Purchasing and Supply Management

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Introduction

Purchasing and supply management process are crucial in any company as it defines the efficiency in the flow of operations. Purchasing is how a business acquires goods, components, and services from another. Supply management is a five-step process that specifies the conditions of the materials or products necessary to meet an enterprise’s demand. This research paper reflects on purchasing and supply management as a critical function in a company. Such responsibilities primarily include procuring, storing, and overseeing the overall merchandise flow.

This research paper focuses on the importance of purchasing and supply management and how this relates to selecting a qualified supplier. The discussions also highlight the steps of creating a project supply and evaluating the various organizations that are benchmarks in purchasing and supply management, including Amazon. This paper acknowledges that purchasing and supply management as crucial for every firm since purchasing and supply management impact performance at all levels. If the goods a firm acquires for consumption do not fulfill specified requirements, the complication will likely hinder operational efficiency. Properly structured purchasing and supply management workflow guarantees optimized productivity.

Importance of Purchasing and Supply Management

There are several other merits to establishing an effective purchasing and supply management mechanism in an organization. The significance lies in the crucial responsibilities that purchasing and distribution channels managers face every day. Previously, I worked in a team of seven, establishing supply and distribution mechanisms for Rick Distributor’s Company. The platform exposed the need for the daily engagement of team members in optimizing the supply chain and distribution strategies.

At work, each team member inside the supply chain unit has direct contact with potential suppliers. My observation was that the primary responsibilities for the purchase and supply teams involve identifying suitable suppliers and negotiating with them throughout raw materials or equipment procurement. The management considers the product’s pricing, service value, and revenue before settling on a specific choice. A good choice is a significant win considering the number of benefits such a business partner can offer.

Impact on Selecting a Qualified Supplier

Some of the benefits observed include lower costs of operations and reliability. Most suppliers worked as independent contractors inside firms in my setting, providing products and services to numerous vendors in return for agreed-upon compensation. Rick Distributor’s purchasing manager led a team charged with advising the company on many critical concerns. Finding a suitable supplier is vital when addressing the subject of machine acquisition. The sourcing decision comprises identifying an appropriate provider capable of meeting the criteria. In most situations, the requirements involve weighing several variables.

Some of the variables commonly applied in my setting included ensuring that the selected firm has some sense of accountability, the firms have the minimum manufacturing capacity, product kind, and market knowledge. The firms must also be culturally fit and have effective communication channels to facilitate transactions (Srai & Lorentz, 2019). These parameters seem to provide critical input to the supplier selection process. In such strategic efforts, the teams ensured to aim to create the first contract for that fortunate provider. A qualified supplier is likely to propel the processes within the business to greater scales, especially when combined with practical production and a stable customer base.

Positive Impact on Costs and Efficiency

After a thriving supply section, studies on the market trends have shown that supply chain management can positively affect these recommendations. Researchers acknowledge that in today’s procurement era, the supply chain is growing more complicated, with one organization using numerous vendors to manufacture their final goods (Bals et al., 2019). Maintaining solid margins is becoming more challenging with increased pressure on the distribution network to keep costs down for the consumer. To maintain maximum profitability and efficiency, businesses must take a systematic approach to their supply chain strategy. There are two most impactful benefits of properly established purchase and supply management, including low costs and optimized performance within the company.

In terms of the cost of operations, there are a lot of upfront expenditures associated with locating and negotiating new relationships with new suppliers. While some significant expenses are associated with establishing relationships with new suppliers, a supplier relationship management program may reduce a large portion of those expenditures (Schulze & Bals, 2020). By developing mutually beneficial relationships with essential suppliers, an organization may realize long-term cost savings via decreased availability, quality, and supply chain delays. Such reliability also ensures that the operations within the company are not hampered therefore addressing the critical question of efficiency within the organizational processes.

Enhanced efficiency is also established with growth in the relationship between the two ends of the transactions. In my experience, it became expected that as an organization’s connection with its supplier deepens, communication improves. As is the case with every relationship, as it grows, the supplier gains a better understanding of the organization, enabling them to improve the efficiency of their service. Order difficulties can emerge, and if such requests occur, the strong connection between the organization and the supplier will make resolution easier. Securing such influential third parties in business is critical for any company. Such a connection introduces the relationship phase, which requires effectively negotiating the prices before closing deals.

