Purchasing System at Boeing Australia Limited

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Background of Boeing Australia Limited

Boeing Australia Limited (BAL) is an international subsidiary of the popular United States Boeing Company. Established in 1996, the company’s principal plans include instituting, upgrading, and carrying out routine maintenance of military airplanes, machines, and space telecommunication equipment. The progressive development of the Australia-based company has earned it a very powerful legacy system. However, the company has encountered a multitude of drawbacks in its attempt to implement a modern procurement system.

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There have been arguments and counterarguments that pertain to whether the company should implement a new procurement system or it should revamp the present one. This situation has led to the crop up of divided decisions amongst the company’s top leaders. Some of the managers support the overhaul of the entire procurement system whereas others want temporary upgrades of the existing system. Temporary enhancements of the existing system are very expensive.

The company dreads losses if it follows this decision. Nonetheless, BAL’s procurement system is in dire need of improvement in facets that include supplier consolidation, internal management, and the two-fold feedback. This project explores the limitations of the current procurement system in Boeing Australia Limited to provide apt solutions that will enable the company to implement an e-procurement system to ensure effective management of its clients, suppliers, and internal organizational systems.

Analysis – BAL’s Current Procurement

Statement of Issues – Problem Areas

Immediate Issue

The immediate issue at Boeing Australia Limited is the company’s position to implement a suitable procurement system to manage consumers, suppliers, and the internal organization. This issue follows various developments in procurement systems that have created additional e-business opportunities (McKevitt, Flynn, & Davis 2014). However, BAL operates under a constrained budget that hinders it from implementing an expensive e-procurement technology in all its operational units.

Systemic Issue

Boeing Australia Limited also suffers a systemic issue that emerges from internal organizational inefficiencies. The professional team at BAL has numerously failed to offer appropriate customer support in the past concerning logistics. Ohlandt (2014) reveals that the root of the problem traces in the procurement department that has had delays because of the nature of the present system. This issue also extends to the organizational security of both clients and suppliers concerning cyber security together with the slow establishment of Information Technology systems.

Limitations of the Current Procurement Processes

The current procurement processes at Boeing Australia Limited lag behind modern technology. The current procurement system at the company only supports a one-step single human interface that is just a little better than the bygone manual procurement systems. Although this system still works for the company, it is technologically obsolete for the increasingly advanced functions of the company. The current procurement system has led to operational inadequacies due to its slow performance that has further caused time inefficiency (Ohlandt 2014). This situation implies future operational risks and uncertainties that may result in reduced competitiveness.

Roles and Goals of the Procurement Team

BAL’s procurement team is charged with various roles and achievement goals that pertain to the realization of the overall objectives of the procurement department. Primarily, the company expects the procurement team to establish and maintain effective systems that lead the company towards cost-effective and time-saving processes by ensuring that it acquires the right materials at appropriate prices and in time.

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Since the company runs various subsidiary firms around the world, the procurement team has to deploy various procurement technology acquisition processes carefully to avoid crucial mistakes that may pose severe repercussions to the company. Therefore, the team observes proper communication, timely information, and pricing issues with the view of streamlining the procurement functions (Payne, Dorn, & Miller 2012).

Improvement in the Procurement Process – Short-Term Improvement

Rationalization and Management of Suppliers

Owing to the challenges that the company is currently facing and the prevailing budgetary constraints, the management has attempted to maintain the relevance of the existing procurement system through the implementation of short-term improvement strategies. At the outset, Boeing Australia Limited used rationalization and management of suppliers to maintain the practicability of the procurement process.

The company has continued to rationalize its existing supplier networks in a bid to improve its business operations (Gardenal 2013). The company has wide-ranging and diverse supplier networks in many parts of the world. Its expansion in the last five years has resulted in the provision of a vast range of services. As such, it has greatly contributed to the growth of the supplier networks. In addition to supplier rationalization, Boeing Australia Limited has validated a reputable supplier management system to strengthen the relationship between the company and suppliers. This strategy has enhanced the functionality of the supply chain.

Concisely, rationalization and management of the supply chain have enabled the maintenance of a competent lot of suppliers by the company requirements and consumer demands. Nonetheless, this strategy is only a short-term procurement plan that can imply impending uncertainties and risks for BAL. As a result, the possibility of encountering uncertain supplier patterns and outlay profiles shortly remains high (Simon, Smith, & West 2010).

