The modern healthcare systems increased ability to offer quality services has increased the importance of some previously overlooked issues such as organ donation. In todays scenarios, there exist a wide variety of methods through which people can procure replacement organs. Health institutions are, therefore, hard pressed to ensure that they adhere to the best practices in ensuring that their clients have fair access to legally-procured organs. They must also ensure that these patients are prioritized in a transparent and ethical manner, without affording preferential treatment to any of their cases. Therefore, the bioethics of organ procurement are vital for helping health professionals to meet their mandate to their clients.
Donor organs are living tissue and as such, must be handled in ways that preserve their integrity. From the onset, Organ Procurement Organizations (OPOs) must obtain the donors consent before collecting any of their tissue either after death or through surgery in the case of kidney or skin transplants (Howard, Cornell, & Cochran, 2012, p. 14). To achieve this, OPOs coordinate their operations with health institutions to ensure their efficiency. Those OPOs that cannot afford to have in-house specialists to perform organ procurements resort to hiring them through other service providers (Howard et al., 2012, p. 15). Access to these professionals ensures that OPOs can educate the public on organ donation, receive donor information, evaluate individual cases, manage post-mortem scenarios, seek the consent of the donors next-of-kin, and contact other health providers to find suitable recipients (Howard et al., 2012, p. 15).
Even as OPOs strive to connect willing donors with recipients in need of their tissue, there are some complexities around the receipt of donor tissue. For instance, recipients have to take a long course of immunosuppressant medication to reduce their bodies chances of rejecting the donor organs (Ridjic, et al., 2011, p. 108). Resultantly, recipients must be beneficiaries of insurance schemes that will help them shoulder the economic cost of being an organ recipient. Medicare, Medicaid, and the Social Security Retirement system are some government initiatives that assist low-income and elderly patients in accessing post-op immunosuppressant medication (Ridjic, et al., 2011, p. 109). Even so, Medicares coverage is limited, and some gaps still exist, which is a disadvantage for many individuals from the recipient pool (Ridjic, et al., 2011, p. 112).
Organ disbursement is a complicated process due to the availability of a small number of donor organs compared to the overwhelming number of potential recipients. The United Network for Organ Sharing handles disbursement in the US and has adopted a best bet organ allocation policy to ensure efficient and fair allocation (Cherkassky, 2011, p. 418). This system allocates donor organs to recipients who are most likely to benefit from them and survive for longer, and not to those who need them the most, as is often the case with medical emergencies (Cherkassky, 2011, p. 420). This approach rules out the urgency of cases such as those of potential recipients who are nearing death due to organ failure but in turn, favors patients who have little or no history of negative behaviors that would shorten the donor organs life span (Cherkassky, 2011, p. 420).
Organ transfer is a critical issue that affects the donors, recipients, their families, health institutions and many other stakeholders. As a result, the procurement and disbursement processes must ensure that they follow the most prudent paths to protect the interests of individuals on both sides of the donation. Organ allocation is a contentious issue, and distribution agencies are still trying to formulate fair allocation protocols to ensure that they perform their duties ethically. By doing so, they can ensure that donor organs are put to the best possible use and that the recipients will, in turn, live more fulfilling lives because of them.
References
Cherkassky, L. (2011). Does the United States Do It Better? A Comparative Analysis of Liver Allocation Protocols in the United Kingdom and the United States. Cambridge Quarterly of Healthcare Ethics 20(3), 418-433.
Howard, R. J., Cornell, D. L., & Cochran, L. (2012). History of Deceased Organ Donation, Transplantation, and Organ Procurement Organizations. Progress in Transplantation, 6-17.
Ridjic, O., Ridjic, G., Masic, I., Muminagic, S., Slipicevic, O., Agic, N., & Karamehic, J. (2011). Financial and Legal Aspects of the Organ Transplantation. AIM, 108-113.
Due to economic related challenges or opportunities and need to establish strategic competencies, companies often resort to outsourcing. This report considers the outsourcing options to be explored to ensure Travel Magazine is up and running despite budgetary constraints.
Outsourcing involves subcontracting or giving third parties work that would otherwise be done within the organization (McIvor, 2005, p. 7). Many organizations especially in the developing world are tending towards outsourcing. Outsourcing is an easy option but it all depends on organizational characteristics.
Considerations in Outsourcing
There are many reasons why institutions choose to outsource their operations. However, at the core of the outsourcing decision is desire to develop a competitive advantage or edge. The competitive advantage is gained through being able to focus on core business, enjoying expertise that is not available in the organization, use of technology that would otherwise be expensive investing in, or benefiting from economies of scale enjoyed by the outsourcing partner.
Travel Magazine plans to outsource so as to cut start up costs due to limited capital. Outsourcing will enable the company to share assets or use the assets of other companies thus it does not have to invest in the assets. Secondly, outsourcing will enable the company to produce high quality magazines by relying on already established expertise in another company.
The company will seek out only vendors with prerequisite experience and expertise for each given outsourced service or activity. The outsourcing process will enable the company to invest the available capital in the core of the business.
Outsourcing comes with a number of benefits but there are also numerous challenges or demerits that the company has to consider in making the outsourcing decisions (McIvor, 2005, p. 23). One key concern is the capability of the company to which Travel Magazine processes are outsourced to deliver quality. Unless considerable care is taken, outsourcing could compromise the final product i.e. quality of the magazine.
Secondly, control of business of processes should be designed into the outsourcing contracts. This measure is taken into consideration because Travel Magazine as a company could easily loose control over the Magazine if all the core functions are outsourced. The outsourcing contract has to be designed in a way that it secures the companys independence in the future. A magazine publishing company has to control its information sources.
Business Processes to Outsource
The outsourcing process starts with analyzing organizational processes to determine which ones are worthy outsourcing. Travel Magazine as a company has a number of functions that it can outsource.
The functions include accounting, editorial, photography, publishing, distribution, printing, layout, advertising, editing, articles, etc. due to budget constraints; the company has to outsource at least five functions. The guiding principle for outsourcing any of the processes or functions is its relative contribution to quality for customers, cost reduction and competitiveness of the magazine.
The processes that should be outsourced include photography, advertising, printing, distribution and publishing. Printing a magazine requires heavy investment in printing machines. Fortunately, there are many organizations that specialize in printing; printing is their core business. By outsourcing the printing process, the organization will save money i.e. no need to invest in expensive printing machines. The money saved can be invested in core business of the organization.
Photography is also worthy outsourcing because it allows the organization to focus its efforts on core business. Although photography is an integral part of the magazine quality, there are a number of organizations that specialize in such services. Outsourcing to such institutions will mean that the organization gets best shots from wherever at relatively low costs.
Secondly, taking good photographs, especially for a magazine, is dependent on many years of experience. Outsourcing such a function would ensure the company accesses experts in the field at lower costs when compared to hiring staff and developing own photography studios.
Advertising is a tricky affair because marketing determines whether a brand resonance for the magazine is built in the long run or not. Given the organization is young and has a budgetary constraint, developing a marketing branch that is fully empowered to do effective advertising may not be cost effective.
There are many marketing and advertising agencies in the market that can be used. These agencies have built the structures and mechanisms or ensuring correct and effective execution when it comes to market communication. They have the personnel with long experience of delivering on brand building and retail activations. Engaging them would mean riding on their long experience and thus following a proven track.
Distribution is best outsourced so as to benefit from already established trade channels. If the company is to set up its own distribution channel or develop its own selling points; that would be an expensive venture. Secondly, that would mean creating competitors out of the established distributors.
There are established distributors in the market who specialize in the distribution of various magazines. All the company needs to do is sign a contract with any of them and the distribution needs are catered for. The distributors would deliver the magazine to all corners through their channels. All the company has to do is identify the niche market and thus contract a distributor with wide penetration in the niche areas.
Finally, publishing is also better off outsourced. Publishing is not a core function or process despite its importance. Once again, relying on established publishers would mean the company does not have to develop its publishing function. Developing such is an expensive venture that is capital intensive.
In the information age we live in, much magazine sales sell online. Finding a reputable publisher to publish the magazine online will be a welcome move. This will mean that the company does not have to invest in IT requirements that would facilitate online publications.
The company will maintain in-house business processes such as accounting, editorial, layout and article sourcing or development. Given the organization is going to outsource many processes; accounting has to be done in-house for proper monitoring of the different concerns.
If accounting is outsourced, the organization looses total control over processes in the way. It would have to wait or rely on accounting reports from elsewhere to maker pertinent decisions. If the process is left in-house, a financial manager can closely monitor all processes and facilitate towards better decision making by management.
Sales from a magazine and by extension profits are largely dependent on its perceived quality. Quality of a magazine is dependent on kind of information it contains, the magazine layout, language use (general look and feel matters a lot). Therefore, strategic positioning of a magazine largely depends on perceived value and import of articles contained in the machine.
The perception is build basing on article content, positioning in the magazine and general structure. It is content, then look and feel that make customers irking for the next copy of a magazine. Therefore, keeping editorial, layout and article sourcing or development in-house is of great importance.
Keeping those functions in-house helps maintain the companys independence. As illustrated, the magazine sells based on articles and general look and feel. Therefore, if that comes from in-house, it means that the organization is actually in charge, it is the primary source of the magazine.
If those processes are outsourced and a problem or misunderstanding happens, the other institution can easily paralyze the companies operations. However, if these core functions are maintained in-house, any breach of contract or misunderstanding by providers of the outsourced services can easily be dealt with. If it is a problem to do with distributors, the organization can easily engage some other distributor or a number of distributors.
Preliminary Performance Targets/ Level of Service Expected from Vendors
Once an organization is clear about what processes are worthy outsourcing, the next step is to be clear about performance expectations (Brown & Scott, 2005, p. 25). Performance targets should guide the decision on what vendor is best suited to handle an organizations processes. The performance levels in each outsourced process will be determined by the characteristic performance indicators in each process.
When it comes to printing, the printing vendor would have to guarantee production of timely clean copies. The vendor must have capacity to do custom printing and be timely about deliveries. A vendor that is dealing with many clients and does not have enough capacity could easily end up affecting Travel Magazines operations. Therefore, the vendor must have capacity that will be specifically assigned to the magazines printing as per schedule.
Performance in distribution is determined by level of penetration into designated niche markets. The distributor must have capacity to transport the magazines and assure protection i.e. no theft and no defacing. Timely delivery of the magazines into markets will also be of critical concern. The distributor has to have capacity to deliver the magazine to all parts of the niche market in a timely way.
All people who know how to use a camera can take photographs. However, the photographers expertise and photo development technology determines final quality of a photograph. The photography vendor will need to have mechanisms of ensuring quality is guaranteed and photo shooting at all designate sites is facilitated.
Quality will be guaranteed by professionals who know camera positioning and other aspects of photo shooting like depth and distance calculations. For a travel magazine, the vendor will also need illustrate capacity to avail relevant photos from all interesting sites as may be required.
Performance on the advertising front is determined by the level of brand resonance achieved and sales volume increase over time. The advertising firm will have to demonstrate capacity to develop relevant market communication and design point of sale material that adhere the magazine to target population. Retail activations are also a critical aspect of trade development and thus the agency has to have capacity to instate awesome retail execution and brand performance measurement mechanisms.
The service level expected on the publishing front has to do with acute capacity to drive internet sales of the magazine. Preferably, the organization will engage a publisher with capacity to drive internet sales volumes. Publishing online and related sales is the in-thing in the publication industry of late.
Many people spend their time online and e-trade is the way to go. The publishing company has to have capacity to complement the efforts of our editorial team by ensuring the right content is carried in the magazine and it is well structured in the layout.
Type of Contract for Outsourced Processes
The contract between company and service providers will have to be flexible enough to cater for future changes in market structure (Brown & Scott, 2005, p. 27). For example, the company was forced to outsource over five processes due to economic down turn. However, the economic fortunes are likely to change.
When it comes to distribution and publishers, the company will seek a distributor and publisher that can accept a revenue sharing kind of contract. This means that the distributor will be getting a given percentage of total revenues they help generate for the company. This kind of contract is good because it means the distributor earns of own efforts. Such an arrangement, normally, motivates distributors to drive sales highly.
The contract with printers will be a fixed price contract. A fixed price will be set for every batch of printing work done. Somehow batch estimates are predetermined; therefore, fixed contracts will work just fine. The photography work is not like the printing work due to inability to reach exact estimates of involved costs. Therefore, the company will pursue a cost plus margin kind of contract with the photography service provider.
The advertising agency will have different actions or levels of activity to drive sales. Therefore, a hybrid system consisting of cost plus mark up and fixed pricing will be used. When it comes to retail execution, cost plus mark up will be used because different costs are involved depending on geographical dispersion. Fixed pricing will be used when it comes to above the line market communications.
Criteria for Selecting Preferred Vendor
Cost reduction is the major drive towards outsourcing of business processes. However, pricing will not be the only criterion for choosing a vendor. This is so because tender prices do not often reflect quality guarantee. For each of the processes, we shall be keen on service provider capacity and characteristics.
A concern for quality and competitive edge will drive the vendor selection. Some of the required characteristics have been described under expected service levels. Each vendor will have to meet stipulated service levels at a competitive price to be awarded the tender.
Number of Vendors per Process
Some processes are better handled by a multiple vendors while some are best handled by a single vendor. In advertising, at least two vendors will be welcome. One vendor will deal with market communication especially above the line communication. Another vendor will deal with retail execution e.g. sensitization and promotion awareness activities.
In printing and publishing, a single vendors will work just fine to benefit from economies of scale due to consolidated service sourcing. More than one distributor will be used for the distribution of the magazine. Using different distributors ensures wide coverage and diffuses distributor bargaining power. Finally, a single vendor will be sourced for the photography contract. This is important for consistency plus there is little service variation needed.
