Purchasing and Supply Management
INF 336 Project Procurement Management
Purchasing and Supply Management
Over the course of this class, I have received a massive informational overload on purchasing and supply management that I was truly not aware of prior to this course, and how as a project manager what one requires in relation to supply management and projects. One now has a stronger understanding of supply management, and in this research paper I will discuss the importance of purchasing and supply management and how this relates to selecting a qualified supplier. Furthermore, I will discuss select strategies for negotiating prices, assembling the steps of the creation of a project supply, service and material budget from detailed requirements. Illustrate the benefits and costs of outsourcing, and the growth pattern of outsourcing. Evaluation of the various organizations that are benchmarks in purchasing and supply management, and their best practices. Also, provide specific examples of companies who show market leadership in purchasing and supply management.
Purchasing and supply management is a vital part of businesses worldwide that consist of several components such as supply, service and material budgeting from comprehensive requirements. These components enable organizations to select the most qualified suppliers and strategies for negotiating price. In part, doing so leads these organizations to procurement, storage and monitoring of goods, machinery, supplies, or other raw goods, sold in a store. For most businesses, purchasing and supply management is a vital job description in analyzing customer behavior and ensuring premium items are available.
Purchasing is a vague term and is often limited to what its actual definition is. Buying items for a business by way of suppliers, learning the essentials that must be purchased, negotiating price and working toward the terms of contract agreement, and finally payment and delivery of such products. Thus, purchasing or supply management is not only concerned with standardized steps in the procurement process which are the recognition of need, translation of that need into a commercially equivalent description, search for potential suppliers, selection of a suitable source, agreement on order or contract details, delivery of the products or services and the payment of suppliers (Flynn, Johnson & Leenders, 2015).
Obviously, purchasing and supply management is larger than purchasing as a vague term. There are various responsibilities of purchasing that succeed the basic definition, such as receiving, inspection, scheduling, storage, inbound/outbound traffic and disposal. Furthermore, supply execs have other responsibilities in this realm that include organizational relationships of customers and third-party suppliers. This wide extension of network embodies the definition of supply chain management, where it promotes the focus of lowering costs and times across the supply chain to the benefit of the final customer in the chain. The idea that competition may change from the firm level to the supply chain level has been progressive as the next stage of competitive evolution (Flynn, Johnson & Leenders, 2015).
Outsourcing is a common practice these days for any organization and purchasing and supply management compliment in the assistance of outsourcing for an organization. Organizations outsource when they decide to purchase a product or service provide for them that was previously accomplished in their own organization at a lower price. Nowadays, it’s quite natural for a company to outsource some type of work, however there are financial implications that must be considered when deciding to outsource. Outsourcing to achieve lower overhead, saving money by outsourcing to foreign countries, and providing benefits that cannot be obtained through the organization itself are all reasons why an organization would outsource a product or service.
During my time in the military, we outsourced to both government and commercial contractors to build new secure facilities. On both sides of the project, adjustments had to be made, because the way that government contractors work on projects was not the same way commercial contractors did. Meetings had to be continually rescheduled to accommodate everyone due to the time and availability of both contractors. Another area was the expectations and quality of the work being done. On several occasions both contractors required site visits to explain the importance of the quality of work that needed to be done, and the importance of building the facility within the secure facility requirements were paramount, thus the building would not be able to be used. A third area was the communication barrier, at times it was difficult to communicate with your counterpart because a message wasn’t relayed correctly, or an important individual wasn’t available to meet at the required time. As a result, the contractor received staggered, misguided or outdated information from other parties, and a slowdown in production was inevitable at this point. These barriers mentioned greatly affected the overall flow of the project, and even caused delays in completion toward building the secure facilities. Moving on, we will discuss the recognition of need.
The recognition of need refers to the necessity of product or service by an organization. From here, there is the description of the need, which is important because products and/or services being requested, and the accuracy of such products and services are paramount for the buyers, which is mandatory that the customer receives the proper product or service. Once this is complete, the identification and analysis of sources comes next.
With investigative and surge of orders in the purchasing process comes the receipt and inspection of goods, because the proper receiving of materials and items is paramount. Through sheer experience many organizations have learned that consolidating sectors under one department, therefore many organizations have merged receiving and purchasing, as it is so related to each other, making the receiving department responsible for the purchasing department.
After the section of receipt and inspection of goods comes invoice clearing and payment in the supply process. An invoice, commonly a bill of sale or agreement in some form or fashion, is the account of all items and services accomplished or to be accomplished by the seller. Furthermore, it notifies the buyer of prices that were previously agreed upon or estimates of said goods and/or services. Usually invoices have confirmation numbers or order numbers to keep track of the invoice and have serial numbers for products purchased. The main concern behind invoices are whether the invoice is aligned with the agreed upon terms and conditions set out between supplier and customer. If the invoice is not accurate then contact should be made and steps should be taken to correct any errors therein. I have seen this occur many times during the building of the secure facilities, one specifically where the wrong locks were purchased. The concerning part was the commercial contractor did not have the required locking mechanism, so they took it upon themselves to provide us with “an updated model” of the lock that was originally requested. From a bird’s eye view, this would seem like a valid fix to a simple problem, however we were under strict guidelines as far as what type of locks should be used to keep the facility in compliance with government regulations. The lock had to be returned, and our options were either the commercial contractor had to search for another lock and provide the lock we requested, or our office would have to create an approved deviation from the regulation, and get the lock approved in writing. This is a prime example that if inconsistencies happen, actions must be taken to rectify the situation.
Finally, the last step in the purchasing and supply process is the maintenance of records and relationships. This process involves record keeping and file management and compiling any related information or documents. With this step in the process, basic records that need to be maintained either by paper copy or digitally uploaded to a cloud drive and kept on a server for record keeping. These files may also include labor contracts, tool records, business purchases, and bid history documents.
In purchasing and supply management, there are various strategies for choosing the most competent suppliers and negotiating desired prices. When picking suppliers, the supplier’s ability to meet quality of satisfactory standards, quantities, price/costs, delivery rates, and services and evaluated to make this decision.
Flynn, A. E. Johnson, P. F., Leenders, M. R. (2015). Purchasing and Supply Management. San Diego, CA. Bridgepoint Education, Inc.