European Journal of Purchasing and Supply Management 5 (1999) 75}83
Fitting purchasing to the "ve stages of strategic management
Joseph L. Cavinato*
Department of Business Logistics, Acquisition Research & Development Center, The Smeal College of Business Administration,
The Pennsylvania State University, University Park, PA 16803, USA
Received 19 March 1998; received in revised form 18 November 1998; accepted 19 November 1998
In 1990, we published the results of our study of how
purchasing either "t or did not "t within the strategic
outlook of a parent organization (Freeman and
Cavinato, 1990). Since that time, however, the "eld of
purchasing has been in a state of transition. Once re-
garded merely as the passive buyer of goods and services,
purchasing is increasingly recognized as an active, #uid
contributor essential for organizational competitiveness.
In light of this change, it is appropriate to reexamine
the function of purchasing within the evolution of stra-
tegic management. This article provides follow-up mater-
ial to our 1990 study. Additionally, it o!ers new informa-
tion on how purchasing &&"ts'' into the "fth stage of
strategic management } the knowledge-based organiza-
tion } a concept "rst introduced by Peter Senge (Senge,
1990; Gluck et al., 1980). For other discussions of the "fth
tier see Schwartz (1991), Nonaka and Takeuchi (1985)
and Welch and Nayak (1992). The need for such a study
is clear: it is imperative that we view purchasing within
the context of the "rm, rather than as a stand-alone
entity. In an age of downsizing, outsourcing, cross-func-
tional team processes, increasingly sophisticated in-
formation and communications systems, and assessing
every function in terms of how much value it adds to the
"rm, it is vital to examine how each group "ts within the
strategic orientation of the "rm as a whole.
After reviewing the "ve stages, I will apply them to the
"eld of purchasing using data I obtained from "eld inter-
views. Using this information, I will show how 15 man-
agement concepts progress through each of the "ve
stages. This o!ers a competitive benchmark by which
"rms world-wide may gauge their own performances. It
also provides an invaluable tool for determining the
solutions to three major strategic purchasing questions
* Tel.: 001 814 865 1866; fax: 001 814 863 7067; e-mail: jlc5@
psu.edu.
Much of Senge's concepts build upon the "rst four stages of his
paradigm those "rst developed by Gluck et al. (1980).
0969-7012/99/$ - see front matter  1999 Elsevier Science Ltd. All rights reserved.
PII: S 0 9 6 9 - 7 0 1 2 ( 9 9 ) 0 0 0 1 2 - X
facing companies today: (1) what priorities should we
change? (2) what should we change next? and (3) what
should we change it to?
1. The 5ve stages
Before describing how the "eld of purchasing "ts into
the "ve-stage framework, we must "rst review what those
stages are and how they function. Gluck et al. de"ned
strategic management as &&a system of corporate values,
planning capabilities, or organizational responsibilities
that couple strategic thinking with operational decision
making at all levels and across all functional lines of
authority in a corporation'' (Gluck et al., 1980). They also
determined that most companies follow a sequential
four-stage path in their evolution of strategic manage-
ment: (Stage 1) basic "nancial planning, (Stage 2) fore-
cast-based planning, (Stage 3) externally oriented plann-
ing, and (Stage 4) strategic management. Further, they
observed that each stage is marked by clear advances
over its predecessor(s) in terms of explicit formulation of
issues and alternatives, quality of preparatory sta! work,
readiness of top management to guide and participate in
the strategic decision-making process, and e!ectiveness
of implementation. The knowledge-based business (Stage
5) represents the most advanced stage of the strategic
management progression as we understand it in the late
1990s.
The emphasis of each stage re#ects the general tone of
management in the "rm. Stages 1 and 2 are inwardly
focused upon the "nancials of the "rm. These two stages
assume product/service success in the marketplace; there-
fore, the energy is applied toward optimizing and plann-
ing for the "rm's "nancial matters. Stage 3 is externally
focused upon the product/service position in the market-
place. The emphasis here tends to be upon internal
planning to better improve market share. The focus of
Stages 4 and 5 tend to shift towards outward action.