Time Line for Contracting Process
Time
Activity
1st and 2nd Month
Prepare the Service Level Requirement based on research
3rd and 4Th Month
Open Tendering (RFP)
5th Month
Outsourcing Contract Negotiations
6th Month
Refining Contracts as per negotiations
6th Month
Contract signing and Post tendering negotiations
7th and 8th Month
Implementation preparations
9th month
Magazine Roll out
Reference List
Brown, D. & Scott, W. (2005). The Black Book of Outsourcing: How to Manage the Changes, Challenges, and Opportunities. New York: John Wiley and Sons
McIvor, R. (2005). The Outsourcing Process: Strategies for Evaluation and Management. Cambridge: Cambridge University Press
The dynamic nature of modern business environment, coupled with rapid advances and complexities in communication and technology have resulted in development of diverse business strategies aimed at promoting business competitiveness in the global markets (Bower 2003).
Companies are currently seeking positions of competitive advantage over their rivals by strategizing towards the creation of long term consumer and supplier loyalty.
In addition, business leaders are pursuing new and advanced business paradigms that provide opportunities for their companies to work closely with long term and new business partners in order to effectively adapt to the rapid changes occurring in the market place (Bower 2003).
New and beneficial business relationships are arrived at through development of project procurement strategies that aim at striking a balance between work, motivation, and risks for long term sustainable business efficiency.
Procurement refers to the process of acquiring new services and products at the most efficient prices and incorporates activities such as contract strategy, contract documentation and contractor selection (Bower 2003). In simpler terms, procurement concerns itself with the function of purchasing inputs that are used in the firms value chain such as raw materials, supplies, machinery etc.
The process employs specific technology which facilitates in dealing with vendors, qualification tools, and information systems (Barnes & Open University 2001). Procurement practice is one the processes that organizations and teams acknowledge as a most important element of project management (Dinsmore 2010)
Project Procurement Management
Project procurement management knowledge is essential for firms to operate efficiently (Tomczyk 2005). Knowledge and expertise in this field assists in decision making on purchasing of goods and services from external suppliers, contractors, and suppliers. Project procurement deals with the interactions between purchasers and contractors as well as contract administration (Tomczyk 2005).
Project procurement management is further concerned with inventory management which is especially important due to the tremendous amount of uncertainties associated with the same (Willoughby 2001).
Consequently, effective procurement management requires a comprehensive understanding of project management processes, ability to utilize specific procurement tools at each stage of the project and a clear understanding of the benefits associated with integration of procurement tools rather than executing the procurement process in isolation (Hairston 2005).
Project procurement activities are spread throughout the firm with the purchasing and contracting function being conducted by the purchasing department, plant managers, office managers, sales persons, or in some cases by the chief executive officers (Barnes & Open University 2001). A particular procurement activity is often associated with specific value activity which it supports.
Consequently, procurement choices are geared towards value maximization by making the most efficient choices regarding contracts, engaging stakeholders, as well as linking business strategy to project selection (Rowlinson & Walker 2007).
Procurement choices should be made in such a way that they ensure balancing demands and responsibilities, protecting the reputation of those involved in the projects, encouraging innovation and promoting knowledge transfer where it can reap value (Rowlinson & Walker 2007). In addition, such choices should seek to attract and develop a skilled pool of talent which has the ability to deliver expected value to the stakeholders.
The cost of project procurement in most firms represents an insignificant proportion of the total costs. However the cost has a large impact on the overall cost of the firm which demands procurement executives to improve procurement and purchasing practices in order to achieve maximum efficiency.
In response to this, companies have adopted E- Procurement strategies which have become an increasingly important cost reduction tool. E- Procurement is being implemented in most organizations in a bid to reduce overall operational costs (Buchanan 2008).
In order to further manage associated costs, project management processes require the executives to focus more on the risks associated with the project, definition of track and measurement of quality, as well as effective control and communication (Great Britain 2002).
The Concept of Value
The definition of value depends on the perspective taken as well as the perceivers needs at the specific moment (Moser 2007). Numerous scholars have sought to define the concept of value in terms of financial benefits, social benefits, goal attainment and competitive advantage.
These diverging explanations have served to prove that value is a multi-dimensional construct that can be evaluated through various approaches. The concept has been widely used while referring to consumer needs with much less emphasis being put on the integration of suppliers in the value concepts.
However, in business procurement, researchers conceptualize value in business relationships in terms of the value of the supplier bundle of products and services that is exchanged at a price to the purchaser and the long term costs and benefits associated with the relationship established between the purchasing firm and the supplier (Moser 2007).
The value of the relationship depicts the aggregate worth of all the transactions that will be undertaken by the two firms over the contractual period while the perceived financial value refers to the present value of cash benefits accruing from the current and future transactions (Moser 2007).
The client expects to obtain value from their investment, timely delivery of project, durability of the end product, reasonable running costs, and defect free completion of the project from the contractor (Masterman 2002). In order to achieve this, the clients needs and objectives must be addressed in the project procurement process.
The financial based perception of value is limited to cash benefits and does not account for non cash benefits associated with effective business procurement management such as technological transfer and continuous quality improvement derived from the interactions between the purchasers and suppliers (Koppellman 1998).
In the past, supplier selection focused on issues such as costs, quality, and delivery of the goods and services in question. This focus has however shifted towards suppliers long term capabilities and the long term benefits that the purchaser is likely to derive from such interaction.
Benefits of Effective Procurement to Business Organizations
Effective procurement is important in firms since it facilitates appropriate decision making with regard to purchase of the right product and service at the right price (NCC 2006).
The process maximizes the level of service provision and plays an important role ensuring a balanced budget for the organization, promoting savings, creating a diverse market, promoting innovation, and delivering an organizations strategic objectives (NCC, 2006). Effective procurement practices significantly cuts costs and improve efficiency within an organization (CIPS n d).
In modern business environment, more focus is being awarded to efforts aimed at cutting costs through elimination of unnecessary costs. However, these strategies are often associated with increased time consumption, widespread unemployment and often create severe staff morale problems (CIPS n d).
Consequently, organizations managements are seeking to devise other means through which they can cut costs within their organizations. Procurement provides one such opportunity that organizations can manoeuvre to reduce overall operational since the value of input products and services forms a substantial part of the firms turn over (CIP n d).
The worlds major airlines have been experiencing cost related difficulties in the recent past. For instance, the British Airways has faced numerous challenges ranging from terrorist threats to deteriorating business climate which has put the organizations procurement function under question (CIP n d).
This prompted the organization to enhance its procurement function by negotiating lower prices through electronic auctions and limiting the number of suppliers. This move led to reduction in cost amounting to 650 million pounds in 2004 and savings worth over twenty million (CIP n d).
Improving efficiency in procurement and supply chain management generates benefits beyond price reduction for products and services (CIP n d). An organizations ability to effectively manage its supply chain provides the real benefits to the organizations. For example, a retailer seeking to refurbish his sites would have to look for contractors who will guarantee maximum return from the investment.
Consequently, the retailer should carefully evaluate the options available in the supply market and cooperate with the selected contractors in order to reduce operation costs and duration. Failure to effectively manage the procurement process often results in project delay which in turn increases overall costs. In addition, Effective procurement promotes security of supply (CIP n d).
The process promotes timely risk identification which creates room for risk mitigation and management (NRC 2005). Further, establishment of good relationships between purchasers and suppliers ensures continuous flow of goods and services to the firm which in turn promotes consistency in production and service provision.
Establishing good relationships with suppliers enables a firm to access new and advanced products on a timely basis. A firm may reap additional benefits by engaging suppliers in the product design process which promotes technology transfer where both the purchasers and suppliers exchange ideas in order to achieve product innovation (CIP n d).
Procurement and supply chain management process has the ability to deliver value if it is managed as a whole. The suppliers and purchaser must work together in order to reap the benefits associated with effective procurement management.
This is because in absence of cooperation between the stakeholders, each function pursues its own interests which often results in conflict of interest. Therefore, firms must ensure consistency between the purchase and supply management decision making which in turn translates to the organizations objectives, culture and structure.
Example of Project Procurement in the Construction Industry
In the construction industry, effective procurement is manifested in sustainable and sensitive use of resources, affordable and well functioning designs incorporating high standards of inbuilt utility and safety (Harris 2006). This can only be achieved by engaging able project managers who in turn make appropriate choices in awarding of contracts to competent and skilled designers and contractors (Harris 2006).
As shown in the figure below, construction projects are complex and require extensive planning. Indeed, according to Brown et al (2001), construction projects, regardless of their simplicity involve the participation of people from different teams who are integrated into a single team that is expected to efficiently execute a particular task.
According to Alhazmi & McCaffer (n.d), it has been estimated that the selection of an appropriate procurement method would result in approximately 5% reduction in construction production costs. Since each project has its unique set of requirements and characteristics, the chosen procurement method must address the technical issues of the project as well as the client and contractor needs (Alhazmi & McCaffer n d).
Various procurement considerations arise while undertaking construction projects (Edgerton 2008). The person wishing to pursue a construction project should put into considerations factors such as the objectives and constraints of the project, skills, and experience of the contractor firm (Edgerton 2008).
Brown et al. (2001) conducted an extensive analysis of the UK construction industry and revealed that the highly differentiated nature of the industry resulted in poor quality, cost escalations, and schedule overruns. The costs were attributed to lack of cooperation between the stakeholders in the project.
Consequently, firms in the industry sought to reduce construction costs by awarding tenders to contractors who focused on project duration cost and client expectations (Brown et al., 2001). In order to overcome the challenges prevalent in the industry, contractors developed new strategies which aimed at achieving cooperation between the contractors and the clients.
Further, a new project delivery process was established as a means of promoting improvement and innovation in the UK construction industry (Brown et al., 2001).
In conclusion, business organizations are moving towards online procurement which has proven to be especially effective in large corporations (Davila 2002). E-Procurement facilitates acquisition of goods and services via the internet and enhances work automation, organizational spending and information availability.
Advance in technology has aided firms to move towards the creation of collaborative supply chain management tools which serve to reduce administrative costs, reducing the project life cycle, lowering inventory and price levels and increasing inter organization collaboration.
Reference list
Alhazmi, T., & McCaffer R., 2000. Project Procurement System Selection Model. Web.
Barnes, D., & Open University, 2001. Understanding Business: Processes. London, Routledge.
Bower, D., 2003. Management of Procurement. London: Thomas Telford.
Brown, C. D., Ashleigh J. M., Riley J.M., Shaw D R., 2001. New Project Procurement Process. Web.
Buchanan, M., 2008. Profitability Buying Strategies: How To Cut Procurement Costs And Buys Your Way To Higher Profits. New York, Kogan Page Publishing.
CIPS. Not dated. Why Purchasing Key-The Message to Business Leaders. Web.
Davila, A., 2002. Moving Procurement Systems to the Internet to the Internet: the Adoption and Use of E-Procurement Technologies Models. Web.
Dinsmore, C. P., 2010. The AMA Handbook of Project Management. New York, AMACOM Division American Management Association.
Edgerton, W. W., 2008. Recommended Contract Practices For Underground Construction. London, SME Publishing.
Great Britain, 2002. Business Benefits through Project Management. London, The stationery Office.
Harris, F. 2006. Modern Construction Management. London, Wiley Blackwell
Hairston, J., R., 2005. Integrating Procurement and Project Management. Web.
Jagger, D., 1988. Logistics Information Management MCB UP Ltd. Journal of Enterprise Information Management. Web.
Koppelmann, U., 1998. Procurement Marketing: A Strategic Concept. Berlin, Springer.
Masterman, E. W. J., 2002. Introduction to Building Procurement Systems. New York, Taylor & Francis.
Moser, R., 2007. Strategic Purchasing and Supply Management: A Strategy Based Selection of Suppliers. Wiesbaden, DUV.
National Research Council, 2005. The Owners Role in Project Risk Management. Washington DC, National Academies Press.
New Castle City Council, 2006. Supporting People: Procurement Plan. Web.
Tomczyk, A. C., 2005. Project Managers Spotlight on Planning. California, John Wiley & Sons.
Rowlinson, M. S & Walker T.H.T., 2007. Procurement Systems: A Cross-Industry Project Management Perspective. London, Routledge.
Willoughby, A. K., 2001. Project procurement and disposal decisions: An inventory management model, NY: Elsevier. International journal of production economies. Web.
Procurement is one of the most important business processes in any given business organisation. The success of this practice can make or break the competitive advantage enjoyed by the company in the market. In this paper, the author looked at procurement practices of two companies operating in Victoria, Australia.
The two companies are Montana Foods Limited and High Country Meats Limited. The author settled for the two companies given that their operations mostly revolve around Victoria. It was found that the success of these two companies is informed by their procurement practices.
Both companies have automated their processes. However, it was found that the participation of other employees in the procurement process varies in the two companies.
Introduction
Every organisation makes purchases, including for services and commodities, to meet most of its objectives. The procurement process is, therefore, meant to add value to a companys operations (Garrido & Gutierrez 2004, p. 322). Depending on the organisation, the tendency to purchase and procurement procedures varies.
To understand some of the procurement processes, the author of the paper identifies two organisations, both found in Victoria, Australia. The two organisations identified for the study are Montana Foods Limited and High Country Meats Limited.
The author examines the procurement practises of the two companies. The author draws parallels between the procurement practices in the two companies in a bid to find out which set of procurement practices is best suited to a company.
The author relies on the aforementioned comparison to identify some of the inefficient procurement practises. To this end, the theories learnt in the coursework will be applied in a bid to improve procurement practices.
The author will examine some aspects of procurement to give credence to the topic. According to Christiansen & Maltz (2002, p. 46), the activities of Supplier Cooperation Program have a direct impact on the procurement practices.
The direct impact is precisely the reason why the paper examines such activities in the two companies. The activities are examined in relation to the product, process, and logistical developments between the company and the suppliers. The two companies are Montana Foods Limited and High Country Meats Limited.
While still on the aspects surrounding procurement practices, the author examines the stress testing conducted on the processes. In addition, the paper examines several categories of risks involved during the procurement process.
Upon the establishment of risk, the author will apply the theories learnt to analyse how the risks can be minimised and, ultimately, eliminated.
