Supply Chain Management
Supply chain management is one of the most significant aspects of any successful business, because it ensures that customer satisfaction is met by a company. A firm cannot survive without a proper supply chain management even if the products produced are of a very high quality. The manner in which the products are packaged, stored and delivered to the customers is a key. Additionally, it is very important for the company to keep track of the inventories and supplies made both to the business entity and outside it. Job of keeping and monitoring the inventories and supply within an organization is always a responsibility of the purchasing and supplies manager who then reports periodically to the managing director. The purchasing and supplies manager is thus responsible for the general management of the stock and deliveries in the business entity. To this extent, due to the flexibility of the prices and the market value of the products, the supplies management department is also tasked with the negotiation of the pieces and quantities between the company and the manufacturers and the firm and the wholesalers. The paper thus critically examines the negotiation strategies, means of outsourcing and the general importance of the supplies management to the business entity.
The Concept of Purchasing and Supplies Management
For any company wishing to boost its competitiveness on the market, the key department is the purchasing and supplies department. Through the department, the business entity can effectively acquire the raw materials required for production while, at the same time, maintain good inventories and foster sales for the firm. Any activities that enhance the acquisition of any services or goods form other suppliers into the company, fall within the scope of the term purchasing and thus subject to the purchasing department. However, it is not all about acquiring products for the business entity that matters but the process must ensure secure storage of the goods and determine which departments urgently need the goods and thus ensuring a good flow of them to the required areas. Some of the core elements of the management process within the supplies department include good negotiation of the prices and the quantities as well as the quality of the products. The responsibilities also encompass ensuring proper descriptions of the products, cross checking whether the supplied goods match the goods ordered and fostering a quick delivery of the purchased products to the company. While the whole process of acquiring and disposing products may be marred with several factors, it is the duty of the supplies department to ensure smooth and effective process.
Unlike the purchases, supplies involve the outflow of goods from the company to either wholesalers or retailers. It is through the process that the consumers are able to access the final products for their consumption. For this reason, it is a common fallacy for people to think that supplies only involve the determination of the prices and acquisition of the products for use. Supplies management, however, is a broad spectrum of different interlinked activities for the efficient receivable of the goods and placing them under good use. For example, activities such as the factors taken into consideration in acquiring the products, how well they are stored, the descriptions of the products and proper disbursement of the acquired products to the necessary stations. These processes may not be visible at the time of paying for the goods but they are fundamental. Further, supplies are not necessary the tangible goods but may also involve the acquisition of services for the company. For this reason, supply refers to all steps leading to the ordering, identification, access and storage of the products and services within an organization for the purpose of meeting the goals and objectives of the company. Through the department, therefore, the business entity seeks to acquire raw materials and the office stationeries and equipment at the most cost-effective price in order to facilitate the needs of the firm.
Choosing a Qualified Supplier
Having gotten a background of what the department of supply and management concerns itself with, it is necessary to realize that the process of selecting a supplier for the company is crucial. Suppliers determine the quality of the products brought to the firm and must thus be properly vetted. The choice of selecting a supplier and tracking its development also squarely lies within this department. Supplier evaluations and requests for improvements are some of the issues touching on the development aspects of the supplies department though on a limited scope. The acquisition and the investment of the suppliers operations within the company is thus an extensive development step. The process of tracking the development of the suppliers is important, because the business entity is interested in quality services and thus reserves the right of rejecting a supplier and acquiring the services of another supplier. Owing to the importance of the services acquired from the suppliers and taking into consideration that the company acquires the services on large scale, the purchases and supplies department ensures that the suppliers are vetted, their experiences uncovered and their skills authenticated before the firm can finally settle on a main supplier.
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Importance of the Purchasing and Supplies Department
The purchasing and supplies department is therefore a core pillar of the company. First, the business entity can only engage marketers and any other required analysts for the better of the firm. It is very essential for the company to spot those products which are selling quicker and at a good price. This requires professionals to give advice. After the advice, the company can then decide tom stick with a supplier whose products are selling well on the market. Through the supplies department, the firm is also able to track the stock and inventories received by having the products well-arranged and properly documented.
