Category: Procurement

Introduction

The government is responsible for providing citizens with various public goods, that is, goods available for everyone for free and not decreasing in the quantity after one uses them. Public goods include such significant entities as national security, police service, street lighting, flood defenses, and highway and school systems. However, the government cannot produce all the necessary inputs to provide citizens with essential public goods. Therefore, it needs to acquire the needed resources, which is the primary function of public procurement. It is difficult to underestimate the importance of procurement in public organizations, which will be discussed in this paper. Although public procurement has much in common with private procurement, it is faced with unique challenges, including privatization issues, poor contract management, e-procurement, outsourcing government services, HR issues, and corruption. This paper will explore these challenges, as well as ethical considerations and leadership efforts concerned with dealing with these problems.

The Role of Procurement as an Internal Service Function

Procurement plays a significant role in the public sector since it enables governments to provide citizens with the necessary public goods. The primary goal of public procurement is to “obtain the right goods, capital assets or services … in the right quantity, for delivery at the right time to the right place, from the right source … with the right service, and at the right price” (Pitzer & Thai, 2009, p. 6). Public procurement’s responsibilities have been widened recently, and, apart from acquiring goods and services, they have begun to include such processes as identifying the need of the population and contract closeout (Pitzer & Thai, 2009). As a result, procurement in public organizations has become an essential tool for governments to fulfill their obligations to citizens.

The goals of public procurement in obtaining goods may be divided into various categories. These categories include cost, quality, timeliness, managing risks, fulfilling economic and social objectives, maximizing competition, and maintaining transparency and integrity (Pitzer & Thai, 2009). When considering the right cost, procurement officers compare not only prices of goods but also associated indirect costs, such as the cost of shipping or the risk of loss, to determine the best cost-benefit ratio (Pitzer & Thai, 2009). Public procurement is also responsible for ensuring that the quality of the obtained goods and services meets the expectations of end-users and that these goods and services are delivered to users in time. Public procurement’s role in fulfilling social and economic objectives consists in providing safe and fair working conditions, taking care of the environment, and promoting the rehabilitation of severely disabled people and prisoners (Pitzer & Thai, 2009). Moreover, by maximizing competition, public procurement contributes to the reduction of costs, an increase in quality, and the development of innovations (Pitzer & Thai, 2009). Thus, public procurement is important because it fosters the well-being of society in various ways.

Yet, the most important reason why public organizations need procurement management is that they use money received through taxation to purchase goods or services. According to Pitzer and Thai (2009), public procurement expenditures comprise about 10-30% of various countries’ GNPs and have a considerable impact on the economy. In addition, in democratic countries, such as the US, the public requires transparency in the operations conducted by the government. Given these factors, procurement in the public sector should be carefully managed to ensure economic stability and citizens’ awareness of the use of their taxes.

The procurement department in public organizations also plays a vital role in increasing the effectiveness of other departments. For example, procurement officers are responsible for providing accurate information about procurement transactions, the acquisition cost and location of fixed assets, and disposed excess or surplus property to the financial department (McCue & Pitzer, 2005). Public procurement is also of great assistance to the budget department. In this case, procurement managers’ role is to provide market information, help with forecasting, and compare the agency requests with real-life cost data (McCue & Pitzer, 2005). In sum, the role of the procurement department in public organizations goes beyond placing orders and making purchases of the necessary goods and services. It also collaborates with other departments and assists them in performing their functions.

Internal and External Challenges to Implementing Procurement Policies

Public procurement faces multiple challenges, one of which is corruption. Thai (2009) argues that corruption is very prevalent in public procurement and may result in a 20-25% increase in the costs of government procurement. One example of corruption is when suppliers send expensive gifts to the procurement department, which may incite procurement officers to make a contract with these suppliers, even if they are not the best available option (Pitzer & Thai, 2009). Another corrupt practice that poses a challenge before public procurement is personal purchases. In this instance, procurement officers buy items for their families, co-workers, or other not-for-profit organizations at prices reserved for government purchases (Pitzer & Thai, 2009). The abuse of functions, embezzlement, and bribery also constitute a challenge for public procurement. A possible reason for corrupt practices in public procurement is the large sums of money involved in the process and the non-commercial nature of public procurement. As a result, procurement officers may be tempted to engage in corrupt practices, and public organizations may not have appropriate regulations to prevent it.