Montana Foods Limited
Montana Foods Limited is a private business entity that has been in operation for close to a decade, having been registered in 2006. According to Manta (2013, p. 13), the company is situated within the Broadmeadows area of Victoria, Australia.
Operating in the manufacturing industry, Montana Foods deals with the processing of milk by-products and, more specifically, cheese.
From Manta (2013, p. 13), it is established that the company, famously known for its Beer Cheese, has a staff of about 173 individuals.
It is important to note that the company is gender sensitive, owing to the fairly even gender distribution among the employees. Out of the 173 personnel, 100 are female, evenly distributed in all positions in the company.
With a steadily growing reputation of cheese supply, the company has a significant stake in the dairy market within Victoria area. With only one location, the company has an annual turnover of more than $20,000,000. It is, therefore, evident that the companys marketing strategies are paying off.
High Country Meats Limited
High Country Meats Limited is a private company located within the Cobram area of Victoria, Australia. Registered in 2008, the company deals in meat and related products. It is both a wholesale and retail distributor (Manta 2013, p. 18).
High Country Meats has a staff of about 150 personnel. Gender is factored into the engagement of staff owing to the equal distribution of people from both genders in the business enterprise.
It is important to note that the company has a single location in the Cobram area. Such a situation allows it to command a huge stake of the meat market in the region.
According to Manta (2013, p. 26), the company has an annual turnover of more than $50,000,000. Such a figure attests to the companys competitive edge in the market. From the stated figure, the turnover can only get higher.
The Procurement Process
As Chopra & Sondhi (2004, p. 53) rightly put it, procurement is the process where a company purchases goods and services whenever they are required at a favourable cost. The fact that procurement is a process implies that there are steps to be followed.
Several companies have developed different approaches of procurement process, all in a bid to give them a competitive edge in the market.
It is important to note that most companies have automated their procurement processes. One of the systems employed in the procurement process is the Enterprise Resource Planning (ERP) system. The system is business management software that companies use to manage their operations.
It is used in such diverse areas as material purchasing, product planning, inventory control, and distribution. In addition to the ERP, companies use the Electronic Data Interchange (EDI).
Both systems help to hasten the procurement process. EDI is the standardised method of transferring data from one computer to the other over different systems or networks.
It enables companies to conduct business transactions, such as sending orders to warehouses, tracking shipments, sending invoices, and other e-commerce transactions. Notwithstanding the automation, the steps in the procurement process remain relatively the same.
According to Zsidisin & Ritchie (2009, p. 34), the first step in the procurement process is the identification of what the organisation requires. It could be anything from raw material, a service provider, components that go to make an end product, among others. To this end, a Purchase Requisition (PR) is prepared.
Regardless of whether the process is automated or not, the buyer is furnished with a PR, which indicates the commodity or service required by the ordering department.
The purchase requisition could go to a procurement department with a whole team of people dealing with the order, or one person who could be designated as a procurement officer. From there, the process proceeds to the next step.
The second step is the evaluation of suppliers (Supply Chain Management 2013). The buyer identifies the various suppliers in the market. The supplier must, naturally, supply the commodities relevant to the buyers requirements.
Upon the establishment of the suppliers available, the buyer then proceeds to tender out the process. At this point, suppliers place bids from which the buyer will carefully select the most cost effective to meet the required quality standards.
The tendering process is guided by a set of criteria followed by the procurement staff to make sure that basic standards are maintained in picking the right suppliers.
The criteria can be set on minimum or maximum costs within which to operate and the type of material needed. The criteria make the procurement process less cumbersome.
After the tendering process is completed, the buyer will then have to approve a supplier, depending on the merits of the bid. At this stage, the buyer will issue a purchase order (Esper & Davis 2007).
From the purchase order, the supplier will be furnished with the quantity and date of delivery of the commodities demanded by the buyer. It is incumbent upon the supplier to ensure that the specifications indicated in the purchase order are fully met.
Failure to meet the specifications may lead to a breach of contract or a reorder at the cost of the supplier, which will delay production operations, where time is of essence.
Finally, the procurement process is terminated upon the receipt of the commodities purchased from the supplier. All the relevant documentations confirming the supply should be kept by both the supplier and the buyer. It is from such records that payments and any other enquiry with regard to the procurement are made.
Confusions can arise with regard to the process, which may force the parties involved in the procurement process to refer back to the documents to clear any issues that may arise from the order.
The ultimate goal, however, is for the buyer to ensure that the cost of the purchase made notwithstanding, the business is capable of making profits. That is the core mandate of every entrepreneur.
As earlier indicated, companies follow the steps mentioned above in their procurement processes. However, to remain competitive, various companies have employed practices that give their respective procurement processes a competitive edge.
Some of the practices include supplier buyer relationship, the use of technology, and the team- based procurement approach. According to Zsidisin & Ritchie (2009, p. 51), a companys procurement process is best evaluated using such practices as those mentioned and discussed above.
The Procurement Process at Montana Foods Limited
By virtue of operating in a manufacturing related industry, Montana Foods purchases a wide array of commodities. Such commodities range from raw materials to machines, as well as related parts (Manta 2013, p. 76).
In order to remain competitive, the company opted to automate its procurement processes to make them more efficient. It is the practice of automation of the procurement process that sets Montana Foods Limited apart from the rest in the industry.
Several benefits of the electronic procurement process at Montana Foods worth noting include the improved contract compliance, as well as the shortened procurement cycles.
In addition, the electronic procurement practice has increased the accuracy of the production capacity. It is also important to note that the practice has improved the visibility of the supply chain.
The Procurement Process at High Country Meats Limited
The meat wholesaler and retailer have incorporated several practices into its procurement procedures. First, the company has automated most of its procurement processes. Procurement processes at all levels, which include direct and indirect procurement (Manta 2013, p. 78), have been automated.
In addition to the automation, the company has built long term relationships with reliable suppliers. It is, therefore, interesting to note that High Country Meats has not changed any of its suppliers for a long time.
Finally, the company has transformed its procurement process to make it more of a team effort as opposed to a one man show.
Comparison of Procurement Practices in the Two Companies
After looking at the procurement processes and practices carried out by the respective companies, the author finds it interesting that both companies have automated their procurement processes.
However, the variance of the procurement practices is distinguished by how High Country Meats adopts a holistic approach. High Country Meats makes the process a team effort and, further, builds a budding relationship with customers. On its part, Montana Foods remains rigid on the two fronts.
For instance, whereas High Country Meats improves the supplier relationships, Montana Foods does not make any relevant improvement as far as relationships with their clients are concerned. As a result, inefficiencies in the procurement process arise when some suppliers fail to meet the set deadlines.
According to Esper & Davis (2007, p. 57), such inefficiencies have prolonged the procurement cycle. A prolonged procurement cycle affects the normal operations of a company and, subsequently, dilutes possible gains in profits.
In the opinion of Christiansen & Maltz (2002, p. 177), a good relationship between a supplier and a buyer is beneficial as it improves service delivery to customers. The two argue that sustaining one trusted supplier is better than interchanging suppliers, owing to the reliability factor.
A trusted supplier will, subsequently, minimise the costs of procurement, owing to the abolition of certain aspects of the procurement process, such as bidding.
Another discrepancy in the procurement practices of the two companies is the teamwork aspect. In Montana Foods, the procurement process is designated to a single officer. On its part High Meats has turned the process into a team affair.
In High Country Meats, representatives from each department are nominated to sit in the procurement committee. It is from there that decisions are made.
Chopra & Sondhi (2004, p. 54) point out that turning procurement into a teamwork affair boosts the morale of the members of staff. As a result of this, the process becomes more efficient.
Supplier Co-operation Programme Activities
In order to ensure that there is an improved cooperation between the supplier and the buyer, there are several activities that are undertaken with that regard. According to Christiansen & Maltz (2002, p. 189), some of the activities include the logistics development, as well as the process and product development.
As far as High Country Meats is concerned, the activity most looked into is the Logistics Development.
As already discussed, the company has a single source logistics procedure, which is beneficial both to the supplier and to the buyer. The most outstanding benefit, according to Christiansen & Maltz (2002, p. 189), is the short procurement cycle on the buyers part.
On the suppliers part, the most conspicuous benefit of the single source logistics is the improved supply chain visibility.
Categories of Risk
According to Wu & Blackhurst (2009, p. 162) and Chopra & Sondhi (2004, p. 57), there are four categories of risks. The categories include disruptions, delay, systems, and capacity. Each of the categories is brought about by various factors unique to them.
The two companies discussed in this paper have risk factors associated to them when they are examined individually and, subsequently, compared to each other.
High Country Meats Limited
Chopra & Sondhi (2004, p. 57) point out that the procurement process risks being disrupted owing to several factors, which the author finds unique to High Country Meats.
For instance, the companys reliance on a single source supplier, who cannot meet the production capacity, risks delaying normal operations of the company in the event that the supplier fails to deliver the order on time.
As a result of insolvency, a supplier may, likewise, be incapacitated and the failed delivery will result in a chain reaction of events that will, subsequently, disrupt the service delivery of the company. In order to avoid such a situation, Chopra & Sondhi (2004, p. 57) argue that it is important to evaluate all the suppliers.
When it comes to delays as risks in the procurement process, Chopra & Sondhi (2004, p. 58) find that inflexibility at the supply source is a contributing factor.
In addition to that, the two propose that high capacity utilisation by the suppliers is another contributing factor. As far as High Country Meat is concerned, the author is of the opinion that the company should increase responsiveness in order to mitigate such risks.
Montana Foods Limited
As far as the procurement of commodities at Montana Foods is concerned, the author finds that one of the procurement related risks results from the systems. From the practices initially outlined, it was established that Montana Foods relies heavily on its electronic procurement processes.
From Chopra & Sondhi (2004, p. 57), it is evident that overreliance on systems is potentially risky in the procurement process.
One major contributing factor is that the systems may malfunction and, as a result, compromise the whole procurement process. To mitigate the effects of such a risk, it is incumbent upon the company to ensure that there is prior or alternative back up in case the systems fail (Esper & Davis 2007, p. 57).
Capacity is yet another risk factor associated with procurement, according to Chopra & Sondhi (2004, p. 57). Owing to the volume of its operations, the capacity of procurement at Montana Foods is relatively high. The high capacity is in itself a risk factor, owing to the costs involved.
For instance, a supplier can cite financial constraints as an inhibiting factor to the delivery of the commodity required.
To mitigate the effects of such a risk, the author opines that there should be an aggregate demand associated with the procurement process. According to Svensson (2000, p. 168), this demands that a manufacturing company should purchase commodities that are urgently needed.
Conclusion
It is evident that no organisation can avoid making purchases. From such purchases, the normal operations of the organisations are realised. It is incumbent upon each and every member of the procurement team to invest in practices that will put their company at the pinnacle of success.
Some of the most relevant procurement practices include embracing technology and making the procurement process a team affair. It is important to note that by improving the relationship between a supplier and a buyer, the procurement process yields more benefits to a company.
Some of the benefits that a company stands to gain from enhanced procurement practices include reduced costs and improved visibility of the company.
According to this author, companies should strive to ensure that they develop proper procurement practices. According to Monczka, Landfield & Guinepero (2008, p. 98), this is important in order for the company to remain relevant.
Companies should strive to adopt the most efficient procurement processes that will enable them meet their timelines in the production process, as well as meet the demand of their own clients within normal reorder levels.
It is also important to note that if the best practices in the procurement process are adhered to and scaled down to the employees of the company, then efficiency and cost saving to boost profits are realised.
Companies should be able to experiment with varying methods used in the procurement practice to see what works best for them in relation to their core business. It is important to note that what works best for a service provider will not necessary work for a goods provider. The opposite is true.
Procurement managers must take this into account when they are choosing the appropriate procurement method.
As demand grows, it follows that procurement managers need to review the procurement procedures that will accommodate the growth and still maintain the profit margin of their companies, bearing in mind the efficiency levels of the process chosen.
The roll out of any new system or change of procurement process should bring on board all members of staff to enhance smooth transition with minimum hitches and interruptions.
Procurement practices can make or break the companies edge in the market. In case of a lapse in the purchasing and supply system, there are setbacks in other processes associated with the company.
It is, therefore, important for any company to optimise the operations of its purchasing department to make sure that the department maintains its position in the market.
The importance of the procurement process in any company cannot be downplayed. The point was highlighted by comparing two companies operating in Victoria, Australia.
References
Chopra, S & Sondhi, M 2004, Managing risk to avoid supply-chain breakdown, MIT Sloan Management Review, vol. 46 no. 2, pp. 53-61.
Christiansen, E & Maltz, A 2002, Becoming an interesting customer: procurement strategies for buyers without leverage, International Journal of Logistics, Research and Application, vol. 5 no. 2, pp. 177-195.
Esper, F & Davis, S 2007, Logistics learning capability: sustaining the competitive advantage gained through logistics leverage, Journal of Business Logistics, vol. 28 no. 2, pp. 57-82.
Garrido, MJ & Gutierrez, J 2004, Determinants of influence and participation in the buying centre: an analysis of Spanish industrial companies, Journal of Business & Industrial Marketing, vol. 19 no. 4/5, pp. 322-323.
Manta, M 2013, High Country Meats. Web.
Monczka, R Landfield, R & Guinepero, L 2008, Purchasing and supply chain management, South Western Cengage Learning, Ontario.
Supply Chain Management 2013, What is a supply chain?, .
Svensson, G 2000, A typology of vulnerability scenarios towards suppliers and customers in the supply chains based upon time and relationship dependencies, Vaxjo University Press, Sweden.
Wu, T & Blackhurst, J 2009, Managing risk and vulnerability: tools and methods for supplying chain decision makers, Grubers, Kent.
Zsidisin, G & Ritchie, B 2008, Supply chain risk: a handbook of assessment, management and performance, Ridurt Books, Boston.
