Question

From your experience and by conducting research online explain purchasing strategies you have seen within the supply chain and focus on the movement of products. Explain different purchasing designs and strategies and explain how these strategies are separate from the supply management and supply chain management strategies.

Answer 1

Utilisation 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 organisation becoming dynamic, and therefore, demanding constant control and monitoring. Purchasing is a major input cost for any organisation, 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 utilisation 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.

Most purchasing strategies are based around decisions regarding savings on input course as well as, procuring high quality material. Centralised purchasing strategy reduces input cost of transportation by focusing on purchases from vendors, within a concentrated location. Companies may also decide to implement the single vendor procurement strategy provided the vendor offers excellent quality, delivery, as well as, other benefits in the form of credit facility returns. The strategy however always carries a risk factor being dependent on a single supply source. Another strategy utilised by many companies is implementing a purchasing cycle whereby procurement is through group of vendors with orders being placed with each vendor, in a cyclical manner, which is preset. They mostly may outsource procurement for I volume purchases. Procurement options are the preferred strategy for companies which require labour other services for short term projects. This mode of procurement is also utilised for subcontracting projects, ensures excellent pricing levels are availed due to its inherent competitive nature, involving bidding.

There are certain core principles which form part of purchasing strategy within almost every organisation, due consideration is awarded to these factors to arrive at the best procurement strategy suitable for the organisation. Total quality methods and analysis of a vendor through utilisation 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 optimise 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 window 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 optimise production. Considering globalisation of businesses most large corporations have understood they social responsibility and adopted green initiatives, in every possible business process. Procurement is a major department for application of green initiative as utilisation of recyclable products, as well as promoting products manufactured from reusable and recyclables material, goes a long way in creating a positive image of the company as being socially responsible. Every company will identify purchasing strategies that ensure minimum cost and maximum quality with perfect delivery schedule, resulting in products that have enough value to create excellent profits.

Purchasing strategies differ essentially from supply chain management strategies, as the very goal that is to be achieved is different. The core aim of purchasing strategy is to optimise procurement through minimising 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 maximisation of profits. Therefore purchasing strategy has as its main focus optimisation of input required to create the best possible product at a given cost, where is supply chain management has as its main focus, optimising 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 please show 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.