The department also enables the company to track the consumer behavior patterns on the market regarding the firms product. It, therefore, calls for a continuous research process which is usually undertaken by the purchasing and supplies unit. Without performing the research, the production of some products would seem like a coercion on the consumers to purchase. The quality and tastes of the products must, however, be determined by the supplies department in order for the company to meet the taste of the consumers. The research also assists in uncovering the upcoming competitors and thus learning how to beat them on the market. Further, the department unifies the company with other market players.
The supplies department has a great say concerning the recruitment of employees in the company. For example, the firm cannot employ people when it is doing poorly in terms of the sale of products. For this reason, the department has a great influence on the risk assessment decisions in the company. Further, through the analysis of the quality of the products and services of the suppliers within the business entity, the department can have a clear view of what kind of suppliers to hire. The history of the suppliers thus has an impact on the negotiation process with the prospective suppliers. Through research on the suppliers from the market, the department supports innovation in the company
The relationship formed between the suppliers and the company also determines the kind of services the firm receives. For example, a supplier which is in constant communication with the business entity, which makes prompt payments, is likely to make very qualitative supplies to the latter and at a very good price as compared to its competitors. The good relationship would further spark a constant flow of raw materials and avoid any shortages of the raw materials in the company that could devastatingly affect the profit margins for the firm. Good relationships between the company and the suppliers is thus maintained through the negotiation process.
Negotiation is the process by which pertinent issues between the buyer and the seller, such as the prices, quantity, issues touching on the conflict of interest and others are discussed before an agreement for the supply of goods is finally arrived. Through the process, the parties are free to raise their conflicting views for the purpose of making a decision that would be favorable to all the parties. The agreement reached is, therefore, done based on the mutual agreement of the parties after settling all conflicting issues between or amongst them.
Several types of negotiations exist and, therefore, the choice of any depends on the strategy of the buyer or the supplier. The two negotiation styles include a two-party negotiation or an intergroup negotiation. On the one hand, the two-party negotiation involves the company through a representative, negotiating with one person representing the supplier. On the other hand, the intergroup negotiations involve the business entity having a set of negotiators facing another set of negotiators from the suppliers side. In the intergroup negotiations, the manager is usually part of the bargaining team in ensuring that a mutual agreement is reached between the two sides of the bargain. Another type of negotiation is the constituency negotiation where the manager acts on behalf of the company engaging with another person representing a constituency. The last type of negotiations is the group negotiations by which negotiations are done, as a whole group with a common purpose or aim are arriving at a common solution. Parties come to a negotiation with different ambitions. The first one is to ensure that they create value by claiming their interests in the negotiation or the manner in which they may benefit from it. Second, the negotiators also seek to claim value by immersing themselves in a competitive process and proving their worth or the worth of their products and the company. Here all the conflicting issues are laid bare to the table, and the negotiators have an opportunity of engaging on the same so that they can finally make a decision. Both have a 50 percent chance and, therefore, it is a win-win situation.
In recognition of the fact that both the seller and the purchaser need each other for the survival of their businesses, several strategies have to be put in place for effective negotiation. First, both parties should enter the negotiation with a rough idea about the reasonable price on the market but should not make the price an issue for negotiation. The important thing is the terms of the delivery, because the buyer is interested in quality products but at a cheap price, while the seller is interested in selling at a higher price to get a good profit. Eventually, however, the two must reach a point where they both agree to certain price and quality. When the time for negotiating the pieces arrives, it calls upon the buyer to have conducted a very thorough market research and insist on the most favorable prices. Such a party must have a ceiling price that they would not be willing to go beyond during the negotiations. A buyer must also be quick to notice the interests of the seller in the negotiations as opposed to the interests of the organization the seller hails.