E-Procurement for Contemporary Organisations: How E-Procurement Changes the Role of Purchasing and Its Relationships with Suppliers
Nowadays, the interest in purchasing and supply management has been considerably increased because e-procurement and other e-operations have changed the role of these processes. Purchasing tries to maximize its contribution to the organizational performance considering different financial, operation, and supply chain aspects (Kim, Suresh, & Kocabasoglu-Hillmer 2015). At the same time, purchasing aims at ensuring economic supply and keeping a company in operation procuring goods, services, and supplies. Can it happen that e-procurement can change the role of purchasing and its relationships with suppliers? This paper investigates the current changes in purchasing and supply management about e-procurement and other opportunities available on the Internet.
Companies should control the flow of money, promote control, develop effective supply sources, and maintain good relations with suppliers (Pooler & Pooler 2012). The appearance of a new platform, the Internet, has already influenced the way of how the majority of business transactions occur. People start spending less time on the recognition of their needs, the identification of possible suppliers, the analysis of the opinions, the determination of delivery issues, the processes of placement and payment of their orders, and even the development of the relations with the suppliers from different parts of the world.
Pablos et al. (2012) admit that purchasing that is also defined as procurement is the main process that links suppliers and organizations. In case some changes take place in the process (in this case, ordinary purchasing turns into e-procurement), the relations between suppliers and companies should undergo certain changes anyway. The investigations show that not all organizations have successfully implemented even some basic e-procurement systems (Quesada et al. 2010).
Therefore, not all organizations and suppliers can use the same schemes in their work. They have to spend some time to analyze their opportunities and choose the most appropriate methods in the development of their relations. Still, the companies and people, who have already tried e-procurement, realize how electronic operations may change the role of purchasing and supply management. The following aspects attract the attention of organizations and people, who want to benefit with e-procurement:
The reduction of paper processes is the most evident contribution of e-procurement;
The decrease of damaging supply interruptions that can influence the performance (Caniels & Gelderman 2005);
A considerable reduction of delivery time;
A possibility to gain control over ordering costs and practices;
The access to the information about suppliers.
These changes help to save time and efforts of people to improve their purchasing practices and performance. As a result, they focus on the quality of services they offer and the guarantees they provide their consumers with. To experience all positive outcomes of e-procurement, companies should choose appropriate strategic designs and improve their supply chain management processes. The supporters of e-procurement underline the necessity to implement new systems and overcome the existing barriers that are may be based on various cultural, social, and economic differences but not to spend time on analyzing the benefits of innovations.
Reference List
Caniels, MCJ & Gelderman, CJ 2005, Purchasing strategies in the Kraljic matrix a power and dependent perspective, Journal of Purchasing & Supply Management, vol. 11, pp. 141-155. Web.
Kim, M, Suresh, NC & Kocabasoglu-Hillmer, C 2015, A contextual analysis of the impact of strategic sourcing and e-procurement on performance, Journal of Business & Industrial Marketing, vol. 30, no. 1, pp. 1-16. Web.
Pooler, DJ & Pooler, VH 2012, Purchasing and supply management: creative the vision, Springer Science & Business Media, New York. Web.
Quesada, G, Gozalez, ME, Mueller, J & Mueller, R 2010, Impact of e-procurement on procurement practices and performance, Benchmarking: An International Journal, vol. 17, no. 4, pp. 516-538. Web.
Each business project consists of multiple phases such as project initiation, planning, execution and closure (Westland, 2007). Throughout all of these stages, the cooperating sides are to be in ongoing communication with each other, and these interactions and steps are referred to as the life-cycle of the project (Kerzner, 2013). Project initiation includes the definition of the project, determination of the goals of the buyers and seller, the first offer, negotiations, discussion of terms and conditions. Project planning includes multiple details and schemes designed to coordinate the operations within the project during its implementation. That is done to achieve the highest level of productivity and quality.
The stage of execution is accompanied by constant monitoring and control over the result of the interaction of the parties, and the fulfillment of their obligations and duties outlined in the contract terms (Westland, 2007). Finally, the project closure also referred to as close-out is the post-implementation stage that serves to review the performance of both sides, make and conclusion, and prepare the contract to the completed and archived. This phase occurs before the final payment and signifies that the work under a particular contract has been completed. Contract close-out is the responsibility of both of the sides (the buyer and the seller) to ensure that all the terms outlined in the contract were followed, and all the deliverables are exchanged by the parties. As a result, the stage of contract close-out has multiple aspects and obligations for the contracting sides.
The Tasks Associated with the Close-out of Procurement Contracts
First of all, the contractor is to make sure that all the documents related to the contract are gathered and turned over to the procurement officials. That is necessary to be done in time, so the close-out phase begins without any delays. The documents serve to notify the agency of the contractor that all the work they had to do within the terms of the contract is completed. Secondly, the contractor is to make sure that the documents concerning process monitoring issues are arranged and turned in. That includes all the safety management papers and conclusions. Thirdly, the deliverables mentioned in the contract need to be documented based on the information denoting whether or not they were provided, reviewed and received. Finally, one more task necessary to fulfill during the contract close-out is a property closeout. This task signifies that the contractor has submitted a final property report. This document is to mention the ownership rights private or government-owned.
When it comes to the funding, the contractor is to turn in the papers concerning final payment invoices and payments that include all the costs, performances, and commodities that were disallowed or discontinued, in addition to all the refunds and excessive costs. Besides, the contractor is to compile a report about all the payments received under the contract. Moreover, to complete the set of documents required for the contract close-out, the contractor needs a vendors performance report and a contract completion statement. The latter is typical issues after the final payment has been received. The contract completion statement notes that all the documents and papers for the contract have been prepared and processed and the contract may be closed and appropriately archived. Developing a contract close-out plan one is to remember that each contract is different which means that the procedure of close-out and the tasks included in it need to be customized based on the unique features and aspects of each particular contract.
Termination of Contractual Relationships and Settlement of Seller Claims
Termination of a contract can be defined as the annulment of the contracting terms and obligations of both parties after at least one of them has already performed some of their duties (Callahan, 2009). Contract termination is viewed as a remedy, and it provides the sides with the opportunities to determine the conditions for termination on their own. Contracts can be terminated for a wide range of reasons.
For instance, a termination may happen based on the mutual agreement of the sides. This form of termination has a sub-category such as abandonment of the contract which signifies that neither of the parties is interested in continuing the cooperation, and it is clear from their conduct that the contract is to be terminated (Chapple, 2010). The abandonment of a contract occurs when after a long period none of the parties showed attempts to perform their duties.
Another type of contract termination may be caused by the breach of one of the necessary conditions by one of the sides. In the case of termination upon breach, the cooperating sides are to identify the term that was violated and then to establish the level of its importance. The violation of terms defined as essential leads to an immediate breach of a contract.
Moreover, one more type of contract termination occurs due to repudiation. In other words, termination happens when one of the parties refuses to perform their duties and follow the terms and obligations because of their unwillingness or inability to continue the cooperation (Chapple, 2009). Repudiation also occurs when one of the sides states that they would only agree to perform their duties based on the conditions that are incompatible with the terms and requirements of the contract. Breach upon repudiation will be followed through only in case if the innocent side is willing to accept the repudiation.
Besides, the innocent side is considered innocent only if they are determined to continue with the contract. Repudiatory conduct in relevance to a contract should not be taken lightly as it is an extremely serious matter. It can be worked around in a contract but only after the innocent side accepts the repudiation. Also, unwillingness or inability to perform the duties by one of the sides can be a single act or a complex of several decisions. Moreover, repudiation may happen due to the initial miscommunication between the cooperating parties or the misapprehension of the terms and conditions of a contract by one of the parties.
One of the most common causes of contract termination is the default. For example, in construction and design contracts, there are often lists of possible defaults which outline the contractors inability to complete the contract and provide the necessary results within a particular period. Besides, some of the default termination permits focus on the systematic breach of the contractual terms and regular failure to follow through with the requirements and obligations (Callahan, 2009).
Also, the right of termination may be lost by one of the parties under particular circumstances. For instance, the right to terminate a contract is lost when one of the sides induced a certain expectation on the other side knowing that this expectation would be assumed but not fulfilled later (Chapple, 2010).
How to Determine If All Requirements of a Procurement Contract Have Been Fulfilled by the Buyer and the Seller
Contract close-out is not a very complex procedure, but it includes many steps since it is a detailed administrative process. The main objective of the contract close-out is to establish that both of the sides have fulfilled their duties and followed their obligations, and all the payments are made, and all the deliverables are received. Besides, the contract close-out serves to determine the level of success of a contract. As a result, this procedure includes multiple reports, signatures, documents concerning the costs and funding, properties, materials, and equipment, performances and obligations of both sides, time frames, and the levels of satisfaction of the parties with the final results. For the convenience of the parties, the close-out procedure may be based on a checklist that reflects all the aspects that need to be covered and verified. Checklists can be specifically designed for each particular contract based on its type and the kind of performance and deliverables it outlines (Knauer, 2007).
Contract close-out procedure is to include all of the stages of the contract and deal with all obligations, performances, and expenditures. During this process, it is important to reveal all the deficiencies (if any) that could have happened while the contract was implemented. To determine if all the requirements have been fulfilled by the buyer and the seller the parties need to answer a series of questions such as were the objectives outlined in the terms of the contract achieved? , were all the deliverables received and accepted in time? , did the performed result match the expected budget and time frame? , was the buyer satisfied with the quality of the final result or product? (Westland, 2007).
Flowchart Showing How to Properly Close-out a Contract
Performance of the project closure and the following review of the completion of the project.
The flowchart above presents various aspects of the project closure and the activities that need to be accomplished at these stages. Not all of these stages would apply to any type of contract. For example, particular projects do not include any new technologies and patents, so that part can be skipped. Overall, the close-out of a project consists of only two main phases which are the performance of the project closure and the following review of the completion of the project (Westland, 2007; PO Closeout, n. d.).
How Invoices That Have Not Been Submitted by Vendors or That Have Been Submitted by Vendors but Not Yet Paid Should Be Handled
Payment is one of the most vital aspects of any business project. There are different ways to handle the invoices during the business cooperation of the two contracting sides. The parties are to establish the conditions under which the payments will be submitted and received in different situations at the stage of contract planning and preparation. That needs to be done to avoid further misunderstandings between the participants or potential conflicts. The dates of payments may be assigned and put into a schedule; such an approach obliges both the seller and the buyer to deliver their duties strictly on time. This way of invoicing is rather restrictive, but it enforces very clear discipline and minimizes the chances of delays within the process of the contract execution. Besides, the payments may be submitted separately for each portion of the work or series of goods delivered by the vendor. For that, the parties would have to divide their working process into several parts.
As a result, each portion of work and the following payment may be treated as separate plans, and this makes it easier to coordinate the tasks and operations of the delivery side. Moreover, the invoices may be submitted based on the acquisition of the deliverables. In other words, each time the buyer receives the products they are to submit payment for them. This approach allows the contracting sides to coordinate their financial reports easier and avoid misunderstandings concerning the payments. Finally, one more way to handle the invoices is for the buyer to pay for the final result beforehand. In this case, the expected sum of money is acquired entirely by the vendor before they start the execution of the contract.
This kind of payment is practiced quite rarely due to its risky and impractical nature since the contract may be breached, its terms and conditions may be violated, or a delay may occur. All of these incidents are likely to impact the financial side of the contract and cause confusion. From the perspective of the optimization of the working process, it is easier for both the buyer and the seller to submit and receive the payments multiple times during the process of the contract implementation and document all the payments along the way for the final report. Also, there is a chance that the parties may clash because of the invoices that are disputable. If such a situation happens, the part of the invoices that do not cause any doubts should be submitted, and the remaining payments need to be reviewed by the project team and the officials separately (Westland, 2007).
Three Questions Listed in the Procurement Management Conformance Checklist
Were formal supplier performance reviews regularly undertaken?
This question is crucial to ask when completing a project and closing a procurement contract. The role of performance reports and reviews is to determine the level of success at each stage of the project execution. Regularly undertaken performance reviews allow both sides to monitor their performance and the performance of their partners. With the help of the regular performance reviews, the sides will be able to determine the possible weaknesses of their work, resolve causes of all the possible future conflicts and dissatisfactions, identify the problematic areas, and address them before the issues become too serious. The failure to undertake performance reviews regularly and after each significant stage of performance may lead to unmet expectations, delays, and cause tension between the sides of the contract.
Did any supplier issues remain unresolved throughout the project?
This question is necessary to ask for the parties to evaluate the thoroughness of their performances. Project and contract execution is a multilayered process that includes a variety of tasks for both the buyer and the seller. As a result, the sides may clash, develop misunderstandings, and have arguments. Ideally, all the issues, no matter how minor, are to be addressed, analyzed, discussed, and resolved during the stage of the contract implementation. Besides, when the issue has to do with the performance of the supplier, the buyer should clarify all the problems so that they can be avoided before a new contract is signed as the relationships between the buyers and the suppliers often have a lengthy character. Establishing fair and respectable interaction with the supplier, a buyer invests in their future creating profitable connections.
Did any supplier issues lower the quality of deliverables?
The quality of the products is the main concern of the buyer. That is why it needs to be carefully monitored and analyzed. In the case of the buyer finds out that the quality of the deliverables was caused by the issues with the supplier, the situation needs to be addressed and discussed. The kind of issues of the supplier and their causes determine the future of the cooperation between them and the buyer who ended up getting the products of lower quality. The buyer needs to make sure whether or not such issues with this or any other supplier may occur again and find the ways to address or avoid them for the sake of the product quality and stable cooperation with the partners.
Conclusion
Procurement contract close-out is not a complex but a multidimensional process that involves a variety of necessary administrative moments. The stage of project closure requires a documented verification of the completion of the project and all of its aspects (properties, deliverables, duties, and obligations, payments, unplanned problems, violations of conditions, terminations of plans, legal issues, to name a few). The purpose of the final stage of the project is to review and evaluate the execution of the contract and the level of performance of each of the sides.
Reference List
Callahan, M. (2009). Termination of construction and design contracts. Austin, TX: Wolters Kluwer Law & Business.