Emerging information technologies (IT) also represent a challenge for public procurement. According to Dixit et al. (2009), electronic procurement has several benefits, such as the possibility to automate buying and selling, effective control of parts inventories, and the reduction of purchasing agent overhead. However, the necessity to integrate IT into public procurement leads to the need for recruiting and retaining buyers and the support staff with high levels of computer literacy (McCue & Pitzer, 2005). Apart from that, procurement managers are faced with the task of developing appropriate performance measures that would indicate organizational success (McCue & Pitzer, 2005). Thus, the challenge of using IT in public procurement is closely linked to managing human resources.

Human resource management is a significant challenge to public procurement not only because of the introduction of IT but also some other issues. For example, in public organizations, monetary rewards for employees whose performance exceeds the expectation are not provided (McCue & Pitzer, 2005). Therefore, there is a need to find other practices to recognize employees’ efforts. Furthermore, Pitzer and Thai (2009) refer to the evolution of the workforce as “the greatest challenge to public procurement in the first two decades of the 21^st century” (p. 222). As a result of the workforce evolution, public organizations have to replace the aging staff, develop training programs for employees from the next generation, and adapt workers to rapidly-changing technology and innovations (Pitzer & Thai, 2009). Hence, public procurement needs to update its HR practices to hire more young professionals and provide them with the necessary resources to improve organizational performance.

Another challenge to procurement in public organizations is associated with contract management, particularly assessing contract risks. Pitzer and Thai (2009) emphasize the importance of identifying all possible risks and including them in the contract using clear and concise language to prevent ambiguities and misinterpretation. They distinguish the following types of risks that should be assessed in the contract: proposal risks, surety/liability risks, schedule risks, contractual risks, performance risks, and price risks (Pitzer & Thai, 2009). Briefly, a good contract should clearly and unambiguously define the party’s responsibilities, terms of the agreement, penalties, and conditions for breaching the contract. Unfortunately, as Smith (2019) argues, many public procurement officers think that contract management is only about specifying terms of agreement and penalties. They do not pay attention to the value and risks of the contract and its impact on the buyer (Smith, 2019). Smith (2019) says that public procurement officers sometimes even fail to draw the contract in a concise and unambiguous language, which is a big problem in public procurement. Consequently, the issue with contract management is that it is a complicated procedure, and not every employee is qualified enough for it.

Privatization is also a significant challenge to public procurement since, along with its benefits, it has particular drawbacks and encounters various obstacles. Privatization means “allowing private organizations to perform the work of government” (Becker, 2001, p. 1). This practice has certain advantages, such as improving service quality, increasing productivity, and getting access to specialized skills and equipment (Becker, 2001). Furthermore, the most frequent reason for governments to privatize is cost reduction (Savas, 2000). Privatization is the most feasible when public organizations fail to perform their duties, and their work results in low-quality goods and services, inefficiency, debts and losses, unresponsiveness to the public, and illegal practices (Savas, 2000). In this case, it would be reasonable to delegate the work of the government to private organizations.

However, there are certain issues with privatization, which pose a challenge to procurement in public organizations. The most important concern is the loss of adequate control over operations, which Becker (2001) calls “the Achilles heel of privatization” (p. 11). Privatization may negatively affect employees since, in private organizations, the disparity in the wages of executives and low-level workers are much greater than in public organizations (Becker, 2001). In addition, privatization may result in an increased workload, which will decrease employees’ productivity in the long run (Becker, 2001). Another issue is that the public may resist privatization due to the fear of prices going up (Savas, 2000). Finally, this practice can lead to the creation of uncontrolled private monopolies, which will endanger competition (Savas, 2000). Thus, public organizations have to consider all these issues when deciding to engage in privatization practice.

