Principles of Purchasing Management CW Part2
Principles of Purchasing Management CW Part2
Principles of Purchasing Management CW Part2
Just as where the African man sits and sleeps on a Gold Mine is where the other
developed countries come and take away their diamonds the national resource
belonged to the land using their own man strength.
We could identify few core purchasing strategies that could be identified in the
modern purchasing management as listed below,
Supplier optimization
TQM (Total Quality Management)
Risk management
Global sourcing
Vendor development
Green purchasing channels
Lean production
There are few common differences we could identify in traditional and modern
purchasing those are given below
Modern purchasing
Systematic
Long term
Holistic
Traditional purchasing
Short term
Transactional
Reactive
Section B answer:-
Halldorsson et al. (2007) contend that there is no right theory for understanding the
management of integrated supply chains
Purchasing has played a key role in any organization from past to present in order to
get required materials for lowest possible price. But due to the changes occurred
purchasing evolved into cost saving. Today the purchasing used to identify as the
foundation of the organization.
Cost saving
Increased quality
Purchasing improvement
Transportation improvement
There are few purchasing techniques in order to reduce the cost and order to
purchased required materials those techniques are,
Bulk buying
Opportunity buying
Local vendors
Partnership with major vendors
E- procurement
To reduce the cost organization may adopt to new lean production methods as well
in lean production no overproduction or over processing is done because of that
scenario we could easily obtain maximum from purchasing also few roles like
negotiation and willingness to work with suppliers too is important which is also why
purchasing have a central role in the organization.
There are few major factors we could use to identify how the purchasing is important
to an organization how it plays the central role of an organization those are
Reduce the cost
Gain Technological development
Achieve Economies of scale
SECTION C answer:Recently, after hearing the positive yet unexpected outcome of a transportation
strategic sourcing effort, a senior executive asked the project leader a million-dollar
question: How in the world did you get 15 percent savings from a supplier weve
been using for more than 15 years, let alone more than 25 percent from their biggest
competitor? While the results were compelling, the executive in question was
surprised and somewhat angry that a long-term supplier he viewed as a partner had
been willing to yield such significant savings. The answer to his question was simple:
process. Specifically, the Strategic Sourcing process used to deliver these savings
was vastly different from the process in place for decades prior at this multi-billiondollar manufacturer.
Chen, Paulraj and Lado, (2004) cites, (Ellram and Carr 1994; Cooper and Ellram
1993) that once purchasing was a neglected business function but with the growing
importance towards supply chain management Purchasing has evolved as a key
strategic role and a vital business partner in the organisation. Also Krause, Pagell
and Curkovic (2001) cites, Watts et al. (1992) states since the core of purchasings
role is to support the production and operations activities with an uninterrupted flow
of materials and service, the purchasing and manufacturing strategies must be
consistent with each other, and they must be able to support the corporate level
competitive strategy.
According to Buffa (1984) these strategies towards competitive advantage on
purchasing has been mainly based on 4 significances as quality, cost, flexibility and
dependability but Ward et al (1990) adds another priority as innovation which makes
it five significances (cited in Chen, Paulraj and Lado, 2004).
Fig. 1. The relationship between competitive strategy and functional area strategies.
Adapted from Watts et al. (1992).
Corporations apply purchasing strategies to make profitable decisions on purchasing
from a different group of well organised suppliers that offer on time supplying, quality
products and at commonly pleasant terms (purchasing-procurement-center.com,
2015).
manufacturing
flexibility,
technology-based
competitive
Techniques, 2015).
Six sigma
Six sigma refers to Focusing and improving the quality of process outputs by
identifying and removing the causes of defects while minimizing the variability
in
manufacturing
and
business
process(Total
Quality
Management
Techniques, 2015).
Just in time
Just in time refers to A production strategy for improving return on investment
by reducing in process inventory and associated carrying cost (Total Quality
Management Techniques, 2015).
GonzlezBenito (2002) cites, (Bartezzaghi and Turco,1989; Chan et al.,
1990; Gilbert, 1990; Sakakibara et al., 1993; Schonberger, 1982; Voss and
Robinson, 1987) mainly the JIT system was used in the automobile industry
but different authors prcised that the suppliers play the most important role in
just in in time systems who has to deliver small batches just when needed so
a specific way of managing purchasing and supplying activities is called JIT
Purchasing
3. Risk Management
Many companies acquire their required supplies from around the world eg:
china which is famous for cheap labour, so these companies are anxious
about the risk management process even it is advantageous regarding the
price, these advantages can be contradicted due to natural disasters and
various
other
unavoidable
circumstances
(purchasing-procurement-
center.com, 2015).
4. Global Sourcing
Multinational corporations consider the whole world as a market place and
they choose and source from different suppliers and vendors in the world,
basically the application of a comprehensive strategic sourcing strategy
effectively means supplies of goods and services of all countries that can
manufacture goods or provide the most economical service. And Strategic
Sourcing means best products and services at best value using a process
that achieves a significant reduction in operating costs (purchasingprocurement-center.com, 2015).
5. Vendor development
Some corporations depend only on one supplier, but if this suppliers is unable
to provide the required standards the purchaser or the purchasing department
will help the vendors to improve their service as well to develop the
procurement cycle (purchasing-procurement-center.com, 2015).
6. Green Purchasing
Green procurement refers to the purchase of products and services that have
an effect on human health and the environment compared to products or
services that serve the same purpose competing . This comparison may
consider raw materials acquisition, production , manufacture , packaging ,
distribution , reuse , operation , maintenance and disposal of the product or
service (Financial.ucsc.edu, 2015).
Basically Green purchasing is known as environmentally preferred
purchasing
(EPP),
environmentally
responsible
purchasing,
green
Reference Index
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