PURCHASING CONCEPTS AND MODELS

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Introduction

The report will discuss in detail about the purchasing model of the company called Wal-Mart. Three components will be covered in the report that is the supplier selection criteria, purchasing cost analysis and ICT for purchasing operations and management.

With so many people spending a huge amount of money on the goods and services the success of the company largely depend on the overall communication with the suppliers, the amount spent on the purchasing of goods and services and the role of information and communication technology in suppliers operations (Shaw et al, 2012). In addition the role of purchasing manager is also transforming within the industry and has become very crucial which usually involve money value which is staggering with each passing day. There are number of reports and surveys which show that companies are spending a huge sum of money on the purchasing manager. In company like Wal-Mart, role of purchasing manager become even more crucial since the entire business cycle depend highly on suppliers and their efficiency as a manufacturer. It is important to understand here that with so much money spent on the outsourcing of number of services which are complex by nature and calculate the best kind of values which means that for companies, buying and implementation of procurement decisions as per the demand (Shaw et al, 2012).

Supplier selection criteria and related issues (e.g. single or multiple sources, local and overseas etc)

Supplier selection can be defined as a process where the company is able to recognize, test and then contract with number of suppliers. The process of supplier selection also deploys a lot of financial resources on the company and in return, companies also expect some major advantages from contracting with suppliers that offer some kind of value as well. The process of supplier selection consists of recognizing the suppliers, collecting the data from the suppliers, formation of the terms of contract, negotiation and testing the efficiency and effectiveness of suppliers (Shaw et al, 2012). Following are the detailed discussion of supplier’s process: –

Recognizing the potential of suppliers: – to sustain this fierce market, it is crucial to grow the present suppliers but also look for new and innovative kind of suppliers. There are number of reasons that make new type suppliers crucial. First there exist different kinds of suppliers that are higher in some manner to the existing suppliers. For instance, a new type of suppliers that grows a novel kind of production and technology or aligned with process that permits it to decrease the cost of production which is relative to dominates the production and technology related to it (Mani et al, 2014). There is supplier’s qualification that screens and it also involves different kind of features. The buyer has the power to contact past customers and at the same time also asks about the delivery performance of the suppliers.

Information need to suppliers: when the buyer is recognized the potential kind of suppliers, the very next step in selection of suppliers is formally ask about the suppliers that gives data related to goods and services. There are number of things that covers following aspects: –

Request for proposal is given when the buyer can sense the market and also offer a statement of work that consist the set of performance that is needed. For instance, the RFP can define a formed part with specific strength, resistance for fire and higher level of flexibility however, mentions that specific composition of different material (Mani et al, 2014). Suppliers can respond to RFP with different details on how one can satisfy the performance of the buyer needs and the price that can be accepted for certain things.

Then there is request for different quotes where the buyer can grow a statement for work that defines the present specification for different goods and services (Mani et al, 2014).

Contract terms: the process consists of a contract that is present between the suppliers and buyers. The data received from different suppliers through different kind of requests defined into formal contractual terms that is before the contract (Dai & Blackhurst, 2012).

Negotiation can be defined for contract awards decisions that the buyers that considered every qualification as well as terms for contract that can be offered (Mani et al, 2014). A qualification for suppliers that are considered exogenous, for instance when the reputation of the suppliers is based on historical performance and it does not change the short terms.

Evaluation of suppliers and contract award: this part of buyer tests the suppliers, decides the winner of the contract and also performs the follow up that tests the future suppliers selections. Suppliers test is the process where the buyer can rank the orders different kind of suppliers (Dai & Blackhurst, 2012).