Introducing Credit Card Purchasing

Apart from rationalization and management of supplier networks, BAL has also introduced credit card purchasing as a short-term procurement strategy. McHugh (2011) posits that the introduction of credit card purchasing has improved the management of the company’s financial accounts. This strategy has enabled the company to regulate expenditure trends. This situation has further made the company sustain the continuous supply of material requirements and constant availability of workforce payoffs. In addition, credit card purchasing has facilitated the monitoring of expenditure patterns for both suppliers and consumers.

Accordingly, the strategy has enabled suppliers to benefit from heightened purchasing powers that have promoted a constant supply of material requirements. On a different dimension, the introduction of credit card purchasing in the company has enabled the company to have better management of employee spending patterns. The company has accomplished this objective through the institution of expenditure limits on the employee profiles that are embedded in the credit cards (Gardenal 2013).

Outwardly, the adoption of credit card services has enhanced the existing procurement system to an extent of increasing the overall efficiency. The short-term strategy has improved the effectiveness of the prevailing procurement system since it has enabled the availability of computerized payments to suppliers. However, to realize the full potential of the credit card purchasing strategy, BAL needs to implement an e-procurement technology (McHugh 2011).

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Formation of the Materials Management Process Council

The company has also formed a ‘material management process council’ as a short-term plan to acquire production materials at sensible prices in a bid to control the expenditure patterns. Simon et al. (2010) reveal that the function of the management council is to carry out logistic duties to sustain dependable inventory management records whilst enhancing quality control in the existing procurement process. The size of the company demands this kind of council to control the inflow and outflow of physical products as well as to manage intangible services in a bid to avoid losses that may arise due to maladministration. Material management has enabled the company to realize the delivery of quality products and services around the globe.

The formation of the council has also eased the monitoring of the firm’s operations at local, regional, and international levels. This arrangement has maintained a high value for its clients through the standardization of products and services in all areas of its operation. Various studies have indicated that the institution of a material management council in production companies is a crucial step towards alleviation of material loss, which may lead to unrecoverable losses (Haruvy & Jap 2013). Nevertheless, BAL should enhance its material management council by implementing an e-procurement strategy that will promote the activities of the council.

Reverse Auctioning

Boeing Australia Limited also uses reverse auctioning-term as a procurement strategy. In this strategy, the company allows two suppliers to compete for a single procurement opportunity that arises. Haruvy and Jap (2013) advance that the nature of bidding that characterizes reverse auctioning takes down the price of the production materials. Suppliers compete to offer the best price that is acceptable by the company or that matches the reverse auction’s market. However, reverse auctioning has become a challenge for the company concerning the vast range of materials that Boeing Australia Limited deals with in the production process.

Reverse auction strategies are only relevant for some types of procurement plans. In this sense, the strategy poses a variety of procurement drawbacks. BAL procurement process, just like any other ordinary procurement process, relies on profitability and supplier chain uncertainties. Therefore, the company should use this strategy to procure indirect products that are less critical to the production processes (Sharif, Alshawi, Kamal, Eldabi, & Mazhar 2014).

Alternative Options & Recommendations

Long-Term Improvement

Boeing Australia Limited has to institute long-term procurement strategies to avoid the high costs of short-term strategies that restrain the company’s budgetary allocations. The company has a reputable legacy system that encompasses all its twelve functional sites and four primary divisions. On purpose, the company can use this longstanding legacy system to develop modern procurement systems in an attempt to enhance operational efficiency. Long-term improvement of the existing procurement systems will also enhance the identification and initialization of functions.

However, according to Carrington, Strooper, Newby, and Stevenson (2005), the relevance of a long-term strategy depends on a range of modern procurement technologies that resonate with the present production and management technologies. The monitoring of performance systems is a subject that is technology-sensitive in contemporary production environments. The implementation of a long-term technological system concerning the improvement of procurement will facilitate the accomplishment of longstanding operational effectiveness (Simon et al. 2010).