Stage 4 energy focuses upon continuously "nding
76 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
opportunities around technologies and capabilities.
Stage 5 extends farther using information and learning as
enablers to grow the organization in ways that develop
and sustain competitive advantage.
1.1. Stage 1: basic xnancial planning
In this stage, formal planning is centered around the
budgeting process. Revenues and costs are forecast for
the year and performance is evaluated on the basis of
actual versus budget. The focus is within the function,
and the overriding objective is to meet the goals of the
budget. Accounting/"nance departments dominate the
decision-making process throughout the organization.
This is indicative of mature businesses such as regulated
utilities. Diverse companies are forced into Stage 2 be-
cause of the short-time horizon and reactive perspective
of this stage.
1.2. Stage 2: forecast-based planning
Here, formal planning is conducted primarily through
gap analysis: anticipated earnings and opportunities are
forecast, desired earnings are plotted, and programs are
developed to rationalize the two. The development of
these programs fosters an environmental analysis pro-
cess, multi-year forecasting, and the allocation of limited
resources across the various segments of the business.
Although superior to Stage 1, the static focus of this stage
often causes problems. Annual forecasts are usually pro-
duced solely by extrapolating from past performance,
often failing even to incorporate anticipated environ-
mental changes.
Furthermore, once the forecast-driven business plan
has been developed it cannot be altered until the next
planning period. Companies move from Stage 2 to Stage
3 when they realize this lack of forward perspective is
causing them to miss opportunities.
1.3. Stage 3: externally oriented planning
The planning procedure in Stage 3 is dynamic and
anticipatory, scanning the environment and responding
to the marketplace. Complex companies reorganize into
speci"c product strategic business units (SBUs) to facilit-
ate this strategic focus. Each SBU develops its own
product strategies in accord with an overall corporate
strategy. The focus becomes one of benchmarking: how
do we compare to our competitors with our "nished
product and market share? SBU management can e!ec-
tively monitor the speci"c business, analyze and develop
strategic alternatives, and maintain a proactive posture
by focusing on a limited number of product lines. How-
ever, the SBU structure does not facilitate corporate-
wide opportunities for capitalizing on synergies in such
areas as purchasing and R & D despite the improved
product planning it o!ers. Furthermore, as the #ow of
strategic alternatives is from SBU management to corpo-
rate management, lower management typically deter-
mines the strategic options that will be developed for the
annual review by senior management. This "ltering at
lower levels has two signi"cant negative consequences for
the corporation in terms of its long-term positioning and
"nancial status: (1) information is lost because lower-
level managers often disregard information that is not
immediately relevant to their SBU but which might be
valuable to the corporation, and (2) the amount of time it
takes for strategic alternatives to climb the corporate
ladder means that new solutions might be outdated be-
fore they are even implemented. Concern over these
negative consequences often prompts companies to move
into Stage 4.
1.4. Stage 4: strategic management
In Stage 4, companies seek to combine the strategic
planning process with operational decision making.
Their ability to do this is based on three factors: (1) the
planning framework, (2) the planning process, and (3) the
corporate value system. Within the planning framework,
strategic planning must be conducted at all levels. Prod-
uct/market planning sets sales level, price, and so forth.
Business unit planning determines market position and
cost structures. Shared resource planning allocates re-
sources across business units in the best interests of the
company. Shared concern planning focuses on the needs
of groups and business units or customers. Finally, cor-
porate planning sets the direction of the organization as
a whole and structures the "nancial and human resources
of the company. While individual approaches vary from
"rm to "rm, the overall objective of the planning process
in Stage 4 is to foster creativity at all of these levels. This
creative outlook is essential, for a company must culti-
vate a culture that supports this less linear strategic
planning framework and process in order to succeed as
a Stage 4 organization. This culture values teamwork,
entrepreneurial spirit, open communication, and believes
that the "rm can direct its own future rather than forever
falling victim to environmental factors if it is successful in
the process of strategic management.