Strategies for Negotiating Prices

In my experience, there are various efficient negotiation methods used in buying and supply chain management. Strategy is concerned with the supply chain’s value to a business in the supply chain realm. Supply managers may encounter roadblocks while determining which technique to use to accomplish such goals. There are tactics for identifying competent suppliers and procedures for negotiating the contract terms. Before picking a provider, there are numerous principles to consider. At the very least, the provider should demonstrate a comprehensive understanding of quality and quantity requirements, cost and pricing comparisons, and the actual services delivered.

With proper relationships, such negotiations tend to develop into a ritual that both the buyer and seller practice. It is fair and expected of the supplier to operate efficiently, maintain pricing in line with expenses, avoid abusing a position of privilege, make claims reasonably and adequately, and be prepared to evaluate the buyer’s organization’s particular requirements before agreeing. Using these tactics with the supplier may establish a solid working relationship characterized by open communication. The need for such transparency was clear with my exposure to the details in establishing an adequate project supply for a company.

Project Supply

In this context, the term supply chain management refers to various ways for effectively integrating the movement of commodities, money, and information. These things are often outsourced from a variety of locations. Suppliers, manufacturers, wholesalers, distributors, and retailers are examples of these sources. Items may transit through many hands before reaching the client. SCM organizes and integrates this back and forth between internal and external stakeholders. Its purpose is to enhance customer service but not at the firm’s expense, which is attempting to cut supply chain costs simultaneously. There are several stages along this process, but the first is the design and planning in establishing the possible operation’s cost.

Based on experience working in the team, when executives, investors, and the project team cannot agree on the project’s costs and purpose, the project will fail. Therefore, the group’s good consensus is a crucial aspect to consider. In most cases, a gap analysis identifies the requirements of each business sector and enables the project to reach enterprise-wide best practices. It is critical to question and clarify claims from state to actual needs. This step serves as a road map for project activities and indicates if the project is ahead of time or behind schedule.

Attaining stakeholder objectives also fosters a feeling of ownership in the project’s success—weekly tracking and communication of project progress. Keep the project team and stakeholders informed of task completion percentages and prospective date adjustments. Determine the executive support required for the project’s success. Such support is essential for the change management endeavor to succeed. The project manager’s primary objective should be to maintain a positive work environment. Risk management may assist the project team in mitigating the risk’s influence on the project’s success. Prioritization may also be a challenge for project teams that have internal resources.

In my setting, when individuals acquire direct interaction with the interested parties, they develop a sense of self-sufficiency with minimal material budget adjustments. As observed, to dislodge people from their existing way of doing things, a well-designed change management effort is required. Spare no expense in terms of time and resources for training users on the new tool and procedure. Establish clear and attainable deadlines to ensure the project’s success. Monitoring the usage of new technologies can help determine compliance. The team compiled and shared lessons learned with the project team and sponsors to verify the work. The team members also ensured to conduct a customer satisfaction survey to ascertain the project’s success. Such procedures seemed to work effectively in most of the project supply projects. There were also direct benefits associated with cost outsourcing.

Benefits and Costs of Outsourcing

Effective supply chain management may help the company save costs, improve the company’s profitability levels, and boost customer happiness. Nonetheless, mismanagement of a single link may have a detrimental effect on the remainder of the distribution network, resulting in lost revenue and customer discontent. Due to the dangers associated with inadequate supply chain management, many businesses outsource certain supply chain phases to third-party suppliers with years of expertise in this field. Consider a few of the advantages of outsourcing your supply chain.

From experience, businesses might outsource their supply chain to improve service and expand their company. Entanglement in SCM’s strategic and tactical intricacies may divert firms’ attention away from their primary capabilities. By outsourcing supply chain procedures, businesses can devote their time, attention, and resources to what they do best: producing superior goods and services for their customers. The external logistics companies contribute skills, solutions, and experience that would take organizations years and considerable financial investment to build internally. Their expertise may be beneficial, mainly if they are specialized in your location, sector, or vertical. Additionally, they employ operational excellence methods to assist your organization in improving its efficiency and production.