Driving value through the procurement process enhances the identification of all needs within the company. The paper discusses the acquisition of equipment by Abu Dhabi National Oil Company (ADNOC), an oil and gas holding company in Abu Dhabi as a tool to improve the quality and effectiveness of the institution. The procedure involved is critical in ensuring the maximization of profits and the reduction of the cost of production. The importance of writing the article is to analyze the vital gaps for improving the system in establishing modern techniques of procurement. The main findings in the paper are that communication and involvement of the stakeholders is one major aspect of adding value to the process.
Other factors affecting the procurement system in the company are the demand and supply of drilling and production chemicals, gaskets, valves, and safety equipment for engineers on the different sites operated by ADNOC. There is a need to enhance the purchasing cycle to make provision for efficient sourcing of goods that are delivered in time without compromising the quality of products. The effectiveness of the procurement department is critical in improving companies efficiency and achieving the goals set. The equipment has high demand in the institution, but limited suppliers due to their high cost or the lack of availability from a quality perspective. The price mechanisms applied must conform to the situation of the industry and have the ability to control the costs. Different elements in the market render the systems expensive to purchase. The high demand and insufficient supply of material and equipment for engineers are major aspects that influence the prices. Finally, the paper sums up with a conclusive paragraph that discusses the important elements discussed.
Introduction
The modern procurement and sourcing processes have the capability to focus on lowering the costs of supplies. The processes have shifted the subject to major business needs with the aim of accomplishing the goals by taking into account important aspects such as product quality and reliability. Moreover, through the emphasis on the vital categories within the business, organizations can manage and build supplier relationship that is perceived to enhance delivery results. Supply chain management has become a major concern in different companies. As the worlds market becomes competitive, the profitability depends less on raising the prices. Consequently, there is the need for enhancement of productive innovation, faster response to time, and higher quality. Similarly, there is the need to grow the cross-collaboration as a way to drive the modern generation to more advanced strategies. Implementation of diverse methods is critical in resolving challenges facing organizations. Procurement is a process of obtaining products by making decisions of when and how much to purchase. The procedure at the procurement department of ADNOC in Abu Dhabi ensures that the appropriate quality and quantity of materials and equipment are acquired at the lowest cost and suitable source.
Driving Value through Procurement and Supply
The purchasing cycle in the organization makes provision for all departments to have a link to information about the functions and other related operations. The services have been enhanced through a reliable association of long-lasting affiliation with both international and local vendors. Consequently, the involvement of an experienced team provides the clients with the best equipment suited for most of their needs. In the modern world, optimization of procurement is considered as a host of most benefits and added tremendous value. From a companys perspective, the obvious advantages of efficiency within this department are the maximization of financials (Chima, 2011). Managing the procurement process enables an organization to gain immediate upfront cost savings by attaining services, contracts, and other items. In order to apprehend the process of procurement, see Figure 1 below.
Figure 1. The procurement funnel (Frazier, 2014).
ADNOC is the seventh biggest oil producer in the world. It is also one of the companies with the lowest costs of operations per barrel due to the characteristics of its onshore and offshore sites. A fully functioning department of procurement ensures that products and services required by their engineers on the different sites (rigs) are bought through an efficient and cost-effective method. Moreover, having a clear understanding of the spending allows the management to have higher bargaining power with the vendors (Srivastava & Verma, 2012). With this added benefit, the company can fully maximize the profits by acquiring what seems to be unavailable to it. Visibility into budgets and spending patterns makes a provision for an organization to leverage any additional cash flow. A fully operational department can contribute to greater preparedness and efficiency. Besides, many perceive the procurement process as a single-dimensional procedure within the company (Daniel, Keen, & McPherson, 2010).
An optimized purchasing cycle makes provision for efficient sourcing of goods that are delivered in time. Updating the department of procurement in ADNOC ensures that the supply chain can navigate through unforeseen challenges such as volatility of commodities. Moreover, it creates an avenue of distinguishing between successful sellers from underachieving vendors. Any competitive edge of this institution makes a difference between new customers and levels of sale (Chima, 2011). A progressive procurement procedure can allow the business to seek more innovative products and services. Besides, entrusting the procurement department enables it to source modern equipment and chemicals with high efficiency of achieving the intended purpose (Ross, 2011). For a better understanding, see Figure 2 below.
Recommendations for Improvement of Procurement System
An effective procurement procedure has room for improving the companies efficiency and bottom line. However, to improve the performance of this department, it is critical to have a strategic plan that aims at achieving the set goals. The first technique of success in ADNOC is to provide the team with the required procurement tools that enhance the process. Consequently, it is imperative to incorporate a strategic sourcing procedure. Oil and gas organizations aim at offsetting the barriers of expensive systems and equipment. It is important to note that new products are not the solution to achieving efficiency (Mumford, 2012). With a proper organization of operations, ADNOC can be equipped to enhance innovation, keep the costs low, and have an improved response to the customers name, the engineers on sites, and their client overseas ultimately. In reality, continuous competitiveness and growth in this industry will require the management to enhance the alignment of functions in the procurement department especially with the current crop of oil prices.
Figure 2. The role of procurement support personnel (Ross, 2011).
Areas of Improvement for ADNOC
ADNOC can achieve benefits that apply to most facets of the oil and gas companies. Benefits such as reliability, quality, environmental performance, and safety can help to improve the position of the institution within the global market. Reliability is an important factor in the supply chain since it makes the provision of timing and quality. Buying materials or contracting services for engineers on different sites influences the productivity of the company. If the operations of the institutions are delayed as a result of the poor procurement process, the profit margins are reduced. It is important to improve the diversity of selecting vendors. The equipment and services purchased must have the ability to enhance safety in the drilling operations.
Improvements and refining the procurement process make a provision for the management to focus on the stakeholders engagement. In the modern business environment, traditional techniques are perceived as time-consuming, expensive, and harbor major drawbacks. The key priority of planning within this department in ADNOC is to audit and improve the communication with the bidders. In some cases, the purchase of materials for engineers on different sites can be tedious, and the strategy to acquire quality products renders it important to involve the major stakeholders before making decisions. Moreover, the contact between the buyer and seller makes provision for a full trial that enhances accountability throughout this process (Walker & Brammer, 2009). It is important to ensure that all vital roles within the supply chain are met.
Collaboration with Stakeholders
To ensure that a virtuous cycle operates effectively, there is a need to guarantee the continuity of efficient communication throughout the procurement processes. ADNOC uses common tools that permit the company to all other interested parties when they are required. Consequently, the application of collaborative solutions gives the stakeholders access to definitive information about the institution. It is important to bring a combination of supply-side and buyer-side parties at all stages of the procedures (Goodwin, Harris, Nelson, Roach, & Torres, 2013). By promoting this, the organization has better chances of acquiring quality equipment that encompasses innovation and the right specification. For instance, organized meetings between end-users and suppliers in the chosen company have shown an interesting result with regards to the timely delivery. Indeed, as suppliers are able to understand the full requirements from our end users, the time required to procure the products or services is lower as well as better matching the needs and requirements.
Collaboration is an effective tool that builds a stronger, transparent affiliation between the company and its partner (Mumford, 2012). It is a critical benefit for the delivery of quality products for efficient operations in the organization.
Collaboration is perceived as the preferred method of driving greater value through sourcing. The investments in ADNOC ensure that it fosters both internal and external involvement of the stakeholders as a game-changer in the procurement department. Moreover, specific features such as automated centralization, workflows, and functions need to be established for the purpose of enhancing compliance, enterprise performance, and risk mitigation (Forgues & Koskela, 2009). Engagement with stakeholders can improve the delivery of services and achievements of the goals. Consequently, the development of a proper guide of the procurement process renders it easier to communicate to the relevant parties. Besides, it is important for the management to define the engagement objectives to enhance accountability.
The process makes provision for selecting the best method to involve the players and influential stakeholders to interact. Similarly, the organization can have a strategy to develop metrics of its success by ensuring that the efforts are focused on the important issues affecting the procurement process (Mumford, 2012).
Organizational Policies and Procedures
In the modern business environment, it is critical to reducing the costs of procuring equipment and enhancing the results despite the challenges faced by a company. Consequently, there is the need to establish a governed supply chain (Ponte, 2009). Acquiring better services from a team of experts leads to the improvement of commitment and endorsement of leadership within an organization. Moreover, the alignment of the staff maximizes the effectiveness and develops a commensurate benefit to the institution (Monczka, Handfield, Giunipero, & Patterson, 2015). The adoption of a hybrid approach allows a combination of strategic plans and decentralized execution of enhancing the services. See detailed information in Figure 4 below.
Figure 4. Alignment of staff (Monczka et al., 2015).
Setting the conditions for the procurement process is one way to enhance accountability and reliability in ADNOC. Moreover, it is the responsibility of the team members to commit their effort in ensuring quality that determines reliability. Enhancement of confidentiality is a major aspect of promoting transparency. Besides, adhering to the companys values is vital in achieving the goals of this department (Arnaboldi, Azzone, & Giorgino, 2015). Similarly, it is a way to enhance safety for the staff operating the equipment. The success of ADNOC relies on both internal (engineers) and external stakeholders (Government of the UAE and other governments) (Amina, Baazaoui, & Abdellatif, 2015).
Demand and Supply Factors Affecting Procurement
The purchase of drilling and production chemicals, gaskets, valves, and safety equipment for engineers on the different sites in the oil and gas industry is a sensitive task to undertake. The demand for the equipment within the organization is high since they are used to run everyday operations. Moreover, by viewing the procurement system, decisions must be made to award the supply tenders to the appropriate contractors. Equipment remains critical in the drilling process of ADNOC, and the procurement department must ensure its existence. On the other hand, oil and gas companies require a large amount of capital that renders the industry more restricted. For this reason, institutions dealing with the necessary tools are fewer, and this aspect lowers their availability. Such elements in the market make the systems expensive to purchase (Daniel et al., 2010). Therefore, it is important to have a strategic plan for acquiring the products by ensuring that quality goods are delivered to the company.
Figure 5. Pricing mechanism (Monczka et al., 2015).
The current pricing mechanisms render it effective for the industry to control the cost of drilling equipment. Nonetheless, a careful examination of all the products and services needs to be done for the purpose of establishing a standardized value. Moreover, the risk can be undertaken by experts within the procurement department. By regulating demand for the tools, prices can be lowered to a suitable level where the cost of production is minimized. Similarly, the strategy can be used for improving their quality.
Conclusion
Driving value through the procurement process ensures that deployed procedures are effective in delivering quality products within the company. Moreover, purchased techniques and tools enhance competitiveness in the market. The challenges involved include both external and internal changes that render it hard for the organization to drive the costs down. The companys performance in the oil and gas industry can be examined through the help of a competitive benchmark. Besides, properly implemented and planned programs in the sourcing procedures enhance the effectiveness of the business and the quality of products and services. Furthermore, this route of attaining advantage by pioneering procurement is important for institutions in this industry bearing in mind that the equipment is expensive. Commercializing and developing new ideas is achieved through strategic decisions within this department. To be clear, the process within ADNOC is critical in ensuring cost reduction and profit maximization. The application of leadership qualities in managing the department makes provision for improving the effectiveness of the institution. So, procurement is a key step in the value chain for quality assurance and competitiveness. The margin generated is the difference between the value given to the product or service and the costs associated with its creation until its commercialization.
References
Amina, R., Baazaoui, A., & Abdellatif, T. (2015). The influence of internal marketing on the behavior of the expatriate employee and on the determination of the external customer satisfaction. Humanistic Management Network, 21(15), 1-20.
Arnaboldi, M., Azzone, G., & Giorgino, M. (2015). Performance measurement and management for engineers. New York, NY: Elsevier.
Chima, C. M. (2011). Supply-chain management issues in the oil and gas industry. Journal of Business & Economics Research (JBER), 5(6), 27-36.
Daniel, P., Keen, M., & McPherson, C. (2010). The taxation of petroleum and minerals. New York, NY: Routledge.
Forgues, D., & Koskela, L. (2009). The influence of a collaborative procurement approach using integrated design in construction on project team performance. International Journal of Managing Projects in Business, 2(3), 370-385.
Frazier, D. (2014). A survival guide for government contractors. Raleigh, NC: Lulu Publishing.
Goodwin, N., Harris, J. M., Nelson, J. A., Roach, B., & Torres, M. (2013). Microeconomics in context. New York, NY: Routledge.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and Supply Chain Management. New York, NY: Cengage Learning.
Mumford, M. D. (2012). Handbook of organizational creativity. San Diego, CA: Elsevier.
Ponte, S. (2009). Governing through quality: conventions and supply relations in the value chain for South African wine. Sociologia Ruralis, 49(3), 236-257.
Ross, D. F. (2011). Introduction to supply chain management technologies. Boca Raton, FL: CPR Press.
Srivastava, R. M., & Verma, S. (2012). Strategic management: Concepts, Skills, and Processes. New Delhi: PHI Learning.
Walker, H., & Brammer, S. (2009). Sustainable procurement in the United Kingdom public sector. Supply Chain Management: An International Journal, 14(2), 128-137.
Green procurement has been recognized as an effective means of reducing unwanted environmental effects related to production, distribution, and consumption of products around the world since the 1980s (Emmett and Vivek, 2010). It is a concept that has drawn heated debates among business owners and other stakeholders. According to Worthington (2009) There is no single definition of sustainable procurement-not least because sustainability is a contested concept-and applications vary across organizational hierarchy and sector .
However, Farahani (2009) thinks otherwise and gives a definition by explaining that green procurement, also known as sustainable procurement is a spending and investment process typically associated with public policy, although it is equally applicable to the private sector . The topic, which is widely linked to the wider agenda of sustainable development, has in the recent past been a point of interest for many businesses, governments, organizations and other stakeholders.