As strategically advanced as the Stage 4 company is, it
is still bound by conventional concepts of what business-
es do. This limitation is best illustrated by a hypothetical
situation. A company in Stage 3 makes a product }
cameras. Another company in Stage 4 sees beyond the
physical product to its functional value } to transfer
images. The Stage 4 company therefore determines that
its mission is not to produce a single kind of "nished
product that might soon become obsolete, but to pro-
duce all types of image-transfer equipment, whether it be
cameras, fax machines, modems, or laser printers. The
focus is upon developing and perfecting the inherent
 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
technology, and salable product opportunities evolve
from these. But what both of these product- and func-
tion-based companies fail to realize is that technologies,
processes, and products are all very quickly replicable
today, and that it is the ability to detect, interpret, and
apply them } in other words the ability to learn } that is
the way to ensure long-term survival for a company.
Only those Stage 4 companies with exceptionally dy-
namic leadership and tremendous vision can make the
transition to Stage 5.
1.5. Stage 5: knowledge-based business
Strategic planning in Stage 5 has its roots in scenario-
building processes and can be most simply described as
being based on continuously detecting what is possible
and how. The idea is to develop possible scenarios, while
knowing that most will never occur. The bene"t of this
strategy is that the organization has already anticipated
and considered possible events and their results. If an
event occurs, the organization has already prepared its
response and can implement it more rapidly than an
organization that is reacting to an unanticipated event.
Scenario planning di!ers from contingency planning in
that the former allows a loose framework for organiza-
tions to continuously brainstorm the horizon while the
latter forces organizations to build elaborate cause}e!ect
relationships that tend to change or not occur as origin-
ally anticipated. Stage 5 organizations have a host of
antennae } marketing personnel, R & D processes, and
other information links } to collect signals of opportuni-
ties and threats, and a means of turning those signals into
business options and directions. As Nonaka and
Takeuchi observe, these "rms use various forms of know-
ledge to develop concepts for the successful implementa-
tion of products and services.
The ability to gather and process these signals, how-
ever, is useless unless the organization can respond to
them quickly. Stage 5 "rms are characterized by excellent
communication links into, within, and outside the organ-
ization. These links are necessary because the organiza-
tion must be able to swiftly reorganize itself into sub-
organizations, create specialized groups, call in outside
consultants, and disband as opportunities arise and cir-
cumstances change. Stage 5 organizations value people,
whether insiders or outsiders, who can assemble creative
packages of products and services for competitive ad-
vantage. They also reward innovation } often for its own
sake } for innovation is necessary for survival.
2. Fitting purchasing to the organization
The research for this article was obtained from per-
sonal interviews conducted from December 1996 to Jan-
uary 1998 that sought to determine where the purchasing
77
function was in terms of its strategic evolution, or stage of
development. Of the 195 "rms we examined, 84 were
located in North America, and 111 were located in Euro-
pe. Nine di!erent industries were included in the re-
search: automotive, electronics, fast-moving consumer
goods, computers, telecommunications, metals, petro-
leum/chemicals, software, and services. The sample of
"rms ranged in equivalent sales volume from US$50
million to US$120 billion per year.
The methodology for this research is based upon that
of the original article by Cavinato and Freeman (1990).
Although no categorization process is exactly precise
when dealing with dynamic organizations, the results
revealed some consistent patterns. The research consisted
of examining actual purchasing practices and aligning
them within the spectrum of attributes on a continuum
from very basic (Stage 1) to very sophisticated and in line
with Stage 5 behaviour of departments of all forms in such
"rms. The investigation process started by "rst selecting
sets of three "rms according to outward characteristics of
each stage. The "rst visits were to very mature businesses
that outwardly possessed Stage 1 characteristics. The
interviewing process consisted of a three pronged
approach: (a) validating the original Cavinato and
Freeman stage characteristics, (b) ascertaining current
activities and inquiring what will be the next level of
practice enhancement that each purchasing depart-
ment was undertaking or planning, and (c) capturing the
evolutionary steps backwards that purchasing depart-
ments undertook to attain their current level of develop-
ment. These evolutionary "ndings are summarized in
Table 1.
The "ve stages measure 15 key purchasing attributes.