Such improved operation ultimately improves customer satisfaction is critical for any long-term, successful company venture and can only be accomplished via optimum supply chain operation. Outsourcing these responsibilities to a knowledgeable partner helps minimize the risk of an inefficient supply chain, which may have a detrimental effect on customer relationships and profitability. Third-party providers are better prepared with the people resources, technology, and practical procedures necessary to guarantee the smooth and efficient operation of the supply chain.

Finally, the company is likely to gain adaptability and expanded working capital. The third-party suppliers are better prepared with supply chain management techniques and technology, so they are more positioned to respond to changing market circumstances and customer demands. Their resources and experience are especially advantageous when businesses expand production to variable client demand. Raised working capital also offers operating resources and industry experience when businesses engage with third-party supply chain organizations. When properly used, these tools may assist you in gaining an advantage over more prominent companies in the field. Some companies have benefited significantly from such optimized supply chain optimization as Amazon, Cisco Systems, and Johnson & Johnson.

Benchmarks Organizations

These companies have managed to address global purchasing and supply chain descriptions effectively. Amazon’s SCM goal aims to decentralize and embrace emerging technology. The growth pattern of outsourcing of such an approach is almost exponential. Today, Amazon shops use various automated and robotic technology to pick and process orders and organize and store inventory (Singireddy & Daim, 2018). Amazon has also incorporated drones into its operations, forming Amazon Prime Air (Singireddy & Daim, 2018). Amazon Prime Air is a service that utilizes small drones to deliver items weighing up to five pounds in less than 30 minutes (Singireddy & Daim, 2018). To meet customer requirements, Amazon has developed the logistical capability to outsource its inventory to reduce its inventory costs. The firm utilizes its competitors’ products to manage client connections while retaining its competitive advantage.

Cisco Systems and Johnson & Johnson seem to be majoring in effective outsourcing of the purchase and supply technical processes. In Cisco System’s case, outsourcing has benefited the company in expanding the business (Chakravarty, 2021). The effectiveness of SCM may also be linked to the company’s extensive use of best practices for decentralized storage. For Johnson & Johnson, the approach of shared storage guarantees that items are instantaneously available from practically any point on the earth (Anguelov, 2020). The company’s facilities are strategically positioned in major cities and densely populated areas, and inventory is spread out purposefully to guarantee supply matches demand. The layout of the warehouses, which comprises a variety of separate storage places, allows team members and pick-and-pack automation to obtain items almost instantly and relocate them following delivery requirements.

Conclusion

As established, purchasing and supply management is crucial for every firm since it impacts performance at all levels. Unlike the case of Amazon’s efficient systems, if the goods a firm acquires for consumption do not fulfill specified requirements, they are likely to hinder operational efficiency. Exploring the benefit of outsourcing seems to be an appropriate intervention in optimizing the purchasing and supply chains systems. This research paper has significantly improved a personal grasp of the need for proper purchasing and supply management.

References

Anguelov, L. G. (2020). Monitoring arrangements for outsourced public services: the importance of service characteristics for the distribution of oversight responsibilities. International Public Management Journal, 23(2), 252-275. Web.

Bals, L., Schulze, H., Kelly, S., & Stek, K. (2019). Purchasing and supply management (PSM) competencies: Current and future requirements. Journal of Purchasing and Supply Management, 25(5), 100572. Web.

Chakravarty, A. K. (2021). The outsourcing conundrum: Misappropriation of intellectual property in supply chains. Naval Research Logistics (NRL), 68(2), 229-240. Web.

Schulze, H., & Bals, L. (2020). Implementing sustainable purchasing and supply management (SPSM): A Delphi study on competencies needed by purchasing and supply management (PSM) professionals. Journal of Purchasing and Supply Management, 26(4), 100625. Web.

Singireddy, S. R. R., & Daim, T. U. (2018). Technology roadmap: Drone delivery–amazon prime air. In Infrastructure and Technology Management (pp. 387-412). Springer, Cham.

Srai, J. S., & Lorentz, H. (2019). Developing design principles for the digitalization of purchasing and supply management. Journal of Purchasing and Supply Management, 25(1), 78-98. Web.

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