Purchasing cost analysis

Purchasing cost analysis can be defined as a breakdown and tests of different kind of costs. The basic model is utilized but in practice the breakdown will have a lesser and bigger degree or level based on the need of the purchase in the company, the more complex kind of purchase the more will be the depth of the breakdown. For example, a buyer of the manufactured parts is needed to understand the prices and percentages of the price of raw material, logistics and different kind of overhead (Dai & Blackhurst, 2012). Here it is important to understand that it is difficult to understand the definition and there are companies like Wal-Mart, options of lump packaging, marketing and sales expenses goes into the indirect part. It is also important to get different kind of methods that is easy way to understand the concept. There is non-disclosure of different concepts or there is also some kind of agreements to provide the information as well. One can ethically agree to keep the data confidential in any way and also remember the agreement by writing it. In some cases, when there is any kind of suspicion for suppliers that make the part and also may also require to sign the agreement as well. The company can also decide to not to disclose any information related to cost and purchases. At the same time, the supplier may not understand or know the overall costs and this situation can be harmful since it is easy to slip into a case where no one perform since the cost of purchase was underestimated (Thornton et al, 2013). On the other hand, the supplier can also need to provide some kind of cost since one is paying a lot which cannot be justified on economic level. In either case, all the situations need an action which brings immediate remedy.

There can be two type of cases where a new kind of supplier or periodic based reviews on performance. In case of a new supplier, it has to go through the process for qualification; there is also a risk of loss for new customers that make everything very responsive to the analysis of cost. It is important to compare the cost structure to other suppliers and also test testing the reasons for differences. The purchasing of goods may not impact or receive a discriminatory kind of price which can be risky for the company (Thornton et al, 2013). There are number of edges or risks in case of sourcing and at the same time there are number of advantages as well that shows that suppliers can justify the difference in costs.

Renewal of contract or testing the other ideal time specifically when there has been some cases of fail or loss in recent time. Suppliers and consumers have the option to test and analyze on reducing costs in recent time. Deleting the cost further reduce the price. For instance, when one buy a part for $100 and the organization eliminates per piece cost despite the logistics or packaging costs then there is saving of $2 that can be applied on reduction of the price to 98 dollars (Xie et al, 2011).

The use of ICT for purchasing operations and management

The operation in the company like Wal-Mart is based on different kind of approaches that aims on managing the inventory and supply chain. It also covers the performance from the sales. The overall success of the company is based on effective management of performance in operation management (Chai & Liu, 2014). Particularly, the management of the company covers all kind of decisions of operation management and these types of decisions are related to number of issues and cases that any manager can face on the daily basis. In turn there is also priority that shows the importance of different kind of decisions areas in operations and it exist in the business as well.

There was a time of inter-organizational system which is also known as IOS which is specifically supported by the automation of many kinds of manual based function like setting the accounts and placing the orders. There is range of new kind of characteristics for different sharing the information, communication and collaboration that has increased different systems (Chai & Liu, 2014). Different studies show that there are around thirty thousand of IOS that are in use presently and also support large proportion B-to-B functions. In present time, there are different network leaders as well like Dell or Wal-Mart that have made major changes and took efforts to bring the advantages of collaboration with number of suppliers by utilizing specific form of IOS in supply chain management. It is important to give a lot of understanding on the advantages that these kinds can give to suppliers and this is why there is a challenge of interest on both sides. Despite any importance, studies have shown that leaders especially the suppliers has aimed on gaining the advantages that is driven from supply chain management system by different kind of network leaders (Chai & Liu, 2014). The network of suppliers can be characterized by major amount of supplier firms that work with different kind of network leaders. The association between the suppliers and the network leader can be characterized as asymmetrical. There are network leaders that play a major role in understanding the quality of suppliers. The advantages from the information technologies can be distributed in an uneven manner and it is skewed in support of many kinds of network leaders (Olson & Wu, 2011). Although when there is participation of suppliers, it is important for different kind of network leader to drive the advantages and the company of suppliers can be seen as an advantage from different kind of networks. Despite the network leaders which can be seen as an advantages is at the cost of suppliers, many a times changes the functions and costs for them. For example, the move from vendor managed inventories moves the tasks based on supervising and at the same time managing the inventories of the suppliers and also creates advantages for different network based leaders and it also adds to the functions perfumed by the suppliers. In the similar manner, there is also a quick response based programs that helps in creating different advantages for auto production and retailers while burdening the suppliers with making more deliveries and also incurring higher cost for holding the inventory (Olson & Wu, 2011).

