Procurement and Warehouse (Essay Sample)

Running Head: Procurement and Warehouse
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Procurement and Warehouse
In any organization that is operational, acquisition and storage house are terms that are anonymous. An organization obtains its goods and products through the process of acquisition. Procurement is elaborated as a process by which an organization orders and pays for goods and services acquired in the body. The acquired products have to be stored safely for future use. The storage gets geared by the fact that all the purchased products cannot get utilized in a single day, and hence, they should be kept. The most commonly used facility for storage purposes is the warehouse. A warehouse is a particular room or building where merchandise gets stored before or after buying them. A store offers security to the goods, and the seller or the buyer can be able to make a further arrangement of the goods.
Literature Review
Role and Activities of Procurement
The acquisition involves many activities that may vary from one company to the other based on different factors. Some of these factors include the complexity of the organization’s needs, the cost value of the procurement, the time allocated for the procurement process, the number of available and willing suppliers and the risk deemed during the procurement process (Choi, 2010). Procurement process involves activities such as sourcing, ordering, purchasing, distribution and after sales services if any (Laffont & Tirole, 1993). The organization searches and identifies a reliable supplier of the goods or services intended to get purchased. The provider is engaged by the organization and agrees on a particular price of the goods. The organization orders the delivery of the goods that are of high quality and at best prices. Deliveries get done to the firm and purchased after inspection (Tirole, 1986). The products get taken to the warehouse where they get stored awaiting their need of use to arise. It is worth noting that procurement and purchasing differ. Procurement is the process of identifying and obtaining goods and services and encompasses purchasing and sourcing while purchasing is the particular function associated with actual buying of goods from suppliers (Choi, 2010).
The primary role of procurement is to execute all the activities associated with procurement to ensure goods bought are of right price, right quantity, and the sound quality (Tirole, 1986). Furthermore, acquisition ensures that the goods bought from the right place and arrived at the right time in the organization. Moreover, it ensures that the products are obtained from good sources and attract appropriate services. Other roles of procurement include identifying opportunities available for the company through evaluation and selection of suppliers (Choi, 2010). Review of specifications or statement of work, acting as the primary contact with the vendors, determining the method of awarding contracts and establishing a supply base. Procurement has the capability of nurturing leadership in the organization as well as offering more career opportunities for the employees to further their knowledge of purchasing (Laffont & Tirole,1993). Purchasing encourages accountability in the company through proper sourcing. The process helps the organization to develop healthy relationships with other functional groups. Moreover, procurement has a significant role in supporting the organizational goals and objectives especially the strategic plan.
Role and Activities of Warehousing
Warehouses are of different types. However, they serve the same purposes, and the functions are similar. The most common store is public, private and bonded warehouses (Kuehn & Hamburger, 1963). Public warehouses are used by the general public to store their goods for a fee. Commonly, it is owned by a cooperative society or an individual. Furthermore, these warehouses are known as duty-paid stores rooms. Public warehouse offers excellent receipt facilities, dispatch loading and offloading of goods. On a different look, a private store is owned and operated by individuals to suit their needs. They are mostly used by manufacturers to store their products. A bonded warehouse gets used in storing imports awaiting duty clearance at the port (Kuehn & Hamburger, 1963). They get managed by the customs authorities or the government. In the three types of warehouse, the activities and functions carried out therein are similar.
The prime role is storage of surplus commodities. This storage allows for regular production by the manufacturers (Teo & Shu, 2004). They help in stabilizing the prices of goods by a creation of time utility. This time, service ensures that the commodities produced are availed to the consumers especially if they get built at the inopportune time (Webster,1992). The warehouses bear the risk such as theft, fire, spoilage, spilling and exploration on behalf of the buyer or the seller (Holmstrong & Tilore 1989). The warehouse can be used as a financing commodity by the warehouse owner as security. Activities such as grading, sorting, packing and blending activities also take place in the warehouse, to the advantage of the buyer and the seller (Teo & Shu, 2004). A storage gives the importer ample time to plan for the payment of the duty and arrange for the delivery of the imports to the buyers. Some commodities such as tobacco improve in quality while in the warehouse (Kuehn & Hambuger,1963). Furthermore, a storage offers the customer an opportunity to view and inspect goods in bonded warehouses before purchasing them.
Particular LEAN Management Principles and Tools
The competitive market in the world has led companies to abandon the old managerial practices and embrace new tools. These new tools commonly known as the lean tools have helped many businesses to elevate their output while minimizing costs and time wastage (Womack, 2010). The lean management tools are useful in the empowerment of the employees, cost reduction and eliminating waste in an organization. The lean principles apply in the value stream through the elimination of waste hence reducing costs, attracting more sales, generating capital and remaining competitive in the market. According to Hines and Taylor (2000) value streaming the specific activities within a supply chain needed to design order and provide a particular product or value.
Lean principle and tools aim at maximizing activities that add value from customer’s perspectives. Lean can best be described as the set of principles and practices beneficial to the company in creating more customer value faster with the same available resources (Hines & Tylor, 2010). The first principle of lean is motivation with a vision. The vision of the company should be well laid down paying attention to the enterprise’s objectives. Revision of the image is critical if the current one creates no value to the organization. The second principle is setting objectives quantitatively (Womack, 2010). The goals of the company should be unique and in line with the strategic plans of the organization. The objectives should decisively get reached through consultations and incorporation of the customer’s feedback.
The third principle is measuring the conversion (Abdullah, 2003). This measurement gets achieved by use of key performance indicators. The fourth principle is experimental product development (Abdullah, 2003). The company should analyze success and failure of a product before releasing a new one into the market. There should be a comprehensive exploration of the market. The fifth principle involves teamwork. In the organization, there should be working together towards similar goals and objectives (Womack, 2010). The tools of lean management include team leadership, visual controls, ice breakers, strategic planning, practical activities, training and assessments.
Practical Implications
Warehouse Problematic Issues
Warehouses come with additional costs to the organization since they are expensive to maintain in the long run (Teo & Shu, 2004). The costs are in terms of time wastage, the actual loss of items and manpower loss. However, these costs are avoidable with proper lean management and manufacturing principles. The lean manufacturing principles ensure there is no wastage in the organization (Womack, 2010). Manufacturing firm aims at converting all the raw materials to consumer goods, keeping a constant flow of customers into the premise and producing the exact quantities needed by the customers. Furthermore, it aims at getting rid of underserved movements of people, solving problems in the simplest way and utilizing the power and people in the most productive manner (Hines & Tylor, 2010). Furthermore, the principles require the organization to eliminate defects in their products and services, create enough space, avoid transportation of unworthy goods and materials, and avoid time wastage through long setups, delays, and machine breakdowns. The company has to identify its sources of waste before applying any tool. There are two major issues in warehousing: inventory cost and transportation costs.
According to Teo and Shu (2004), inventory costs arise from the unceasing customer demands for the goods that are in the warehouse and have to get supplied. Teo and Shu argue that "Orders placed by retailers generate demands at the warehouse, which acts as the source of supply for the retailers. Teo and Shu continue to argue that "the warehouse replenishes its inventory from an external supplier" (pg. 397). Furthermore, Teo and Shu highlights that "there is a holding cost charged against each unit of inventory per unit time at the retailers and the warehouse and a similar set-up cost charged for each order placed at the store and each retailer" (Pg. 397). The deman...