestern economies for years. The importance of SME for developed economies is obvious fromstatistic data. In instance, according to European Commission annual report on SMEs in 2008, in European Union there were over 20 million enterprises where about 99.8 % of them were small and medium sizeу enterprises. Taking into account importance of SME for economy, it becomes necessary to pay careful attention to academic studies of management practices in small to medium size enterprises. In our days, strategic purchasing is one of the foremost discussed topics of business development. Carr A. (2002) states that since the mid of 80th, strategic role of purchasing has continuously been in the focus of attention in academic and trade journals. However, despite of growth popularity of strategic approach to purchasing management, there is low amount of analysis on hybrid theme of purchasing management in SMEs. Thus, realizing the importance of small to medium size enterprises for national economies and understanding strategic purchasing management as the competitive advantage of the business, the purpose of current master thesis project is to analyze implementation of strategic purchasing and its supplier selection and supplier development functions in SME. In order to accomplish the research purpose, the analysis includes the profound literature on the studied topic; moreover additional effort is put to research the achievements of previous studies on purchasing management in SMEs. Finally, the empirical study of strategic purchasing in small to medium enterprises is performed through interviews with 5 (Five) top managers of small firms operating in Russia. Obtained primary data results are compared with secondary data, so that, cross regional comparison on implementation of strategic purchasing in SMEs of Russia, Denmark and United Kingdom was performed. During the research, the following conclusions were obtained. Cross regional comparison indicates similar level of implementation strategic purchasing, supplier selection, and supplier development functions in SMEs of studied countries. Different share of SMEs in economies of these countries does not impact on strategic purchasing practices. Small and medium size firms show partial implementation of strategic purchasing principles. Supplier selection in small to medium size enterprises is performed mostly in traditional way. No methods on rationalization of supply choice are held. Meanwhile, supplier development programmes are practiced broadly by SME. Small to medium size enterprises tend to undertake “indirect” supplier development programmes. Therefore, SMEs’ purchasing management consists of both traditional and strategic elements in their practices. Furthermore, such elements of strategic purchasing as top management involvement, cooperation with other functions in organization management, close collaborative and long term relations with few number of key suppliers, do not take additional resources from SME, and vice versa, they benefit to complement short internal resource by external in more efficient way, current research concludes that strategic approach to purchasing management is suitable approach to purchasing management in small to medium size enterprises