E-Procurement Strategies

The complexity of operations and processes at Boeing Australia Limited requires robust procurement strategies to ensure effective control and monitoring of the production systems (Croom & Brandon-Jones 2005). BAL has very advanced technological systems in almost all the other units. The use of information systems is also expansive, owing to the nature of the industry in which this company undertakes its business. This situation has elevated the need for e-procurement technology to control purchasing decisions and supplier networks. Tai, Ho, and Wu (2010) posit that e-procurement strategies substantiate effective management of customers, suppliers, and the internal organization.

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The integration of credit card purchasing in e-procurement is an apt way of ensuring proper monitoring of the spending patterns of both suppliers and consumers. However, there is a need to consider various issues concerning the implementation of a technology-based procurement platform. At the outset, BAL should evaluate the present supplier and consumer behavior. According to Sitar (2011), this aspect will enable the company to choose the appropriate e-procurement platform that addresses the particular needs of the suppliers and consumers. BAL has become a large multinational corporation because it has established many branch companies worldwide.

Therefore, the size of the company comes into consideration during the implementation of the e-procurement strategy. E-procurement strategies significantly decrease administrative costs since they automate most of the organizational processes (Croom & Brandon-Jones 2005).

Conclusion

Contemporary business environments demand technologically apt procurement systems that match the effectiveness of other technologies in other business sections such as production, design, and human resource management. A constant improvement in technology that requires the implementation of versatile organizational systems in companies is evident. Companies have to adopt modern systems of production to sustain their competitiveness in contemporary business environments.

BAL is among the companies that need to initiate such technological changes. The company should implement a robust e-procurement platform to satisfy consumer and supplier demands. The accessibility of easy modes of purchase and payment services by versatile credit cards is the pride of the present-day consumers and suppliers. Conclusively, BAL should implement e-procurement strategies to maximize organizational effectiveness.

References

Carrington, D, Strooper, P, Newby, S & Stevenson, T 2005, ‘An industry/university collaboration to upgrade software engineering knowledge and skills in the industry’, The Journal of Systems and Software, vol. 75 no. 1, p. 29.

Croom, S & Brandon-Jones, 2005, ‘Key Issues In E-Procurement: Procurement Implementation and Operation in the Public Sector, Journal of Public Procurement, vol. 5 no. 3, pp. 367-87.

Gardenal, F 2013, ‘A Model to Measure E-Procurement Impacts on Organizational Performance’, Journal of Public Procurement, vol. 13 no. 2, pp. 215-42.

Haruvy, E & Jap, S 2013, ‘Differentiated Bidders and Bidding Behavior in Procurement Auctions’, Journal of Marketing Research (JMR), vol. 50 no. 2, pp. 241-58.

McHugh, N 2011, ‘What is driving commercial purchasing card growth?’, Journal of Corporate Treasury Management, vol. 4 no. 3, pp. 259-271.

McKevitt, D, Flynn A & Davis, P 2014, ‘Public buying decisions: a framework for buyers and small firms, International Journal of Public Sector Management, vol. 27 no. 1, pp. 94-106.

Ohlandt, C 2014, ‘Competition and Collaboration in Space between the U.S., China, and Australia’, Asian Survey, vol. 54 no. 2, pp. 395-417.

Payne, J, Dorn, W & Miller, M 2012, ‘Procurement’s Role in Maximizing Corporate Budgets’, Financial Executive, vol. 28 no. 10, pp. 48-50.

Tai, Y, Ho, C & Wu, W 2010, ‘The performance impact of implementing Web-based e-procurement systems’, International Journal of Production Research, vol. 48 no. 18, pp. 5397-5414.

Sharif, A, Alshawi, S, Kamal, M, Eldabi, T & Mazhar, 2014, ‘Exploring the role of supplier relationship management for sustainable operations: an OR perspective’, Journal of the Operational Research Society, vol. 65 no. 6, pp. 963-78.

Simon, J, Smith, K & West, T 2010, ‘Price Incentives and Consumer Payment Behavior’, Journal of Banking and Finance, vol. 34 no. 8, pp. 1759-72.

Sitar, C 2011, ‘E-Procurement: A New Method for Optimizing The Purchasing Process’, Managerial Challenges of the Contemporary Society, vol. 1 no. 2, pp. 291-95.

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