Purchasing process transformation: restructuring for small purchases

Purpose - Reducing purchasing costs remains an ongoing concern for most organizations. The standard purchasing process that works well for large purchases, however, generates proportionately much higher overhead and administrative costs for small purchases leading to purchase delays, high error rate, and poor vendor participation. There is a need to develop separate purchasing processes for small and large purchases and evaluate underlying factors that affect such process transformation. This paper aims to analyze a successful purchasing process transformation conducted at a utility company for small purchases. Design/methodology/approach - It uses a case study methodology to examine the transformation in detail and understand related issues such as benefits realization, resistance to change, and risk management involved in such transformation projects. Findings - It compares original and transformed purchasing processes and identifies resultant benefits to the company, participating vendors, banks, and employees. It finds that a company receives many operational, informational, and accounting benefits in addition to purchasing cost savings. Practical implications - It provides guidelines for similar restructuring for small purchases in other organizations. Originality/value - The paper offers a generic business process model for small purchases and employs equity-implementation model to explain the factors leading to the success in this purchasing process transformation and possibly other similar organizational transformations.