I have divided these 15 attributes into three sub-catego-
ries: purchasing's concept of the "eld (nos. 1}4), purchas-
ing's roles and measures (nos. 5}10), and the measures of
the purchasing professional (nos. 11}15). Together, these
15 attributes allow us to track the purchasing function
across the "ve developmental stages in a detailed and
comprehensive manner.
2.1. Stage 1: basic xnancial planning
In terms of concepts, the Stage 1 purchasing depart-
ment is seen as simply providing the basic buying service
within a "rm. Strategic planning is limited to "nding
ways to buy an item at a lower price than before, while
the concept of the supply chain itself is a functional
production/purchasing system. The range of products
that purchasing buys is generally limited to MRO items
and o$ce goods.
The organization as a whole expects the purchasing
department to minimize price against budgetary norms.
Thus, the primary concerns of the department relate to
conforming its function to the norms established by
others. Problems are basically process-oriented: how to
78 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83

Table 1
Purchasing emphases throughout range of strategic settings

Purchasing attributes Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Basic "nancial Forecast-based Externally oriented Strategic Knowledge access
planning planning planning management and excution

The Field
1. Concept of Buying Purchasing Procurement Supply Facilitate networks
the "eld
2. Concept of Better price on Maintain favorable Support line of Entrepreneurial Conduit and interpreter
&&strategy'' the next buy price/cost variances business team member of internal value needs
in synch with supplier
value o!erings and
potential
3. Concept of Production/purcha- Supplier deliveries Suppliers and their Innovation through Supplier's capabilities
&&supply sing feeding produc- suppliers to our to "nal use and through to our
chain'' tion "nal product disposition "nal customers'
values
4. Range of MRO items Raw materials Capital goods/projects Suggest source "rms No boundaries
products O$ce goods MRO items Raw materials to purchase Anything that causes
and services Construction O$ce goods MRO items Suggest product, the "rm to write
Construction O$ce goods changes in line a check
Outsourcing with market
management opportunities and
future constraints
5. Expectations Minimization of Cost minimization Contributions through Involved in product Creative &&packages'' of
price Cost avoidance Value analysis development and products and services
Cost reduction Value engineering line of business for internal and ex-
Purchase for quality QCI management ternal customers
Line of business
results
6. Concerns Conformance to norms Basic managerial Supply chain ma- Shape of function Vision leader and
Process problems issues nagement not important; interpreter
Concern with power results and out put Detect } interpret }
regarding scope, are the keys implement business
back door buying, opportunities
centralization, etc.
7. Concept of Lowest price Lowest price Lowest total cost Highest total value Support innovation
purchasing's Control to our "rm to actual user through networks
added-value &&Guardian'' of ethics Manage suppliers Develop suppliers
8. Key measures Financial Gap-based "nancial Total product cost Total chain costs Total chain costs
Competitive chains
9. Budgetary Cost center Cost center Supply chain costs Supply Future cost and impact
approach Planning for future management systems
Partner in change Inter-"rm measures
10. Information Prices Landed costs Total costs to the "rm Total chain costs Market and supplier
needs and attributes base intelligence
Evolving trends
and technologies
11. Managment Clerical/reactive Managerial Managerial Team member Learning for perosnal,
style Forecasting Planning team, and "rm's
advantage
12. Major Process requisitions Management of the Manage commercial Marketplace Manage and lead the
activities into purchase buying function relationships for intelligence supply market
orders and Make process the "rm Source for long term No boundaries
contracts e$cient
13. Management Reactive Reactive but plan Fit department in Positive pro-active Lead with detected
approach for future with plans of rest needs and
of "rm opportunities
 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
Table 1 (Continued)
Purchasing attributes Stage 1 Stage 2
Basic "nancial Forecast-based
planning planning
14. Key personal Task oriented Some managment
skills Functionally based
15. Training and Basic purchasing Price negotiation
development procedures and
needs tasks
obtain an item faster, process an order more quickly, or
solve an immediate user problem.
