Question

critically analyse how IT and e-procurement are changing the role of procurement

Answer 1

Utilization of strategy seems to be all pervasive in the economic environment today, therefore compensation management is not untouched by strategizing, resulting in all processes of an organization becoming dynamic, and therefore, demanding constant control and monitoring. Purchasing is a major input cost for any organization, therefore, adopting a viable strategy for ensuring that value received is commensurate to input cost and optimal for the given cost, through adoption of suitable procurement strategies. The idea behind utilization of purchasing strategies is to ensure that all purchases are cost effective and through vendors who are extremely efficient and dependable, with regard to quality of the goods, as well as, delivery time. These are the two most important factors, considering that quality and lead time both directly impact production and supply, as well as, customer satisfaction through product quality. The core aim of purchasing strategy is to optimize procurement through minimizing input cost while ensuring material quality and negating risk associated with deviation in quality and lead time. The central aim of supply chain management strategy is to identify the customer requirement and implement processes required to satisfy adequately a customer's need leading to satisfaction of these needs, greater demand for the product, and finally maximization of profits. Therefore purchasing strategy has as its main focus optimization of input required to create the best possible product at a given cost, whereas supply chain management has as its main focus, optimizing output to ensure it perfectly meets customer requirements in order to maximize demand and profitability. Therefore it is essential that both these processes are closely linked to ensure flow of communication in the form of adequate feedback of customer needs to the purchase department, and also complete information about the product to the supply chain management.

Most purchasing strategies are based around decisions regarding savings on input costs, as well as, procuring high quality material. With the unprecedented development and Communication Technology business has gone global crossing all national as well as, international boundaries. This has impacted every business even the ones which have not expanded their frontiers into foreign lands. Procurement and sales are the two departments which have been greatly impacted with development in information technology. Both these processes can be managed entirely over Information Technology platforms due to presence of online supply and procurement marketplaces in the form of sites which work as a platform linking buyers to suppliers. This has effectively provided access to suppliers across the world for every organization, making it possible to procure the best quality act the lowest price thereby greatly reducing input cost and enabling competitive pricing for the end product. With globalization, it has become essential for every organization to be absolutely dynamic and open to change and adaptability within every process and department, to be able to sustain, grow and attain organizational goals. Due to the presence of procurement opportunities across the globe organizations cannot afford to get complacent about these processes as the opportunity for constant improvement is always a possibility. The opportunity for constant improvement is always a possibility. Thomas Friedman is definitely being proved right, as regards his The world is Flat concept, as procurement from remote areas of China, India and Africa as possible as from the neighbouring states or countries. The concept of e-Procurement has greatly enhanced product quality as well as reduced pricing effectively contribute into the profitability and success of organizations. Concept is gradually gaining favour with all organizations worldwide and may soon become the norm where Procurement is concerned.

There are certain core principles which form part of purchasing strategy within almost every organization, due consideration is awarded to these factors to arrive at the best procurement strategy suitable for the organization. Total quality methods and analysis of a vendor through utilization of this ensures that the quality of the product constantly improves as well as service with no place for errors. A supplier who uses tools such as Six Sigma, definitely passes the total quality method test. Every company attempts to optimize the supply by selecting the right mix of vendors, which ensures procurement is at optimal cost with guarantee of quality and minimum risk of deviation in quality or delivery. This is achieved through constant monitoring and controls, by rooting out suppliers unable to meet quality requirements. Given the fact that the entire business of a company rests largely upon quality material being available in time, control and monitoring in the form of risk management becomes essential. Just like businesses even procurement has gone global with excellent advantages, but also largely increasing the risk in the form of disasters as well as various external factors which may impact cost, negating the advantage gained from low purchase pricing from countries such as China and India. Some companies who are dependent on single supplier, due to the input material being scarce or simple convenience, right to assist the vendor company by offering it complete support to achieve the standards of quality and service required by the company. It works like a kind of strategic alliance whereby both the supplier, as well as the purchaser, benefit from implementation of processes that optimize production.