Procurement dimensions in the Australian manufacturing sector: flexibility issues in a supply chain perspective

Abstract

The manufacturing sector is a highly dynamic environment subject to continuous change and environmental uncertainty as parts, components and materials are procured and sourced globally. To be competitive, manufacturers must respond to such uncertainties rapidly and with the greatest flexibility in order to procure and maintain the supply of raw materials resources to sustain their manufacturing operations. Thus, the understanding and measuring of the procurement flexibility are key steps in maintaining a competitive advantage. So, the present study examined the theoretical concepts of procurement flexibility and proposed a generalisable measurement scale for manufacturing procurement flexibility. The scale was based on five supplier-manufacturer procurement dimensions of information exchange, supplier integration, product and component delivery, logistics and organisational structure. Further, each of these dimensions was divided into three flexibility elements of range, uniformity and mobility. A measurement scale was developed fiom a review of extant literature on flexibility relationships, purchasing, procurement and supply chain management using Q-Sort methodology. A mail survey of the major industry groups in the Australian manufacturing industry was undertaken. Principal component analysis and multiple regressions were used to examine the relationships between the flexibility dimensions and their elements. The results indicate that there is still much theory formulation and research to be conducted on procurement flexibility measurement scales. The results also revealed that Australian manufacturers have a limited experience with the flexibility issue and in some cases do not have even a procurement strategy.These results provide important practical information and establish a range of relevant implications for the Australian manufacturing sector and its future competitiveness. This study also provides a basis for the continued development and distillation of procurement flexibility measures. One of the interesting outcomes of the Supplier Manufacturer Procurement Flexibility (ProcFlex) dimensions and the implication for overall Supply Chain Management (SCM) objectives and strateges is that ProcFlex is cumulative. Any inflexibilities and constrictions, like excess and lack of inventory, in procurement activities is accumulated and increases along the supply chain. It is like a 'stock-whip' effect that runs from suppliers to customers as to the reverse of the 'bull whip' effect.