By doing so, purchasing adds value to the organization
as a whole by obtaining the lowest price available. Its key
measure, again, is purely "nancial. The budgetary ap-
proach of the department is that of a cost center, so that
the department is given a speci"c amount of money with
which to operate for one year. The department's &&suc-
cess'', therefore, is largely measured by its ability to meet
or beat this amount while still ful"lling its duties. To
ful"ll this function, the department relies on manual
processes, while its limited system needs are transaction-
oriented.
The management style for a Stage 1 purchasing de-
partment stresses conformity while reacting to the needs
of the "rm. Major activities include processing requisi-
tions into purchase orders and contracts in as e$cient
a manner as possible. The management approach is cleri-
cal and reactive. Key skills required of purchasing per-
sonnel are task-oriented and functional } that is, promo-
tion is based on an individual's skill at performing the
&&nuts and bolts'' duties of a purchasing department. The
training and development needs of the department sim-
ply require updating and "lling in the basics.
2.2. Stage 2: forecast-based planning
Here, the purchasing department is conceptualized as
the purchaser (as opposed to the buyer), with a concomi-
tant emphasis placed on forecasting and maintaining the
most favorable price/cost variance. The concept of sup-
ply chain strategy in Stage 2 is that of supplier deliveries
feeding production, while the range of products that
purchasing now acquires has expanded to include sub-
stantial quantities of raw materials in addition to the
more routine non-production and supply items.
The parent organization expects purchasing to con-
tinue minimizing costs as in Stage 1, but also expects it to
avoid and reduce future costs, and to purchase for qual-
79
Stage 3 Stage 4 Stage 5
Externally oriented Strategic Knowledge access
planning management and excution
Managerial Capabilities Talent based
Strong Inter-personal Team leadership Leadership
Strong Analytical Resource provider
Consultant
Conduit
Planning Negotiation on scale General, strategic
Management of alliances, management
System and chain access of techno- Influence and reach
costs and design logies within the "rm and
with outsiders
ity. Departmental concerns include basic managerial
issues and a concern with power regarding such measures
as scope, back door buying by others in the "rm, head
count, and centralization } all of which serve as tradi-
tional measures of a department's importance. Unfortu-
nately, such concerns tend to hinder progression to Stage
3 because they often lead to measurement and develop-
ment in terms of head count, budget size, procedures, and
so on, rather than in terms of purchasing innovation and
other contributions.
Purchasing adds value by continuing to obtain the
lowest price available, by acting as a control on organiza-
tional spending, and by acting as the &&guardian'' of the
"rm's ethics. In the budgetary approach, the key measure
is gap-based. That is, the department asks itself &&Where
are we today?'' &&Where do we want to be in 2}3 years?''
and &&How do we get from here to there?'' Although still
envisioned as a cost center, purchasing plans for the
future integrating its initiatives within the "nancial goals
of the "rm. The department now automates its existing
manual processes to expedite its systems.
Management style is still essentially reactive and con-
formist, but with an eye towards planning for the future.
Managers are especially concerned with overseeing the
buying function and making the entire purchasing pro-
cess more e$cient. Management approach emphasizes
tactical managerial skills such as forecasting and low-
level planning, while all personnel should have some
management aptitude. Training and development for
personnel include instilling a knowledge of buying strat-
egies and short-range planning.
2.3. Stage 3: externally-oriented planning
This stage is marked by great expansion across the
function. The Stage 3 purchasing department is concep-
tualized as providing all procurement functions; that is, it
is in charge of managing inventories, transportation, and
outsourcing in addition to its buying duties. The strategy
80 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
of the department is to support the lines of business and
make positive contributions through various types of
value analyses and reengineering. The concept of the
supply chain has been greatly expanded to include sup-
pliers and their suppliers to the organization's "nal prod-
uct. The range of &&products'' that purchasing acquires
now includes capital goods, raw materials, MRO items,
o$ce supplies, and outsourcing management.
The organization expects the department to contribute
through value analysis, reengineering, and often cross-
functional, cost-minimizing initiatives. The primary con-
cern of the department is on supply-chain management
as well as positioning itself for maximum contribution to
the line of business. The ability to do this is enhanced by
the fact that purchasing in this phase usually has a full
range of commodity responsibilities and can extend to
managing outsourcing relationships as indicated above.