The level of acceptability among businesses and organizations for a long time has widely varied with the industry and region a business is in. However, this is slowly changing as more countries take the issue up with importance and relevance to their economy and environment. According to Friend and Nicholas (2009), There is a general acceptance in many countries that it involves a higher degree of collaboration and engagement between all parties in a supply chain . As acceptability continues to grow in more industries, many businesses have adopted a broad interpretation of sustainable procurement and have developed tools and techniques to support this engagement and collaboration (Phyper and Paul, 2009).
Aim of the study
Perform an in-depth analysis of the development of green procurement in Hong Kong.
Objectives
Explore the true situation of green procurement development among different industries and the different size of organizations in Hong Kong
Research on their knowledge of green procurement
Explore the genuine obstacles as well as incentives for the organizations to implement green procurement
Investigate how the external factors such as globalization and CSR affect the organization to introduce the green procurement
Analyze/forecast the future development of green procurement in Hong Kong
Present recommendations on how to improve and accelerate the development of green procurement in Hong Kong
Purpose of research
The research which will form the basis of the dissertation is inspired by the continuous debates that exist on the role of green procurement in sustainable development. It is also inspired by the recent wave of pressure from environmentalists and other stakeholders to ensure that current developments and investments do not mean sacrifice the state of the environment in future. As a researcher, I believe that all organizations in all industries should be responsible for the negative environmental and social impacts resulting from their day-to-day procurement processes. Therefore, the recommendations at the end of this research will be based on what measures will have been proven significant in conserving the environment according to the study.
Literature review
Green procurement
According to Anderson and David (2009), green procurement broadens the price and quality framework to take account of third-party consequences of procurement decisions, forming a triple baseline of external concerns which the procuring organization must fulfil . The framework of ensuring green procurement is discussed with regard to the environment, social considerations and the economy.
Environmental concerns are the dominant macro-level justification for sustainable procurement, born out of the growing 21st-century consensus that humanity is placing excessive demands on available resources through unsustainable but well-established consumption patterns (Kane, 2009). Many authors and experts in the industry agree that green-procurement stands out in sustainable procurement. Justifications to pursue and invest in green procurement include the need to address climate change and mitigation of over-exploitation of all scarce resources.
Even though the ultimate green procurement is viewed as total avoidance of purchase, businesses realize that this is not realistic. Some of the green procurement examples include using renewably sourced timber for construction, serving organic food in workplace canteens and purchasing energy-saving light-bulbs, just to mention a few. Zhu (2007) advises that in order for companies to develop and sustain green procurement, they should have properly formulated guidelines and procedures. These procedures should then be adhered to during purchases to ensure environmentally responsible procurement.
Application in sustainable development
Green procurement is applicable at every level of the economy starting from the central government to the private sector. In the central government, its application is mainly in designing investments and formulating criteria for spending. Today, governments are more concerned about meeting the needs of the present while being sensitive to those of the future. Solutions are formulated to encourage development today while ensuring that development in the future is not sabotaged. While broad-based green procurement strategies are most prominent in the European Union, it is increasingly becoming common in other regions, particularly the Asian region (Lin, 2011).
Green procurement is also applicable in devolved and local government. Like Erdmenger (2003) explains at market-level, sustainable procurement is typically instrumental; authorities seek to address policy through procurement . Local bodies and government departments can adopt green procurement to address buying challenges. Solutions arising from green procurement will contribute to environmental and community goals. It is further applicable in areas where equality and diversity are sought.
Most significantly, green procurement helps local governments improve sustainability and reduce environmental impacts through developed toolkits such as the one by California Sustainability Alliance (United States Transportation Security Administration, 2008). This enables them to create green jobs, reduce environmental damage and save money. However, for these benefits to be realized, procurement organizations must take a broad approach to green purchasing, reflect on localized economics and cross-cut green procurement targets.
Another area of application is the private sector. According to Sarkis and Qinghua (2010), its proponents aspire to see its application across all areas of the economy . The same author explains that influencing its application in the private sector is not straightforward. This means that the private companies themselves have to be self-motivated to embrace the best practices in procurement, those that promote sustainability (Kane, 2009). Application in the private sector is possible through shareholder pressure, a willing management and enlightened leadership among other principles. The government can influence the application of green procurement in the private sector indirectly through its purchasing power that presents a persuasive environment to them.
Approaches to green procurement
While there are no clearly defined structures under which green procurement should be implemented, there are two most plausible approaches. The first one is the product-based approach. This is where an organization begins by assessing their environmental credentials through its products movement and then moves ahead to assess that of their suppliers. This strategy is mostly applicable to those businesses who are want to use the process as a measure of the impact of a product for marketing purposes. It is also effective for those companies that want a vivid understanding of their suppliers and their processes.
The second approach is supplier-based where an organization may analyze the CSR (Corporate social responsibility) management systems of a supplier and whether its practices conform with the law and with the CSR standards of buying organizations (Esty and Simmons, 2011). This approach is used when an organization wants to measure the amount of environmental and social risks they are exposed to by their suppliers. If implemented correctly, it is an effective way to establish if a companys suppliers meet its environmental standards.
Role of CSR
Asian Development Bank (2005) defines CSR as a built-in, self-regulating mechanism, whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms . CSR activities affect investors, management, employees, consumers, communities, the environment, and other stakeholders. All these stakeholders play different roles to ensure CSR initiatives benefit each of them equally.
The right CSR initiatives in different regions are ensured through laws and regulations, awareness and training corporations on how they can benefit from CSR. Benefits are spread across all stakeholders and include supported development in communities, allowing employees a chance to participate in beneficial activities to the communities, building a reputation for a business and its brands, as well as support for government-initiated development activities and plans. Major challenges for corporations in their efforts to implement CSR include lack of finances, resistance by communities, lack of support by governments, and legal challenges that arise as a result of being involved in different community activities.
Procurement businesses are beginning to include aspects of corporate social responsibility into their projects, but it is arguable that the role of CSR is still not clear (Jonker, 2006). Every stakeholder has a role to play to enable the industry mature in its implementation of CSR. Investors have to be willing to input more finances to support CSR initiatives. Communities play a significant role in helping procurement companies identify social needs that need to be addressed. Clients play a role by putting pressure on procurement companies, as well every business that has a procurement department to do business responsibly.
Supply chain management
The concept of supply chain management resulted from increased competition in the grocery industry due to recession. Supply chain an industry body ensuring maximum responsiveness to consumer demands and minimizing costs in the supply chain. Through supply chain management, customers can be served better and faster. A relationship between customers and trading partners ensures that they are served at a minimum cost. Advanced technology, infrastructure, business structures and competition calls for the most effective way of serving customers by delivering the right products, at the right time, and at the right costs (Organization for Economic Co-operation and Development, 2000).
For supply chain management to benefit both businesses and consumers, there are prerequisites that have to be in place to ensure its effectiveness and efficiency. The most important and main focus areas are product replenishment, category management and enabling technologies (McNail, James and George, 2011). Category management enhances supply chain efficiency by addressing infrastructure concerns. Effective supply chain management is only possible if there is an effective and efficient infrastructure system in place. Infrastructure determines how accessible goods and services are, as well as the level of interaction between consumers, manufacturers and the rest of the supply chain.
Category management gives it an exceptional success by optimizing introductions, assortments and promotions. Efficient customer response is not just about timely delivery but also about ensuring quality deliveries in appropriate packaging. Optimizing assortments and promotions give consumers quality and a variety to give each one of them exactly what they want.
The second prerequisite is the product replenishment. Product replenishment focuses its attention on integrated supplies, automated store ordering, continuous replenishment and a synchronized production. It is also the element of the supply chain which ensures reliable operations through cross-docking and other available systems. Suppliers and consumers rely on these elements to have correct deliveries made at the right time and in correct quantities.
There are different paths identified in supply chains from the manufacturer to the consumer. The aim of product replenishment is to integrate the different paths to a logistic chain which will create one effective and efficient route to ensure the consumer is constantly reached (Humphreys, Shiu and Chan, 2001). Several logistical methods such as cross-docking and order support systems make it possible and fulfil the product replenishment prerequisite for the supply chain to work.
The last prerequisite is enabling technologies. They include electronic fund transfer, electronic data interchange, activity-based costing and item coding, and database maintenance. Technologies such as the electronic data interchange allow everyone on the supply chain to minimize their inventories by reducing order processing time (Humphreys, Shiu and Chan, 2001). They allow a direct connection between different parties on the chain without a need for physical interaction. Different parties can receive messages which were left while they were offline and this keeps the communication going.
Information technology has made it easier for the supply chain to communicate and deliver on time, which is the whole essence of the chain. Enabling technologies have made it easier to deal with logistical problems which become bigger as markets become more global. Database management makes it easy for suppliers to trace their products while electronic fund transfers make payment convenient and safer. Other prerequisites include demand management and supply management. Demand management makes it possible to manage forecasted demand while supply management is the process and method of modern buying (Organization for Economic Co-operation and Development, 2003).
Overview of government green procurement in Hong Kong
Public sector
Procurement in the public sector adopts principles recommended by a study of the development of environmentally responsible product specifications and review on market availability carried out in the year 2000. There are marketing schemes in tender valuations during the purchase of stationeries and paper products (Ho, 2006).
Environmentally preferable products are given priority during government procurements. These include recycled paper, water-based paints, ultra-low sulphur diesel and rechargeable batteries, just to mention a few. The tables below show the state of green purchasing in Hong Kong by the government in the period between 2002 to 2004.
Year
The total value of 17 types of recycled products ($ million)
The total value of non-recycled products procured that have recycled products as alternatives ($ million)
Total value ($ million)
Share of recycled products procured
2002
34.3
51.8
86.1
40%
2003
19.8
N/A*
19.8
100%
2004
54.1
45.4
99.5
54%
Total
108.2
97.2
205.4
53%
Table 1. Green purchasing by the Government Logistics Department (GLD) between 2002 and 2004.
Year
Purchase quantities (tonnes)
Changes in quantities purchased
Percentage of total consumption
2002
1,449
-16.5%
12.5%
2003
1,697
+17.1%
14.7%
2004
1,804
+6.3%
16.1%
Table 2: Recycled paper purchased by GLD.
Private sector
Green procurement in the private sector is purely on a voluntary basis. There are no laws or regulations obligating businesses to adopt green procurement strategies. The scope of green procurement in private businesses is dependent on the companys policies, the cost of environmentally preferable products and measures, as well as the commitment of management (Chan, 2008). It is also highly dependent on customers demands and the companys response to them. Public pressure has in the recent past played a significant role in the companys policies, especially those that touch on the environment.
It is also notable that private companies are more driven by the benefits they gain from initiatives. Organizations practising sustainable procurement meet their needs for goods, services, utilities and works not on a private cost-benefit analysis, but with a view to maximizing net benefits for themselves and the wider world (Lee, 2009). This may result in resistance to good policies and measures that do not offer them any benefits.
However, from studies carried out in the past, it is evident that sustainable development and a preserved environment benefit every business regardless of the industry they have invested in. It is for this reason that the private sector should be equally aggressive in researching on and establishing measures that promote sustainable development. In doing so they must incorporate extrinsic cost considerations into decisions alongside the conventional procurement criteria of price and quality, although in practice the sustainable impacts of a potential suppliers approach are often assessed as a form of quality consideration (Organization for Economic Co-operation and Development, 2010).
The private sector can be encouraged to get involved through performance measures used to compare the cost of implementing green procurement and what the cost of ignoring it. By accurately measuring the extent to which the economy and environment have been impacted by the existence or lack of green procurement processes, it is possible to evaluate the value of their investments and their effectiveness. If the benefits are not felt, the cost of investment becomes more than the benefits accrued. In this case, the model is failing and maybe there would be a need to restructure how legislation and processes are developed. The evaluations play an important role in the decision making processes over future developments.
Recent developments
Since the year 2000, the government of Hong Kong has placed a significant level of importance in green procurement by starting with the public sector through the Government Logistics Department (GLD) under Hong Kong Special Administrative Region (HKSAR). Through the department, the government has developed green specifications for products that it regularly procures. By placing these products in categories, the government is able to identify those that have green alternatives. Out of the 38 categories reached at by the GLD, 19 are considered to have green alternatives which the government gives preference. To understand these measures better, Zhu (2007) explains that in implementing green purchasing within the HKSAR Government, the Stores Procurement Regulations (SPR) were amended in 2000 . The author explains further that the amendments were done to require government departments to give consideration, as far as possible and where economically rational, to purchase products with improved recyclability, higher recycled content, greater energy efficiency and reduced use of toxic substances, amongst others (Zhu, 2007).
In 2008, the countrys green purchases amounted to HK$ 1.76 billion, compared to the total procurement made which was worth HK$ 3.92 billion (Ho, Nicholas and Gilbert, 2010). A policy framework published in 2005 outlines the governments plan for a period of 10 years beginning 2005 to 2014. In this plan, the government pledged to a green procurement policy that gives directions and guidelines on how government procurement should be done. The plan covers the process of selecting, purchasing and maximizing the use of environmentally friendly products and services. It outlines that preference should be given to those products whose usability is sustainable without compromising the environment. Following up on the plan, Ho, Nicholas and Gilbert (2010) report that after a task force in economic challenges meeting in June 2009 and in the policy address 2009-10, the HIKSAR chief executive further announced that the government will expand the scope of green procurement and take the lead in making Hong Kong a green city through legislation .
Methodology
Background
Primary data used in this research project will be collected from a survey conducted on 30 people from the sector. The survey will be conducted in cooperation with organizations and staff federations in the procurement industry. It will be aimed at informing the various discussions on green procurement, as well as its role in a sustainable environment, the economy and livelihoods of people in different economies, in this case, Hong Kong. Involving all people at different levels of professionalism in the sector, regardless of their race or religion, will ensure that the survey collects comprehensive information and all stakeholders in the industry are represented.
The initial findings of the data will be focused on these main questions;
What are the genuine obstacles as well as incentives for the organizations to implement green procurement?
What is the influence of external factors on the planning and implementation of green procurement in Hong Kong?
Is green procurement a necessary trend or an optional development to organizations in Hong Kong?