Another challenge is outsourcing, which is closely related to the practice of privatization. However, while privatization may refer to a complete transfer of public assets to a private organization, outsourcing means contracting with an outside organization to perform a particular government function. Outsourcing benefits public organizations in terms of cost-saving and reducing the need for special resources and professionals necessary for performing particular duties (O’Looney, 1998). Yet, the challenge to public procurement regarding outsourcing consists in the necessity to shift the focus from service delivery to the expertise in the field of contract negotiation and management (O’Looney, 1998). Another issue is that in-house services are often supplied together with informal services, such as consulting, and these services will not be provided by subcontractors unless specified in the contract (O’Looney, 1998). Overall, outsourcing may be a reasonable cost-saving practice for public organizations to provide complex services requiring expertise and technology, but risks and potential costs should be carefully evaluated to ensure the feasibility of this decision.

Ethics and Leadership in Dealing with Challenges

In addressing the specified challenges, professional ethics play a significant role. As was mentioned, procurement officers are responsible not only for making important purchases for the government but also maintain transparency, fostering competition, and contributing to public well-being. Given the constant strain coming from such factors as corruption, the political environment, public expectations, and media attention, it may be difficult for procurement officers to comply with ethical principles accepted in their profession (Pitzer & Thai, 2009). To perform their duties by professional ethics, public procurement officers should be impartial and honest, and their decisions should be based on their loyalty to the organization (Pitzer & Thai, 2009). Procurement officers should be able to withstand conflicts of interest. As a result, it is vital for leaders in public procurement to exercise ethical standards and act in favor of their organizations. McCue and Pitzer (2005) argue that the role of leaders in public procurement is “accomplishing the organizational mission without overspending the budget” (p. 49). The importance of leadership in dealing with challenges consists in directing the work of employees in compliance with organizational goals and professional standards.

Conclusion

To sum up, the importance of public procurement is explained by the necessity to provide the government with the necessary goods and services required to perform its duties. The effective management of public procurement is also significant because it constitutes a large part of government expenditures and utilizes financed received from taxation. Public procurement faces such challenges as corruption, HR issues, contract management, privatization, and outsourcing. To address these challenges, strong leadership is required, and leaders need to comply with ethical principles to ensure cost-effectiveness, transparency, and fulfilling organizational goals.

References

Becker, F. W. (2001). Problems in privatization theory and practice in state and local governments. The Edwin Mellen Press.

Dixit, A., Gupta, M., & Narain, R. (2009). Role of information technology in E-procurement. National seminar on recent advances on information technology. ResearchGate. Web.

McCue, C. and Pitzer, J. T. (2005). Fundamentals of leadership and management in public procurement. National Institute of Governmental Purchasing.

O’Looney, J. (1998). Outsourcing state and local government services: Decision-making strategies and management methods. Praeger. Web.

Pitzer, J. T., & Thai, K. V. (2009). Introduction to public procurement (3^rd ed.). National Institute of Governmental Purchasing.

Savas, E. S. (2000). Privatization and public-private partnerships. Chatham House.

Smith, P. (2019). 5 reasons contract management is still a big challenge in the public sector. Public Spend Forum. Web.

Thai, K. V. (2009). International public procurement: Concepts and practices. In K. V. Thai (Ed.), International handbook of public procurement (pp. 2-22). CRC Press.

Introduction

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 company’s 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 company’s 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 organization’s 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 Magazine’s operations. Therefore, the vendor must have capacity that will be specifically assigned to the magazine’s 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 photographer’s 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

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

Introduction

The concept of procurement directly relates to the process of acquiring goods or services whether (raw or manufactured) in a way that enables a company to meet the needs of its clientele in terms of the quality of the product and quantity it is needed in.

Through the analysis of ( ), it can be seen that procurement is an essential process in all company operations since not all companies are able to extract raw materials, are capable of processing it into different components and have the capacity to assemble it into a viable product. It is based on this that when examining the manufacturing industry as a while it can be divided into 3 distinct types of companies:

1. A raw materials supplier
2. A components manufacturer
3. End product manufacturer

Manufacturing industry supply chain progression

Companies are separated into these distinct categories based on the need to focus on a type of a specialization that they are good at rather than attempting to diversify itself into all aspects that go into creating a finished product. By doing so, this enables a company to significantly reduce its cost of operations while increasing its capacity to be able to develop better product types.