Purchasing adds value to the organization by provid-
ing the lowest total cost to the "rm as well as by manag-
ing suppliers. The key measure for the department is the
lowest total product cost. In Stage 3, the department
requires information and systems that will enable it to
better "t into the organization's materials, maintenance
and production systems. Additionally, at this stage, the
department seeks to minimize its direct involvement in
routine transactions. It begins to measure and allocate its
time to high impact acquisitions.
All of these advances and expansions require new
management approaches. Management style seeks to
dovetail the department's plans with the plans of the rest
of the "rm and/or line of business. For the "rst time,
managers try to "t the buying transaction cycle to the
product cycle of the line of business. Consequently, man-
agement approaches rely heavily on strategic skills. Per-
sonnel in Stage 3 purchasing departments should have
strong managerial, interpersonal, and analytic skills. The
department focuses its training and development e!orts
on management planning as well as keeping its personnel
up-to-date on key purchasing issues and trends.
2.4. Stage 4: strategic management
Conceptually, purchasing now has a broad concept of
supply management: the department is now responsible
for anything that involves inbound materials or service
needs of the organization. With such broad vision, pur-
chasing functions as an equal member of an entrepre-
neurial team responsible for product development and
line of business results. The concept of supply chain for
the Stage 4 purchasing department is equally broad, from
suppliers's capabilities through to the values of the "nal
customers. Purchasing now often drops its &&transaction''
function and assumes an advisory role. Indeed, personnel
in many Stage 4 "rms perform little or no actual purchas-
ing. Instead, they engage in such activities as recommen-
ding an alliance with a source "rm or suggest changes in
products or materials in line with market opportunities
and constraints and the "rm's technological base and
needs.
The organization now expects the department to in-
volve itself deeply in product development and line of
business management. Consequently, the organization
expects the department to produce line of business re-
sults. The shape of the function, therefore, is no longer
important: the department's only concerns are results
and output.
Purchasing adds value in Stage 4 by determining the
highest total value to the actual users of all of the organ-
ization's products. Another vital function it provides is to
act as the focal point of supply relationships between
engineering and manufacturing personnel inside the or-
ganization and individuals in di!erent functions within
supplier "rms. As the coordinator of many commercial
relationships, purchasing must be extremely know-
ledgeable about the supply market. To meet these in-
formational needs, purchasing requires detailed access to
supplier databases, product/service databases, and rela-
tionship component systems.
The management style in Stage 4 is positive, proactive,
and creative, providing strong input to the formation of
organizational products and plans. Major activities of
management personnel include overseeing commercial
relationships for the entire organization and ensuring
that the organization has ample supply sources for both
the short and long terms. Management approach is to
develop small group communication and leadership
skills, because Stage 4 managers almost always work in
teams. All personnel should be aware that purchasing
decisions are no longer viewed in a purchasing context,
but in the context of their impact on the business as
a whole. To this end all employees should develop skills
appropriate for intra- and inter-"rm negotiations con-
cerning the entire system and its relationships. These
skills will de"ne the individuals capable of acting as
managers who are important to the functioning of
the entire organization in Stage 4, and essential if the
organization is to be able to make the transition to
Stage 5.
2.5. Stage 5: knowledge-based business
In the last stage, purchasing functions in the broadest
possible way to create and facilitate networks of all types.
The strategy for the function is to act as a conduit and
interpreter of internal value needs so that they are sym-
pathetically linked and/or serve to a!ect supplier value
o!erings and potential. The concept of the supply chain
in Stage 5 reaches its broadest de"nition: purchasing is
responsible for all products from creation/innovation
through to "nal use and disposition. Due to the scope of
this function, all of the organization's &&products'' fall
within purchasing's sphere of in#uence.
 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
The organization expects purchasing to develop cre-
ative &&packages'' of products and services for both inter-
nal and external customers. The function's primary con-
cerns are leading the organization by providing foresight
and vision: detecting opportunities, guiding the organiza-
tion towards them, interpreting how they can be ex-
ploited to produce the maximum yield, and then imple-
menting the product or package.