The survey will target 30 participants. Such an average number will ensure that more views are represented and the data is not too much to sort out and.
Another source of information will be from an interview with 2 experts in the procurement industry, one from a company and one from a university procurement department. Participants will be chosen from their level of experience and understanding of professional development in procurement. The interviews will be aimed at understanding how the culture of green procurement is appreciated in Hong Kong organizations, by studying how they are able to ensure sustainability and minimal damage to the environment. The interviews will further discuss the need for green procurement development and training in Hong Kong organizations and its role in the regions development.
The interviews will be used to further establish how this has been taken up in various levels of the region including in the government level, local level and the private sector. They will further be used to seek the experts opinion on how through regulations, the sector is being forced to establish green channels of doing business. The interviews will also be significant in discussing the role of respecting organizations internal environmental policies and how green procurement mechanisms can be used as a solution to different challenges facing environmental sustainability in Hong Kong.
Another significant topic of discussion with the interviewees will be stakeholders satisfaction and their role in ensuring quality in the sector. This topic will cover promotions and policy development, as well as how they are being addressed in the procurement sector. Process improvement will be analyzed to understand how by making effort to make a production system better, the procurement processes can achieve sustainability. Other important measures to be discussed in the interview will include the role of a good corporate culture, policy enrichment and effective implementation.
Data analysis and discussions will be written from the findings in different academic resources, the survey and the interview. It will review and classify findings from different statistics and the situation in Hong Kong as far as skill green procurement is concerned. It will also present statistics and information collected from the outlined sources to get a professional understanding of the topic. The findings will be used to structure an argument and different discussions. The industrys position and capability to manage already in place will also be reviewed, discussed and evidence presented. The results will be interpreted and a more detailed examination given.
Participants
To collect comprehensive data and information, this study will be conducted on 32 participants. 30 will participate through questionnaires while the other 2 will be involved as interviewees. It will be open to employees of one of the leading procurement companies in Hong Kong. The survey will encourage participants from all categories and levels of the profession in the company to ensure equal representation. It will target 30 participants, a number that was decided on to ensure easy manageability of data.
Professionals in the area of procurement will account for 70% of the participants. Half of these are expected to have not less than 5 years of experience in the field. The remaining 30% of the participants will include those with experience in environmental matters, including those working for organizations that offer environmental solutions, government representatives in the environment department, and non-governmental organizations working to rehabilitate the environment. To ensure gender balance in the study, 50% of the participants will be female, while the remaining percentage will be male. There will be an age limit of 30 years to ensure information is only collected from experienced participants. The questionnaires will be accessible to the participants for a set period of time to ensure participants fill them at their own time without pressure.
Data collection will also include two interviews. The interviewees are expected to have a good understanding of procurement and the environmental aspects of procurement. They will be further expected to understand green trends in the procurement industry, especially in Hong Kong. Since the interviews will be used to discuss the existing trends, challenges and future solutions to environmental challenges in procurement, a long term experience in this area of study will be required. It is expected that an interview with the head of the procurement department of a university in Hong Kong will meet the expectation of the study. Another proposed interview will be with the procurement department of a sizeable property developer in Hong Kong.
Recruitment
Recruitment will be done by using social network and online forums to reach out to targeted participants. The snowball technique will also be used to reach the targeted number of participants required for the study. In this technique, people familiar with the study will be used to reach out to more people who will then be directed to the researchs weblink. For the interviews, the participants will be contacted on the phone by fetching their numbers from directories. All participants will be presented with adequate explanations and guidelines for the study. All participants will also be required to fill and sign a consent form agreeing to voluntary participation.
Data collection
The research methodology applied in this research project would be designed to achieve the set objectives of the paper. It will include the study of books, academic journals, online articles, past projects by different authors, government statistics and non-governmental bodies. To understand the background of the problem, literature relating to skill mix in the nursing sector will be reviewed. Primary data will be through interviews with experts and key stakeholders in the procurement industry.
Primary data collection will be done by administering questionnaires and doing interviews. Secondary data will be collected from past research projects, government and non-governmental statistics and other relevant sources. The questionnaires will be filled online and will be divided into three sections. The first section will be used to understand the participants understanding of green procurement. The second section will seek to understand the participants view of the current position of green procurement in Hong Kong. The third section will be used to understand their views on what needs to be changed and what should remain as it is, as well as the benefits of undertaking the suggested solutions.
Case design
The case design will be comprehensive and complete enough, to allow stakeholders to understand and utilize the information in decision-making easily, whether they were part of the research team or not. These stakeholders include consumers, manufacturers, logistics companies, distributors of various products, environmental bodies in the country, and the government of Hong Kong. Reviewing the case design will be critical to ensure its validity and applicability. Cross-comparing the case design and its outcome, with similar research projects conducted in the past, will help this research to highlight commonalities and identify areas where the results need to be strengthened. Data analysis tools and software will be beneficial when sorting out data and identifying patterns. As Vardeman and Jobe (2001) argue, data analysis techniques can help gain greater insight into trends being investigated .
Justification of the methods
Appreciative inquiry
Appreciative inquiry is based on the assertion that problems are often the result of our own perspectives and perceptions of phenomena (Vardeman and Jobe, 2001). The approach will be applicable when identifying what has worked well in the past and applying it in the current situation. This proved the most applicable methods when researching on the procurement sectors development and strategic planning. The method will prove particularly relevant when gathering information that will help the sector develop its development plan.
Case study design
According to Jupp and Roger (2006), case studies are particularly useful in depicting a holistic portrayal of a clients experiences and results regarding a program . In order to implement any green initiatives, the sector will need to confirm the effectiveness of its programs and processes. This entails evaluating their strengths, weaknesses and threats. A case design in this research will include arranging a wide range of information from different sources and similar projects in the past from the procurement industry and other stakeholders. Comparing the results and patterns of the past project will then help this research make relevant conclusions and recommendations. The evaluation will include both straightforward comparison and in-depth analysis.
Interviews
Interviews are a brilliant way to pursue in-depth information about a project. They are particularly helpful when a case needs follow-up, and when answers are required from a particular person (Jupp and Roger, 2006). The best way to get information during interviews is to ask open-ended questions. Preparing for interviews will involve choosing settings with the least level of distraction, explaining the purpose of the interview to the interviewees, explaining the purpose of the interview to them, and recording it for reference purposes. This method of research will be beneficial when trying to understand the concept of green procurement, how it can be made better, and any other information that does not involve a large target group.
Questionnaires
Questionnaires will be the most convenient and easy way to collect data from a large population. They are easy to design, and since they do not require a lot of time, it is easy to have respondents to cooperate. Their disadvantages include the fact that they do not allow the researcher to examine complex issues. Since the target group in this research project will be 30 people, questionnaires are considered the most efficient way of gathering information and opinions from such a number of people.
Data analysis
Vardeman and Jobe (2001) define data analysis as the process of inspecting, cleaning, transforming, and modelling data with the goal of highlighting useful information, suggesting conclusions, and supporting decision-making . Data analysis comprises of diverse techniques depending on the type of data, and expected outcomes. When conducting a study on a wide topic such as procurement, data mining is an indispensable technique since it involves discovering knowledge, as opposed to describing it.
In any study focusing on attitudes and perception, the importance of primary data cannot be over-emphasized (Vardeman and Jobe, 2001). In such a project, it is expected that at least 90% of the questionnaires distributed will be returned and filled correctly. Interviews will be scheduled early to guarantee enough time for preparation by participants. Secondary data will be extremely valuable and will be collected to augment the research. Before any data is collected, permission will be sought from different authorities such as the relevant ministries and organizations where participants work. An initial visit to these organizations will be crucial for introductory purpose, familiarization as well as seeking consent for the research project.
Data analysis tools and software will be beneficial when sorting out data and identifying patterns. As Jupp and Roger (2006) argue, data analysis techniques can help virtually any research project gain greater insight into trends and insights in the area of study . Available data analysis tools today include business intelligence platforms, online analytical processing, excel power, among many others. Answers to close-ended questions will be analyzed in percentages while others will be individually analyzed and discussed.
Material
Participants will be required to fill a three-part questionnaire. The questionnaires will be available both online and in hard copy to allow participants to fill them at their own time and comfort. There will be an available weblink where those who want to fill them online can access them. The questionnaires will be available for a considerable duration of time depending on when they are distributed or open for participation. Materials needed for this activity will include the questionnaires themselves, a weblink and detailed instructions of what is expected of the participants.
Interviews will be conducted on the phone and any information required from government officials will be accessed online, after consent from concerned authorities. Sample investigative questions in this survey will include having participants explain what they understand by green procurement, giving examples of experiences they have had themselves in green procurement-related initiatives. Financial resources required for the project are outlined in the budget available at the appendices.
Project time schedules
This research dissertation will be completed in a duration of 3 months
Ethical considerations
There will be a number of ethical issues expected to arise during the formulation of this research study. These issues are further expected to arise during the collection of data for the project. One of the most fundamental principles to be followed in this research project is voluntarism participation. The principle requires that no participant should be coerced to participate in a research or give false information. A participant must also give consent before their identity is revealed if there is a need to do so, although, for such a project, anonymity would be applied.
During a research project, ethics also demand that the process must not subject the respondents to any danger or harm, a factor that will be taken very seriously. A researcher is supposed to apply the principle of anonymity to protect them from the consequences of revealing the information they do. It is also the respondents right to be treated with respect and dignity during the study. These ethical issues are expected to be adhered to when this research project is being conducted.
Limitations
Limitations expected in the research exercise include language barriers since the procurement industry in Hong Kong employs a considerable number of foreigners. This is expected to make it a bit difficult to collect views for the study. Lack of cooperation from some respondents is expected to be a significant challenge, as well as fears that they may not give accurate answers or take too long to respond. Conducting a research project is an expensive activity and finances will be a challenge. These challenges will be addressed by conducting the survey in English which is the language in which this paper will be written and using translators for participants that do not understand English. There will also be comprehensive explanations about the scope of the research to respondents to ensure they understand the objectives of the study. Explanations and elaborations are aimed at minimizing resistance and enabling respondents to complete the task as fast as possible. There will be a proper costing and allocation of funds before the task commences to take care of any financial challenges that may arise.
Green procurement as a subject raises very many controversies. Many businesses disagree on key issues related to the topic, especially those that are not cost-effective enough for them. While many feel that its initiatives could help solve several environmental challenges in the procurement industry, they disagree on how policies should be formulated and who should govern the changes that arise. Businesses affected by this industry feel that key decisions and their implementations should be left to them. Government officials on the other hand feel that its their responsibility to foresee any decisions that affect the environment. Such controversies and debates could pose as a challenge during the research. Too much-contradicting information and opinions may make it hard for the paper to come up with a well-supported conclusion.
Expected outcome
For the proposed study, it is expected that it will be possible to identify the role of green procurement in Hong Kong. The survey will be focused on green procurement and how it allows contributes to sustainable development. It will focus on the role of green procurement on transferability of environmental benefits to other areas of the economy and knowledge among consumers, suppliers and other stakeholders in the industry. It will study the allocation of different skills in Hong Kong to ensure green procurement is well understood and appreciated in the region.
Through interviews conducted on experts in the area of procurement and information gathered from government and non-government sources, it is expected that it will be possible to fully understand the background of the topic and present a comprehensive argument. It is expected that from the information gathered, it will be possible to identify what stakeholders have done so far, what is working and what has failed. Such information will be vital for any country or city with ambitions of using green procurement to promote sustainable development.
This research is significant to every citizen of the city of Hong Kong. Every region recognizes that the quality of the environment determines its future. By ensuring proper environmental decisions are made, a citys investments and developments in other sectors are bound to produce results. The research is also significant to the procurement industry and those who have invested in it, policymakers and other involved stakeholders. It is significant to the direction that procurement training and skill development takes in the organization. It is further expected that the results will help shape the way procurement and its role in sustainable development are viewed.
Green procurement as an only solution or diversification technique will be researched on and discussed. From the literature review, using green procurement as a diversification technique serves more benefits than using it as the only solution to sustainable development. Diversifying the skills and responsibilities of those in the industry allows them to do perform more responsibilities while being able to deliver in their core responsibilities. This argument will be further researched, evidence gathered and evidence presented on which among the two best applies in achieving sustainable development in Hong Kong.
In the process, the research will also establish practical guidelines for the city of Hong Kong to maximize the benefits of green procurement. There will be practical guidelines for stakeholders in the industry considering it as an option to ensuring sustainable and safe development for future years. Necessary resources and steps will also be established through a comprehensive literature review on the subject. It is expected that steps and guidelines gathered on the same will be relevant, comprehensive and viable enough for easy implementation. Professionalism in the
The research will further help understand the value of quality in skills in the context of green procurement. Quality of skills in the industry is a term that has different interpretations depending on the approach that a person takes. It is defined as the extent to which a product or service satisfies a person or a group. Quality in procurement is the process of meeting the expectations of manufacturers, distributors and consumers. Quality of procurement in many industries is viewed in terms of the degree to which the probability of an optimum processs outcome is influenced by the care services given. In this industry, quality is judged based on various domains. These domains include effectiveness, capacity, safety, equity access, reliability and timeliness (Chan, 2001).
Through the research, it will be possible to give suggestions and recommendations on the best quality improvement models. There are various quality improvement models in procurement that have been developed to ensure that services and products availed to clients are up to standard and that they meet the expected quality level. In long-term business processes and policies, extra attention needs to be to ensure that implemented measures are efficient enough and relevant for a long period of time. Applicable quality improvement models in procurement include Quality Assurance, Total Quality Management, Performance Improvement and the ISO standards, among others.
The research will be conducted with an understanding that green procurement is entrusted with a huge responsibility of improving the quality of life of a population. For regions and industries where procurement plays a more significant role than just ensuring the accessibility of goods and services, satisfaction is both paramount and critical. As more regions compete to have the best procurement processes in the world, several challenges and barriers are evident. Policy implementation has been a major obstacle for stakeholders who seek to invest in the industry. This is especially so when environmental matters come into place. The industry is strongly guarded by long policies and procedures of implementing even the smallest initiatives. The rate at which technological innovations and procedures become obsolete is also an issue of concern. As a result, small projects and initiatives which take too long to be implemented might end up being irrelevant by the time they are complete.
