Defining Supply and Purchasing Management (Term Paper Sample)

Supply and purchasing
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Supply and purchasing
Introduction
In the recent years, purchasing and supply management has become a very important strategic option for any firm. The current business world is characterized by high cost pressures from all sides thus the need to manage such costs. Management of the supply chain and purchasing activities has become a source of competitive advantage in this aspect. This paper focuses on the issue of supply and purchasing management. The paper will be divided into a number of sections in order to make the points clear.
Defining supply and purchasing management
Supply and purchasing management refers to the integration of all related functions meant to ensure effective and efficient provision of raw materials and relevant services to the organization. Basically, supply and purchasing management refers to the process of procuring and monitoring the flow of goods, supplies or any other type of raw material. This is one of the most important sections of a business. Supply and purchasing involves many activities ; negotiations with manufacturers and suppliers in the process of acquiring goods or raw materials, gathering of information to determine what and how much should be availed to the market among other activities. All these activities are meant to help the organization compete effectively in the market.
Why a qualified supplier and it relates to it
Supply and purchasing involves several steps that are equally important and universally applied in the organization. The organization should first recognize need, then translate that need to a description, search for most appropriate supplier, selection of an appropriate source, both parties then agree on order or contract details, which is followed by the delivery of goods or services and lastly payment of the suppliers. Selection of a suitable supplier is the most challenging step in all this and this requires the supply and management team to spend a lot of analyzing different suppliers before they choose the most appropriate in regard to the organization’s needs and ability. The selected supplier should possess at least the following attributes; should deliver goods/services on time, should observe quality, fair pricing, should be responsible and last he/she should keep the buyer (the organization in this case) informed (Ancarani & Zsidisin, 2012). The obviously unsuitable suppliers are weeded out to remain with potential candidates from whom the best one is selected.
How to select strategies for negotiating prices and steps to of the creation of a project supply
After a suitable supplier has been evaluated and chosen, the supply and purchasing team will need to negotiate for prices with the supplier in order to acquire goods/services at the most economical price, for the benefit of the organization and the supplier as well. Before anything else, it is always important to understand the supplier in regard to how valuable your organization is to them. This will help the organization to ascertain its bargaining power. For example, a supplier that operates near monopoly will have a better position to bargain unlike the one who has a number of competitors. Therefore, there is need to seek adequate information about the supplier before nay negotiations are made. Again there is need to research the actual costs that the supplier incurs in producing the good to be supplied. With this information, you will be able to approximate the levels where the price should lie even before the negotiations are done.
The supplier’s performance history also needs to be reviewed carefully to understand the past relationships between the buyer and the supplier. Information about the supplier’s history is important more so when a new relationship is to be negotiated upon. For example, this can be done by interviewing anyone who has managed a relationship with the supplier in the past. They will provide information about the supplier’s history and offer crucial advice for the negotiating approach.
In developing price negotiation strategy, it is important to plan the strategy in writing before the negotiations are begun. Priorities need to be outlined and these could include things like low price, specific delivery schedule among others. Additionally, there is need to identify the strengths of your negotiation that can help realize your required concessions. On the other hands, you need to come up with ways of defending the weaker parts of your negotiation and countering the supplier’s strengths.
The negotiation team is then selected and equipped with necessary skills. The team should match the seniority of the suppliers ‘representatives, For instance, if the suppliers’ representatives are the senior managers, the organization should counteract by sending senior managers to do the negotiations. Lastly, a strategy worksheet is developed and completed. This structured strategy worksheet should be read and understood well by the negotiation team before they meet the supplier’s representatives. It will help them not to say the wrong things in the incorrect time, something that can really affect the negotiation process. They should clearly understand the objectives of the negotiation activity before they enter the negotiation room.
In the price negotiations, the first offer made should never be accepted. After the other party has quoted its preferred price, you make a low counter-offer and the other party will definitely come up with a more revised offer from which further negotiations can be made. In some instances, the supplier may quote suspiciously low price. This will raise questions like, are the goods of the right quality? You can also ask about other ongoing costs like repair costs, consumables among other expenses in an attempt to make the asking price look very high. Furthermore, in case the price quoted includes unnecessary features that you don’t need, try to remove those features so as to push the price much lower. You should use your bargaining power to negotiate for a good deal especially when you happen to be a big customer of the supplier.
Benefits of Outsourcing
Basically, outsourcing occurs when an organization decides to purchase its products or services from an outside supplier instead of producing them internally. Outsourcing is a strategic decision which is majorly done to cut down costs. Outsourcing is a strategy that many organizations are pursuing in today’s businesses and the common examples include manufacturing of components, training administration etc. Furthermore there is a new trend in outsourcing is the leasing of employees. In this one, specialized vendors will select, train and pay the client’s employees as well as cater for their healthcare coverage among other many benefits.
Many organizations have pursued outsourcing due to its many benefits. Firstly, outsourcing saves costs. This has been a major reason as to why many organization have decide to outsource some their functions since it’s a way of realizing cost saving. An organization will outsource to a vendor who then perform that function more efficiently and effectively than the company performs that particular function itself. Secondly, outsourcing serves to minimize fluctuations in staffing. These fluctuations may result from changes in demand in demand for the product or service. An organization may be forced to outsource in order to minimize workload on their employees. Employees are freed to do another moneymaking activity for the organization and this also gives them time to participate in other career development activities.
It also ensures that the staff remains focused. An organization may decide to outsource in order to save themselves distractions that may adversely affect their core activity. By outsourcing, they will concentrate on maximizing their core competencies to remain competitive in the market. Outsourcing relieves the organization tedious and time-consuming activities and they can spend more financially rewarding activities like sales and marketing. In simple terms, an organization outsources to enable itself focus on its core competencies and brings in outsourcing partner(s) to perform functions that may not be core to the business. Outsourcing is also a way of ensuring staff morale. This often an overlooked benefit of outsourcing but it’s worth noting. Normally, there is general lack of dedication in performing non-core tasks in an organization. Employees tend to have poor attitude which translates to poor performance, duplication of internal efforts. To overcome this, an organization will need to outsource these non-core functions to solve this problem of overlaps.
Additionally, it is a source of financial stability. An organization will utilize the sources that were formerly used in performing the outsourced activity to improve its cash flow. Lastly, outsourcing enables an organization access new knowledge. For example, when it outsources computer programming and other information technology, it will be able to access new technology and expertise from outside. This mainly benefits smaller business which may not be in a position to withstand the cost of hiring computer experts or develop its own in-house expertise. By outsourcing, the organization will be able to access new technology that puts in a better competitive position in the market.
However, outsourcing comes with its costs despite its benefits. For instance, it comes with a cost of managing the contracted body. An organization will incur costs in ensuring managing and coordinating the activities of the suppliers. A lot of resources, time and energy are spent by the organization’s representatives when travelling to visit the...