Purchasing & Supply Management

Abstract

This paper highlights the realms of purchasing and supply management in context to their relevance in changing business dimensions of our times. Creation of project supply and budget is also mentioned. Recent purchasing and supply management strategies adopted by various firms have been highlighted as a guiding medium and the benefits, costs and growth patterns of outsourcing have also been discussed.

Table of Contents

Abstractii

Introduction1

Discussion1

Importance of Purchasing in the Business World1

Creation Of Project Supply, Service, And Material Budget2

Supplier Selection for Negotiating Prices4

Benefits, Costs & Growth Pattern of Outsourcing6

Best Practices in Purchasing & Supply Management7

Conclusion8

References9

Purchasing & Supply Management

Introduction

Purchasing is a process responsible for acquisition of all the necessary materials required by an organization. Activities pertaining to flow of goods, services and material across the supply chain are considered integral to the purchasing process.

Discussion

The concept of purchasing is often bamboozled as an administrative task with little or no strategic value attached. In 2004, a British aircraft, Boeing B-777 experienced a critical emergency when a GE manufactured engine caught fire. General Electric is one of the most widely acknowledged and successful organizations worldwide. Investigations pertaining to the case revealed how this massive organization had failed to create a robust procurement culture in which faulty parts were bypassed by the employees for installation without the necessary check and balance. A slight ignorance in the procurement and sourcing had cost the organization $8 million along with severe threats to its credibility.

In recent times, the term “Supply management” has emerged as a wider realm encompassing areas that call for identification, classification, and acquirement, access, positioning and managing of all the activities along with efficient utilization and application of resources such that they contribute towards the achievement of strategic goals of an organization.

Importance of Purchasing in the Business World

Purchasing is imperative for organizations for it not only helps in the acquisition of necessary materials throughout the supply chain but also has decisive effects on its overall performance. Poor purchasing may result in irrelevant or wrong materials to be delivered, thus causing the competitive advantage of a company to suffer.

The product offering of a company speaks volumes of its purchasing and supply management foundation. Dells' computers and their ample popularity are owed to the proficient purchasing of various component parts and their inventory management. For Coca Cola however, the lessons were learnt the hard way when contaminated carbon dioxide was packed in a portion of its production from a Belgian bottling plant. The gas had been approved without checking by the parent company and by the supplier due to inefficient supply management regulations and policies.

Apart from improving and sustaining product quality, purchasing and supply management can also help enhance a firm's performance by reducing lead times, increasing order fill-rate, availability and reliability and minimizing delays and associated costs. Studies reveal that supplier involvement and collaboration with purchasing managers in the early project stages allows for reduction ion in lead times by 20 percent and enhancement of product quality by twenty percent (Monczka, ...