Available green procurement techniques include quality assurance which is involved with monitoring and evaluation procedures and techniques in a project to ensure that desired quality standards are met. It is applicable to ensure that goods and services at any level of the supply chain are up to the recommended standard. Important techniques in quality assurance include putting in place checking and monitoring measures. The process involves assessment of quality to identify outlying results so as to check if they indicate any inappropriate results.
Performance improvement is a significant technique easily applicable to green procurement to improve sustainability. Performance improvement is a concept that works towards continuous improvement and consistence in quality. It is more focused on instilling accuracy in a particular process rather than trying to single out the errors present (Chan and Lorett, 2008). It values the empowerment of individual processes through ensuring their capability to improve quality, organizational learning, awareness and being sensitive to the needs of those dependent on a process. This model encourages continuous improvement, identification and prevention of defects (Zhu, Joseph and Kee-hung, 2008a).
The research is further expected to help understand how organizations can be empowered to perform more through green procurement. When well equipped and trained, government and non-government organizations will be able to research on better processes. Organizations further need to be equipped to minimize wastage, a key pillar of green procurement. By implementing such initiatives, organizations that have not been able to utilize their procurement capabilities to improve on efficient will be able to do so.
The research is also expected to gather views and suggestions on the role of technology in the successful implementation of green procurement. Technology is important for effective management of key processes as the industry tries to implement and benefit from green solutions. Technology influences management and workforce in any sector by analyzing production, resource impact, routine to non-routine operations, structure impact, industry impact and work impact as well (Zhu, Joseph and Kee-hung, 2008b). It allows the stakeholders together with the workforce to match the resources available with technology, through different approaches. The management and leadership of organizations are able to run operations more easily changing techniques and processes to better and modern ones. Through such benefits, community green procurement can be taken to a level where it serves more purpose in different industries.
It is also important to note that green procurement features personnel administration, organizational management, industrial management and manpower management in procurement companies. People in an organization are a key determinant of how successfully designed measures are going to be and how long they will last. It is expected that these views will be discussed in the study. As the labour markets get more and more competitive and the need for talent becomes more obvious for optimum performance, human resource managers are facing major challenges as they try to get the best in the market, retain them and ensure they have consistent performance. The procurement industry has especially been hit by retention and staff relevance problem as a result of constantly changing needs in the field. Such challenges will automatically affect the way formulated policies and suggested solutions are implemented.
From the study, it will be possible to establish and discuss internal and external factors that influence the adoption and implementation of green procurement in Hong Kong. Internal factors to be discussed in the study include labour policies, training and support policy, shareholders and the labour market. External factors include government policies, legal factors, technology, social corporate responsibility and globalization as identified by Lin (2011). Since the procurement industry is a significant part of every regions economy and involves external transactions, the behaviour of different economies has enormous effects on its operations. The role of economical changes and trend in how green procurement can be achieved will be discussed.
As Arimura, Nicole and Hajime (2011) argue, successful industries are becoming more adaptable, resilient, quick to change directions, and customer-centred . The procurement sector today is constantly changing and demands strategic planning and organization. Technological innovations such as Transport and Fleet Management Systems have made it easy for the sector to handle information related to skills, knowledge, training, trends and development. It is expected that through the interviews and study of different literature, it will be possible to confirm these arguments.
Reference List
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We are looking for a procurement manager for our friendly team at Company N selling medical devices to healthcare facilities throughout the country. Your duties will be directly connected to sourcing and purchasing different products as per the emerging requirements of the business. The principal deals will involve finding suppliers of components necessary for manufacturing the realized goods while ensuring that the operations are cost-effective and monitoring their quality (Martocchio & Mondy, 2019). You will also provide guidance to other employees in the purchasing process for maintaining the efficiency of stock optimization (Evans, 2021). In addition, you will have to adhere to the policies of our company related to supply chain management in order to guarantee compliance with corporate ethics (Martocchio & Mondy, 2019). They incorporate a variety of regulations applicable to the relationships between the external and internal participants of these operations. Moreover, the orientation on the safety of customers and their wellbeing when selecting the materials is our key priority, which should be taken into account in all deals.
Responsibilities
Developing innovative and cost-effective approaches to implementing procurement strategies;
Negotiating the terms of agreements with suppliers and other employees in order to ensure the future profitability of the company;
Finding reliable vendors and other partners as per the operations connected to supply chain management;
Monitoring the accurate performance of all tasks to ensure a positive outcome;
Regularly revising the existing contracts with the partners in order to timely detect any issues resulting from the change of the business environment;
Regularly monitor the changes in the existing legislation and other regulations connected to manufacturing medical devices and other similar products;
Informing the managers of the introduction of new regulations or any other obstacles, which can potentially disrupt the production process and thereby cause financial losses to the company;
Approving or rejecting the purchases and other related operations suggested by the companys employees while reporting on the feasibility of such decisions;
Controlling the companys procurement budget in order to ensure the compliance of performed projects with available funds.
Requirements
Bachelors degree in logistics or business administration;
Product knowledge about medical devices and similar products;
Thorough knowledge of legal regulations connected to healthcare;
Ability to work in a stressful environment and meet the set deadlines;
Confirmed experience of managing supply chain operations;
Experience managing complex sourcing projects;
Experience using procurement software, including SAP Ariba, Oracle Procurement Cloud, and GEP SMART;
Basic technical software skills: MS Office, MS Outlook;
General knowledge of accounting practices applicable to the responsibilities;
Excellent leadership and management skills;
Excellent communication and people skills for successful negotiations;
Experience in conducting negotiations with suppliers, preparing and signing contracts, and invoicing;
Ability to timely detect and resolve issues related to the work of supply chains;
Ability to recognize conflicts and take timely measures for their prevention or resolution.
Where to Advertise/Post the Job Description
This job description should be posted on the platforms, which are popular among specialists in the field of healthcare and the websites for procurement workers. The former includes MedicalJobs.org, MedJobsCafe.com, and Health eCareers in the first place since the employees in this field might potentially possess the experience required for the job. In turn, the latter is Talentbin, HiringSolved, Sourcing.io, and CareerBuilder resume database. Hiring employees with the help of these resources seems an excellent solution since they are connected to both the type of tasks which are to be performed and the area of expertise in general.
Currently, the Mayo Clinic is looking for human resource services to aid them in the selection of laboratory equipment and other products from various providers. In order to determine if outsourcing will be advantageous or damaging to the organization, they must first determine whether it will be beneficial to the organization. The result is the completion of a cost analysis, which allows the company to choose the most cost-effective method of acquiring laboratory equipment vendors. It will be assessed in this situation whether or not outsourcing the service would be more cost-effective than undertaking direct supplier recruitment. Once the cost analysis has been done, the company can pick which method of costing will be employed in the future for the company. Aiming for cost savings for the company in issue, the supplier selection service that will be outsourced should result in cost savings for the company in question. If a company decides to outsource, the cost should be lower than the cost of direct hiring; otherwise, the supplier selection should be done within the company.
Targets of Preliminary Performance
Goals may not follow each other temporally, as suggested on the slide. They can be parallel if the sourcing team is large. Then suppliers will be found faster, however, fast communication is needed in the team.
Preliminary Performance
The company should be reliable to ensure that the items required in the clinic are delivered on time. This will prevent the clinic from incurring delays which may affect the quality of services provided to the patients. Delays may make the hospital to incur losses when patient seek medical services to another organization due to insufficient laboratory items. In addition, the outsourced company should have a follow up plan to allow the hospital to track where the supplier has reached. This will help in establishing a strong relationship between the hospital and the outsourced company. Regular communication with company will be crucial in ensuring the success of business-to-business relationship. The clinic will save on costs because after a long-term relationship the outsourced company may offer discounts for goods supplied. The clinic should also ensure that the company selected is within its budget. This is to avoid outsourcing a company that will charge high costs for the services. The delivery of high-quality equipment will improve the level of services provided in the hospital. In return, more patients will be referred to the clinic which will increase its revenue.
Levels of Services
The main three levels of service that will be required from vendors looks like this. The fundamental level, without which further work is impossible, is high-quality communication. This level is followed by a careful attitude towards clients and staff, colleagues. Only after reaching the first two levels it will be possible to consider the vendor and its service in terms of price-quality ratio, in general.
Type of Contract
The type of contract that will be employed is fixed price contracts. A fixed-price contract is one in which the payment amount is not contingent on the contractors usage of resources or time (An et al., 2020). In this instance, Mayo Clinic will award the contract to the outsourced company, which will then select the best supplier for laboratory supplies. This is in contrast to a cost-plus contract, which is meant to cover the contractors costs plus a profit margin. By using this type of contract, Mayo Clinic will not incur the risks of cost overruns. The extra costs will charged to the outsourced company. Fixed prices can necessitate retailers determining the price of each item in advance (An et al., 2020). While fixed-price products can be purchased more quickly, bargaining can be used to set the price for an entire set of things being purchased, thereby shortening the time required for bulk purchases. The fixed rates will assist the hospital in budgeting for the necessary laboratory items. Additionally, fixed-price items can be used to estimate the worth of an inventory in advance, such as for insurance estimates.
Evaluation Criteria: The List
When evaluating the best company to outsource the services for supplier selection, a financial proposal will be provided to companies that offer supplier selection services. The proposal will include how much the clinic is willing to pay. This will help in selecting a cost effective company to avoid outsourcing a company with high rates. The financial proposal should as well be transparent to that the company being outsourced is aware of the budget of the clinic. The company should have the supplier information and databases to track them incase the clinic has a complain. For example, if a supplier delivers faulty items, the clinic should have means of reaching out to them through the outsourced company to replace the items. This will prevent the clinic from incurring losses. Different criteria will be applied to different business units as they have different tasks, responsibilities and areas of activity. These units are associated with completely different areas of business, and somewhere constant communication is needed, and somewhere it can be minimized thanks to technology. It is impossible to fit all units under the same criteria.
Number of Vendors
Mayo Clinic will outsource only one vendor. In addition, the organization will identify the appropriate vendors to deliver the laboratory supplies necessary by the clinic. One business will enough, as the hospitals objective is to save money by cutting its expenses. As a result, if a single firm is capable of providing all essential services, there is no need for two or more enterprises to select suppliers. The outsourced organization will bear the cost of searching for and selecting the best suppliers. The clinic will only pay the amount agreed upon when the contract is signed.
Comparison of Cost Analysis
When comparing the cost effectiveness and the cost benefit, the cost measure for both is expressed in terms of financial resources. When comparing cost effectiveness and cost benefit, the cost effectiveness benefit is assessed in units of effectiveness to the organization, while the cost benefit is measured in the monetary value benefits the company receives (Aamer, 2018). This because it provides the benefits in monetary terms, the cost benefit analysis is used to determine the value of a contract. The benefits would amount $120,000 in total. Using the benefit-cost ratio formula, BCR = $120,000/$89,000, or 1.348. Given that the value is positive (and the overall benefits exceed the whole expenses), the cost benefit analysis implies that hiring a supplier with the above expenses demands would be a good option for the organization.
Timeline
The activities to be included in the contract between the Mayo Clinic and the company to which they will outsource their services determine the timeline for completion of the contract. Purchases will be planned for 1-2 months, this is one of the initial stages in the timeline, followed by the rest, no less important. The total period of acquisition through select sellers is more than four months, which will need to be reduced to three months in the future. This period includes a request for a response from the seller, vendor selection, communication, and the drafting of the contract.
Communication Details
In general, it is always important to pay attention to the speed of the project flow. Business is entirely based on human needs, is created by human hands, but it is communications that can slow down the process and achieve results. It is also very important to work on conflict management.
Recommendation
The cost analysis is to help Mayo Clinic to determine whether outsourcing for supplier selection helps in saving on costs or not. Based on the findings, I would recommend outsourcing for the organization. This is because it reduce the costs and time incurred when looking for reliable suppliers. Cost benefit analysis is data-driven as it enables evaluation of the contract free of personal biases and opinions. Organizations can utilize cost benefit analysis because they can determine the money value when they decide to outsource their services.
Usefulness of Outsourcing
The use of outsourcing platforms will allow Mayo Clinic to be accessible to more patients, as well as to keep abreast of changes in large areas. This is due to the fact that outsourcing workers can cover very large areas with an information grid.
Conclusion
Advancing forward has resulted in numerous changes for organizations who opt to contract. They have shifted their emphasis in a variety of ways. The primary change has been in how firms see outsourcing and its benefits. When we look back at the origins of partnering with third-party organizations and individuals, we can see that financial considerations contributed a crucial influence. For some organizations, offshoring was solely for the aim of saving money and decreasing costs thus the need for carrying out a cost analysis. Only a few organizations considered outsourcing as a convenience for them to focus on the major issues even though the outsourcing would be more costly. Advancement in technology has enabled most companies to carry out these services internally by digitizing using the latest technologies. Nowadays, significant progress has been made on this front, and organizations are motivated by a variety of factors to advance while delegating some functions to external teams. Based on all of the above, it is considered very rational to use outsourcing in the framework of the discussed medical business. The decision was made to buy from third party outsourcing vendors until the clinic can afford independent and self-sustaining outsourcing.
References
Aamer, A. M. (2018). Outsourcing in non-developed supplier markets: a lean thinking approach. International Journal of Production Research, 56(18), 6048-6065. Web.
An, Q., Wang, P., Emrouznejad, A., & Hu, J. (2020). Fixed cost allocation based on the principle of efficiency invariance in two-stage systems. European Journal of Operational Research, 283(2), 662-675. Web.
Dekker, H. C., Kawai, T., & Sakaguchi, J. (2018). Contracting abroad: A comparative analysis of contract design in host and home country outsourcing relations. Management Accounting Research, 40(1), 47-61. Web.