By doing so, purchasing-skilled personnel add value
by utilizing suppliers and networks to support innova-
tion throughout the organization. In addition, purchas-
ing acts as a &&total supplier'' to increase the e!ectiveness
of the entire consumer supply chain. The key measures in
budgeting are all-encompassing: the costs to the total
chain are weighed against the total costs of competing
chains. Budgetary approaches examine future costs and
impact systems while developing inter-"rm measures that
cause proactive behavior as opposed to measuring to
standard costs created in the past. Owing to such a broad
mandate, Stage 5 purchasing personnel require all the
information and systems of a Stage 4 department as well
as innovation-enabling systems, total cost and value in-
formation-capturing systems, and a means of constantly
determining the nature of markets from the perspectives
of both buyers and sellers.
The management style in Stage 5 is to lead the organ-
ization towards the needs and opportunities that these
systems detect. Managers emphasize learning to increase
personal, team, and organizational advantage. Stage
5 purchasing personnel require "ve primary skills: (1)
talent in creating &&packages'', (2) the ability to work as
part of a diverse team, (3) the ability to lead, (4) the ability
to act as a consultant, and (5) the ability to function as
a conduit between various groups within the company
and people in supplier "rms. Training and development
e!orts should be focused on fostering the skills needed to
better identify and drive enterprises where purchasing
can contribute to the organization's overall competitive-
ness.
Stage 5 qualities initially appear alien because they do
not seem to be in keeping with the qualities traditionally
associated with purchasing. However, I observed all the
qualities presented in Stage 5 for all 15 attributes in many
purchasing departments during the course of my re-
search. While no one company was functioning with all
15 qualities, indicators showed that this was, in fact, the
strategic developmental goal for several of them.
3. Analysis of 5ndings
The research was part of an investigation of how "rms
and parts of them are changing toward greater strategic
orientations. Overall, most "rms are moving upward
in stages of evolution. In some cases, this upward
81
movement was e!ected quickly due to increased speed
of innovation and competition, while in others rapid
improvement was the result to senior management
leadership initiatives. Similarly, nearly all purchasing de-
partments I studied were moving towards higher stages.
There were no particular groupings of purchasing de-
partments except those in computer and software indus-
tries, which tended to average in Stage 4 with some in
3 and a few in 5. Further, there were no sign"cant
variations between the smaller "rms I examined and the
larger ones.
Overall strategic position: Di!erences in the evolution
of purchasing attributes are shown in Fig. 1. Due to the
qualitative nature of this research, little should be read
into the speci"c "ndings other than large di!erences in
individual attributes. On a macro level, Fig. 1 shows
North American and European "rms in similar relative
positions for each attribute. All the "rms average at 2.91,
or close to Stage 3. The most developed attributes are
Range of Purchasing Activities (C12), Key Personal
Skills (C13), and Training and Development Needs
(C15), while Budgetary Approaches (C9), Expectations
by Others in the Firm (C5), and Concepts of Supply
Chain (C3) are the least developed. Information Needs
(C10) and Purchasing's Concept Value-Add to the Firm
(C7) were similarly strong. These results seem to indicate
that purchasing is developing internally (skills, training
and development, management approaches, activities,
and information), but is being restrained by budgetary
approaches and the roles that others in the "rm seem
to think purchasing should be playing. In the same
way, purchasing's concept of the Supply Chain is not
developed as strongly as that of others in the "rm.
These last three points represent an opportunity for
purchasing.
This research highlights the signi"cance of where pur-
chasing might be in relationship to the overall "rm.
&&Alignment'' occurs when purchasing is at the same stage
of the rest of the "rm. What happens when purchasing is
less developed than the rest of the "rm? When this is the
case, the purchasing group is not valued. It is not seen as
a contributor to the current corporate initiatives, but is
seen as a part of the necessary overhead of the "rm, and is
thus often a candidate for outsourcing. Additionally,
it rarely is seen as a source of managerial talent for
the rest of the "rm. When purchasing is behind the rest of
the "rm, the purchasing management challenge is to
educate the group to bring it up to the level of the rest of
the "rm.
