Purchasing, sourcing and supply management approaches used by wholesalers in South Africa

Abstract

Most contemporary South African businesses are facing tough times. This is the result of emerging trends such as intense global competition which requires businesses to be quick, agile and flexible; new technology available to any business willing to adopt it; more advanced customer expectations and the implementation of new strategic, proactive management approaches. In fact, many of them (including wholesalers) will succeed only if they can successfully integrate strategy, processes, business arrangement, resources, systems and empowered workforces to render their core business effectively.

Choosing suppliers and purchasing products are critical wholesaling activities and often determine the success of wholesalers. Wholesaling institutions, however, vary considerably in size, activity, style of business, types of products provided and services rendered. These variables imply that the complexity of wholesaling activities differs. It therefore stands to reason that the level of sophistication with which these wholesalers manage their purchasing, sourcing and supply activities may differ.

The level of sophistication with which wholesalers manage their purchasing, sourcing and supply function may vary from traditional management approaches to advanced integrated management approaches. The use of the new management approaches by businesses is a vital instrument in facilitating change. This leads to the development of more focused, specialised and high-performance organisations.

Manufacturers are not geared to deal directly with the thousands of small retailers and therefore use wholesalers for this function. Wholesalers provide a vital link between manufacturers and retailers, and play a pivotal role in efficiency of the whole supply chain. Adapting to the supply chain management approach may thus mean the difference between success, failure and the continued existence of the wholesaler in supply chains.

This research study was undertaken to determine to what extent wholesalers in South Africa have adapted to new demands and developments in their purchasing, sourcing and supply functions. Secondary to this objective was the need to (1) investigate the scope of wholesaling, with reference to the global and South African context; (2) investigate the concepts of and the evolution of purchasing to strategic sourcing as part of the broader supply chain management approach; (3) analyse the scope and concept of supply chain management; and (4) determine the purchasing, sourcing and supply management approaches used by the wholesale sector in South Africa.

The study was conducted in several phases. Firstly, a literature research was conducted to gather and integrate secondary data in order to (1) expound the definitions, importance, types, activities and trends of wholesalers; and (2) investigate the development of purchasing to strategic sourcing and evolution of supply chain management, and to give an overview of purchasing, strategic sourcing and supply chain management. Secondly, a questionnaire was compiled containing all the relevant issues identified in the literature research to enable the researcher to establish how far South African wholesalers have advanced in adopting new approaches to managing the purchasing, sourcing and supply function. This questionnaire was pretested on two respondents to verify its validity, before proceeding to the next step.

Thirdly, a letter and the refined and tested questionnaire were mailed to all the wholesalers identified to be involved in the survey, informing them of the research study and soliciting their cooperation. The letter requested the participants to return the questionnaire via facsimile. Fourthly, to improve the response rate, after the date for returning the questionnaire had lapsed, additional questionnaires were faxed to all the respondents who had not completed the initial questionnaire.

The literature research established that the new demands and developments facing wholesalers in managing their purchasing, sourcing and supply function are a reality. Wholesalers are confronted with a variety of challenges concerning these demands and developments which is jeopardising their vital role in the supply chain, and they need to adopt a more sophisticated method of managing these activities, not only to ensure their own survival, but also to lower the costs of the wholesale operation, and ultimately allow an increase in shareholders' wealth.

The empirical study, however, clearly indicated that South African wholesalers are still significantly focused on the tactical aspects of purchasing, incorporating only a few aspects of strategic sourcing and supply chain management. The position of South African wholesalers regarding the level of sophistication in their management approach to the purchasing, sourcing and supply chain management approach can be regarded as a mechanical approach, with proactive tendencies. It is therefore clear that South African wholesalers have not adapted to the strategic sourcing and supply chain management approaches, and need to prepare themselves for this change - or risk failure.