Understanding the Purchasing, Procurement and Supply Management (Coursework Sample)

* Purchasing, Procurement and Supply Management:
Initially, concept of supply chain management (SCM) was employed in retailing and wholesaling with an aim to reduce lead time of delivery by improving integration of distribution and logistics functions of a business. Both producers and service providers used this terminology for developing relationships with second-tier suppliers in order to optimize cost and enhance responsiveness of business with improved quality and delivery time (Kshetri, 2018). The management philosophy is addressed and reinforced with new terms in context of supply chain such as purchasing strategies, supplier integration, strategic supplier alliance, logistics, supply chain synchronization and value chain etc. all these terms are considered main elements of management process in any business. Supply chain management is rewarded as a fundamental component of business management study due to its complexity and practical implications. In spite of this significance, different activities of supply chain are not acknowledged well (Paulraj, 2008). Conceptually, SCM is comprised of all the activities related to value addition starting from the suppliers of raw materials and ending to the delivery of end users. It basically aims to provide coordination for value chain by expanding business boundaries and develop a firm in form of a virtual business entity. Furthermore, area of supply chain could be prolonged by including activities related to the recycling process. However, there is also need to elaborate this term by discussing the importance and role of different participants in supply chain because successful management of this process lies upon strong integration among these key participants (Wisner and Tan, 2000).
The philosophy in this area stressed upon the integration of logistic activities by developing strong connection between multiple business entities which share a common goal of customer satisfaction and cost reduction. Different independent business formulate an organizational setup for effective and efficient supply of material, services, equipment and final products to the end user. Hence, it involves a number of key functions including demand management, purchasing, production planning, distribution network and quality control throughout the chain. Supply chain normally evolves around two main objectives; short term and long term. Short term objective focuses on the increased productivity with reduction in inventory and its cycle period (Tan and Tracey, 2007). On the other hand, long term objective has a more strategic point of view with an aim of increased customer satisfaction as well as enhanced profitability of all stakeholders and market share. For the realization of these objectives, all stakeholders recognize that realize these objectives, all strategic partners must recognize that sourcing activities are very important to perform purchase actions proficiently for a specific business. For instance, the involvement of raw material suppliers or service providers at initial stage could be helpful for manufacturer to use alternative ways for the selection of best material, technologies and other related components to design a quality product (Zsidisin and Smith, 2005) Supplier involvement in the entire process of product development promotes activities related to continuous improvement in overall process of production that has a significant positive impact on performance leading towards competitive advantage (Tracey and Tan, 2001). In general, SCM aims to deliver quality products with efficient utilization of both internal and external suppliers’ skills and capabilities (Morgan and Monczka 1996).
Role of supply chain management is indispensable to run a business operations because it includes key processes such as purchasing, procurement, logistics, and resource management and information flow. It enables the organization to develop linkage between different functions. Supply chain is defined supply chain management encompasses all the processes and procedure that involves in supplying raw materials, services and machinery directly or indirectly to the organizations from external sources. All these efforts of supply chain lead towards achievement of competitive advantage. This definition comprised of both strategic and operational aspects. A series of supply chain activities incorporates a number of key stakeholders to ensure efficiency and effectiveness of supply chain process. Communication and information sharing is basic driver of supply chain in order to support functionality of its different processes (Supply-Chain Council, 2001).
It is a process that involves people, activities, resources and information in an organized way with an aim to deliver high quality to customers. It starts from the supply of basic material that is further transformed in for of final product delivered to the customers. The organizational network develops upstream and downstream associations in order to formulate quality product or service to enhance overall customer satisfaction and business profitability. Material is forwarded from one end to another end, hence, alignment between different stakeholders is very important for successful business operations. In supply chain, suppliers, manufacturers, customers are directly involved in upstream and downstream flow of different activities. Inventory is a main component of supply chain process that requires effective management of entire process (Zablah et al., 2005).
At present, there are several impellers which influence activities and procedure of supply chain. These impellers include empowerment of customers, technological development, globalization and concepts of supply chain (system concepts, total cost concepts and trade off concepts). Consumers are becoming more demanding and require increased value against the cost they pay to acquire a certain product or service. Technological development has increasingly contributed in growth and practices of supply chain. The flow of material and funds is highly influenced due to information technology. Global expansion of business has become very important due to which the opportunities related to sourcing, manufacturing facilities and marketing structure are dispersed at wider level. Hence coordination between the functions of supply chain is very important for development and success in the market (Yin, 2009). .
Purchasing and procurement are the functions in supply chain which are responsible to perform day to day activities related to material and information management. The functional strategies of supply chain define core competencies of firm to develop a strong network structure at national and international level. Many industries expand their business operations at global level by developing optimized functional network of supply chain (Skippari et al., 2016). The main domain of logistics activities in supply chain is to manage flow of raw material in company and final product of the company till its delivery to end consumers. Traditional perspective defines these efforts between suppliers and buyers in order to achieve high performance level of entire chain. However, it also focuses on monetary affairs and information flow between two entities. Information is the main element in whole process as follows the principle to promote communication facilitation among key stakeholders that is very important to maintain inventory flow. Logistics activities are mainly categorized into two major form including Inbound and outbound logistics. Inbound logistics refers to the activities involved in managing the flow from supplier to manufacturer end while outbound logistics intend to deliver the final product from manufacture to end consumer. It develops linkage between the functions to support in order to facilitate their performance (Rogers et al., 2002).
On the basis of this entire discussion, we could be able to summarize that supply chain is an ongoing development process that aims to achieve high level of performance of every component in order to manage all operations more effectively. The literature studies stressed upon the substantial difference in different terms including purchasing, procurement and sourcing. The first element is purchasing that involves in performing operational activities which are focused by one department called purchasing department. At first, need is identified and then purchasing activities are tracked. In this way, a traditional role of purchasing is explained. Moreover, procurement has broader scope that includes activities related to strategic significance. It deals with purchasing and other strategic activities at the same time (Rogers et al., 2016).
The activities related to procurement has a significant impact of competitiveness and efficiency of supply chain of an enterprise as it tends to reduce the material cost. In any business, this cost is entitled by 60-70 percent of final products or semifinal products (Belk, 2009). Hence, the industries have focused a lot towards the development of procurement in order to achieve desirable economic results for an enterprise. The procurement component in supply chain has to face a number of challenges which reduce efficiency and effectiveness of a business. In this regard, many experts of supply chain highlighted importance to pay considerations towards professional capabilities of procurement process. Procurement is a main factor that direct impact on profitability. Therefore, there is dire need to focus on creativity and innovation in this process with strategic alliance and other policies (Busse et al., 2017). Both purchasers and procurement managers determine and cope with risk in supply network. In this way, their creative ideas can contribute to develop increased business value. In this regard, role of d...