What if purchasing is more developed than the rest of
the "rm? When this is the case, the purchasing group is
not appreciated. Others in the "rm do not understand
what it is saying, nor understand what it can contribute.
In such instances, the challenge facing purchasing man-
agement is to educate the rest of the "rm as to what can
and is being contributed by it. In either case, Table 1
82 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
Fig. 1.
shows by each attribute the di!erent steps, processes,
mindsets, and behaviors at each stage of strategic devel-
opment. It is a guide for determining what the next step
in development could be either within the department,
with the rest of the "rm or with outside "rms.
In nearly every "rm studied, purchasing managers
requested insights from the interviewers as to where their
group was positioned. In the previous research (1989}90),
nearly all (130) of the 142 purchasing organizations
studied were less developed than the rest of their respect-
ive "rms. The remaining 12 were as developed with their
"rms. None was more developed. In the current research,
approximately 40% are less developed than the rest of
the "rm, about 40% are on par, and about 20% are more
developed than their "rms. In fact, in nearly three-quar-
ters of all "rms, the senior purchasing manager is more
developed than the rest of the department, and in this
case is providing leadership vision to develop the depart-
ment. Many of these same senior managers are now
active in promoting purchasing to the rest of the "rm.
This gives us valuable insight into the role of the senior
purchasing manager. In the past, he used to be an admin-
istrator of a relatively static function. Today, s/he is
ful"lling both an internal and external leadership and
visionary roles. Anecdotally, this may be due to the
increasing number of senior purchasing department
managers who have no background in the "eld.
3.1. Role of purchasing measures and metrics
The Fig. 1 "ndings point to a speci"c challenge facing
purchasing relating to measures. Budgetary Approaches
(C9) is the least developed attribute, while Identi"ed
Information Needs (C10) is the most. This is pointing to
the fact that what measures the department's perfor-
mance (purchasing price variance, for example) is staidly
traditional, while individual managers use other sources
of information and metrics for their own decision mak-
ing. That is, what is &&strategic'' in behavior and decision
making is largely not being measured in many "rms. This
points to a challenge facing "rms } and the accounting
function in particular } to update the traditional
measurement systems to bring them more in line with the
strategic emphases that "rms are pursuing today.
 J.L. Cavinato / European Journal of Purchasing & Supply Management 5 (1999) 75}83
3.2. Purchasing skills and development
These "ndings show purchasing departments shifting
toward higher levels of strategic behavior (activities, con-
cept of purchasing value-add, management style, man-
agement approaches, key personal skills, training and
development needs, concerns, and purchasing strategy).
The progress of individual attributes across ranges of
stages, shown in Table 1, point toward speci"c training
and development agendas for purchasing. For example,
for key measures, training is being developed and tools
are being applied in many "rms for total product cost,
total chain costs, and how to measure the value of in-
novation brought into the "rm as well as how to measure
competing "rm's chains.
4. Conclusions
Purchasing is no longer a stand-alone function. It, and
all functions and departments, must prove their value
and what is valued is highly perceptual. This research
proves once again that what is &&valuable'' is merely that
which is synchronous with a perceiver's needs at that
moment. Thus, purchasing must be aligned with the rest
of the "rm or contributing to its further development.
Being less or more developed than the rest of the "rm
challenges the purchasing group to either (a) educate
itself, or (b) educate the rest of the "rm. In this latter role,
purchasing becomes a leader of competitive advantage
83
potential for the "rm. In either case, some priorities for
change are highlighted in the methodology and "ndings
of this research.
This research provides a road map of purchasing's
alignment with the rest of the "rm and points to develop-
ment gaps and agendas for change. Some of the speci"c
attributes might not appear familiar to many in the "eld,
but this is evidence of the changing nature of purchasing
and the more strategic opportunities that are available as
purchasing develops further. This study was qualitative
in nature, being based upon perceptions by purchasing
and other managers in "rms. In the end, it is these
perceptions that become &&the truth'' } at least for today.
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