In order to utilize the resources available within a company for a supply effectively, there is need for a proper project supply, service and material budget. The budget aims at the effective utilization of costs. Several steps are thus involved. First, the supplies manager must be able to identify the needs of the supply, service and materials. It is these needs that are then used for the procurement purpose. Several materials may be required such as the supply of computers, the computer maintenance services, technology or equipment. In such case, all these materials must relate to the project when budgetin. The second step is the selection of the alternative materials should the ones contemplated not be found. To avoid being shocked when going to the market for the purchase, it is recommended that the budget must offer alternatives on the basis of the cost benefit analysis. Having a list of alternatives beforehand ensures a successful budget implementation and the expenditures do not go beyond the budget limits. The third step is to ensure that the specifications are okay. The budget must take into account the specifications of the products to avoid confusion or buying of unwanted products. One of the ways to specify a product is through brand name. Another way is specifying that a brand equal to this means that if the first brand is not attained, then another brand of an equal value can be purchased. The company can also take into consideration the environmental requirements, the governmental and the legal requirements in making specifications. The last step is the identification of the possible suppliers of the products and any alternative suppliers should the preferred ones fail. Apart from the above steps, there are other things which are also vital in creating the budget for the supplies of the required equipment and materials. For example, there must exist a rough estimate of how much the company intends to spend. The estimation would include both the direct costs such as the cost of purchasing the needed materials and labor required as well as the indirect costs which are majorly the administrative costs involved. Proper budgeting through the estimation of costs allows the company to project how much money will go to the project and thus reducing the risks the stalling of the project.
Outsourcing is a process by which certain functions of the organization are let out to external firms to perform on behalf of the company. The processes are thus handled by independent business entities which operate under their own skills and competence. The company can choose to engage the services of an individual or a firm. Further, it may decide to delegate the functions for performance on an entire department or a specific part by which the firm cannot effectively perform using the resources it has. Outsourcing has several benefits compared to if the company was performing the function from within. First, the process assists the business entity in saving on costs that could have otherwise been lost in procuring of resources and the performance of the specific task at hand. Further, outsourcing relieves a lot of work for the employees and thus encouraging them to concentrate on other tasks and avoid time wasting. There some types of work that are really stressing and time wasting on the part of the employees within the company. Through outsourcing such kind of workload ids removed from the shoulders of the employees. Additionally, the acquisition of new technologies within the company proves very costly and thus outsourcing becomes the only option. Further, there could arise a function of the organization that requires the use of certain technology but the employees of the firm are ill equipped in handling the technology. Lastly, outsourcing guarantees the quality of the service being rendered because the company is only liable to pay for the services that meet the desired standard or quality. This quality could not have been attained in the business entity through the utilization of the employees because what these people care about is their salaries and not the quality of the work they offer.
While outsourcing is very advantageous to the company, there are also several detriments that come with it. First, there is a risk of the firm losing its privacy. Every company has its own trade secrets which it guards secretly and would not want the same to be exposed to the outside. Second, there are cultures nurtured by the organization which are only unique to the prosperity of the company and its guards. When external employees come to the compound, there is a likelihood that the business entity risks the leakage of important information. There is also a chance that through outsourcing, the company risks losing certain processes that are of very great significance to it. Additionally, when another person handles a job, there is a likelihood that their measure of quality may not be what your organization wants and thus rendering of poor quality work. Last, where the company and the outside partners do not enter into a proper agreement, there are chances that the external firm will inflate costs of the project for its own benefits and to the detriment of the contracting business entity.
Companies Performing Well in Supplies Management
Some of the companies today which are admirable in terms of their purchasing and supplies management are Amazon and Apple. First Amazon has an online store from which customers sent requests to acquire products. As a company therefore, Amazon ensure that at no time should a customer call and lack a product from the firm. The purchasing and supplies department is thus keen in ensuring that virtually all the most important products are in stock, with very well labeled prices and well arranged for easier retrieved and quick delivery to the customer. The heavy investment in acquisition and the supply of products through the internet has thus worked for the company. Apple Inc., in its turn, is one of the most secretive and cost- efficient corporation in the world. The company acquire much of its raw materials from countries which are cheaper such as china and using them at home to make quality products. Further the corporation has partnered with several distributors in various parts of the world to have them sell the products.
From the above discussion, it is plausible to infer that the Purchasing and supplies department is one of the core entities of the organization without which, the company loses competitiveness. Through the departments research, the firm benefits from qualified and reliable suppliers, manage market risks well and learn consumer behavior. Further, the supplies department assists the company to conduct proper negotiations either with business entities for the purpose of outsourcing services or purchasing of products. Some of the companies such as Amazon and Apple have maximized on this department and emerged as some of the economic giants in the world.