Bloom Taxonomy

 

The Bloom’s Taxonomy was introduced in the year 1956 by Dr. Benjamin Bloom to encourage higher level of education like testing different concepts and processes and many more principles (Adams, 2015). The main focus is on these things rather than facts. The concept is used while forming different kind of processes in education and training. Following are the three kind of learning: –

Cognitive which uses mental skills based on knowledge (Adams, 2015)

Affective which is based on development of feelings or emotional self of people (Adams, 2015).

The last one is psychomotor based on many physical kinds of skills (Adams, 2015).

The work is based on higher level of education this is why the words used in the concepts are larger than normal usage. Number of instructional based designers and trainers are often considered the concept as KSA where knowledge is related to cognitive, skills are related to psychomotor and in the end attitudes is related to being affective (Adams, 2015). The committee which was set up produced a compilation for number of affective and cognitive kind of domains where psychomotor domain was removed. The case for this concept was that there was very little experience in teaching for number of skills within the parameter of the college (Adams, 2015). But there are three models in psychomotor conceptualized by number of other authors and researchers. The explanation divides the three domains in subparts from cognitive process to most difficult one (Adams, 2015).

Conclusion

Wal-Mart has the huge network of committed kind of suppliers that assist them to satisfy the requirements of millions of consumers all across the world every week. The company takes it as a responsibility to manufacture the product and services. The company is committed to work very closely with the suppliers and to find more methods to associate with different kind of new suppliers as well (Johnston & Marshall, (2016).

It is important for the company to understand that when any supplier are based on similar kind of region and the buyer is also very vulnerable towards the cost like cost of transportation between the location of buyer and the region of supplier and in case there is any risky situation like strike at port of origin then the vulnerability of consumer (Hassini et al, 2012).

Therefore selection of suppliers in different kind of location decreases the correlation that exists between the buyer and the supplier. However this also assists the buyer when one is able to prevent the windfall by low cost suppliers (Tate et al, 2011).

 

 

 

 

 

 

 

 

 

 

 

Reference

Shaw, K., Shankar, R., Yadav, S. S., & Thakur, L. S. (2012). Supplier selection using fuzzy AHP and fuzzy multi-objective linear programming for developing low carbon supply chain. Expert systems with applications, 39(9), 8182-8192.

Mani, V., Agrawal, R., & Sharma, V. (2014). Supplier selection using social sustainability: AHP based approach in India. International Strategic Management Review, 2(2), 98-112.

Dai, J., & Blackhurst, J. (2012). A four-phase AHP–QFD approach for supplier assessment: a sustainability perspective. International Journal of Production Research, 50(19), 5474-5490.

Thornton, L. M., Autry, C. W., Gligor, D. M., & Brik, A. B. (2013). Does Socially Responsible Supplier Selection Pay Off for Customer Firms? A Cross‐Cultural Comparison. Journal of Supply Chain Management, 49(3), 66-89.

Xie, G., Yue, W., Wang, S., & Lai, K. K. (2011). Quality investment and price decision in a risk-averse supply chain. European Journal of Operational Research, 214(2), 403-410.

Chai, J., & Liu, J. N. (2014). A novel believable rough set approach for supplier selection. Expert systems with applications, 41(1), 92-104.

Olson, D. L., & Wu, D. (2011). Risk management models for supply chain: a scenario analysis of outsourcing to China. Supply Chain Management: An International Journal, 16(6), 401-408.

Johnston, M. W., & Marshall, G. W. (2016). Sales force management: Leadership, innovation, technology. Routledge.

Hassini, E., Surti, C., & Searcy, C. (2012). A literature review and a case study of sustainable supply chains with a focus on metrics. International Journal of Production Economics, 140(1), 69-82.

Tate, W. L., Dooley, K. J., & Ellram, L. M. (2011). Transaction cost and institutional drivers of supplier adoption of environmental practices. Journal of Business Logistics, 32(1), 6-16.

Adams, N. E. (2015). Bloom’s taxonomy of cognitive learning objectives. Journal of the Medical Library Association, 103(3), 152.