Process in creating a finished product

A finished product can this be considered as the culmination of a company utilizing different suppliers and using its own manufacturing processes to create products to be sold. For example, one of the most popular gadgets that has been sold within the past 5 years has been the Apple iPad, yet, the company itself merely sourced the materials needed in its constructions from other companies within its supply chain

iPads are primarily manufactured in China by Foxconn (one of the largest electronic manufacturers in the world) with each individual part being purchased from different parts suppliers.

The processor utilized within the tablet was purchased from Intel, the motherboard was bought from local suppliers in Taiwan, the memory components that go into it were from suppliers in China, and the solid state hard drive was from Seagate. In essence, nearly every single part that went into you average Apple was the result of procuring individual product components from a robust supply chain.

Process Components Involved in the Development of the iPad

The parts manufacturers involved in the process of creating an iPad in turn sourced the needed materials that went into their own products from their own raw material suppliers as well.

This process is known as a procurement supply chain that starts from raw material suppliers and ends with the final product on the shelves of a store. Do note though that this procurement supply chain is not primarily limited to consumer electronics, it can also include manufactured agricultural goods and most of the everyday items that people see around their home.

The reason this is being brought up is due to the fact that while each type of product has its own manufacturing process and supply chain, all of them have the same characteristic in that they depend on the integrity and reliability of their respective procurement supply chains in order for their product to be created (Shuguang, 2010).

Supply Chain Concept

Due to the necessity of reliability in the provision of raw materials and equipment, this immediately brings up the question of what would happen a supply chain should an integral link in the process be removed due to an unforeseen external event (Shuguang, 2010). The end result would of course be obvious, the total and subsequent collapse of the chain which would prevent a product from being completed.

What must be understood is that the inherent problems with doing business in the current global system is the fact that unforeseen circumstances such as natural disasters have severe ramifications on the supply chains for most corporations.

Analysis Method Diagram

Production processes are vulnerable due to their dependence on a continuous stream of raw materials and components (Stecke & Kumar, 2009). Without raw materials, a capable labor force and a constant supply of energy in order to keep production facilities running, the end result is usually the entire system falling apart the seams.

All aspects of the product development supply are necessary to ensure that products can be created to meet consumer demand. The inherent problem though with natural disasters is the fact that they affect all aspects of the production process that was just mentioned in unique ways and, as a result, when they occur this creates considerable difficulties for companies.

Effect on Supply Lines

When natural disasters occur near areas where production facilities are present, the supply of raw materials that goes into the production line stops completely. Natural disasters prevent accessibility due to the destruction of roads and bridges which makes it difficult if not impossible to get the necessary raw materials to the factories they are destined for (Bunkley, 2011).

It should also be noted that companies would also be reluctant to send trucks to areas immediately after a natural disaster due to the possibility of a sudden recurrence. This precaution is actually justifiable as evidenced by a massive tsunami came that directly hit the Japan since after an earthquake had struck (Japan Earthquake, 2011).

It should also be noted that raw materials do not always come from local suppliers, rather, they can also come from international sources (as seen in the relationship between China and Australia involving iron ore and coal) (Financial performance, 2006).. The problem with this is that the various docks and piers designated for the offloading of cargo may have been affected by the natural disaster itself which creates a certain amount of difficulty in terms of getting the raw materials off of a ship and towards a production complex.

The raw material suppliers themselves could have also been affected by the tsunami resulting in their own facilities receiving considerable damage which further complicates their capacity to be able to send raw materials to their various clients (Winslow, 2011).

Effect on Production Capability

When the 2011 earthquake and tsunami struck Japan, it revealed a vulnerability that modern day methods of production had wherein even though a facility is located hundreds of miles away from where a disaster actually happen, there is still the possibility of that particular disaster affecting the ability of that factory to produce products. This is due to the effect natural disasters have on power grids as well as the fact that it can prevent the delivery of essential parts and supplies (Lohr et al., 2011).

It should also be noted that due to the earthquake and tsunami as well as the damage to the Fukushima dai-ichi nuclear reactor, factories located as far away as Tokyo had to slash to lower their production capacity to less than half of what they were normally capable of accomplishing on a daily basis due to issues related to worker safety, the loss of essential parts from Mitsubishi Heavy Industries that had factories near the disaster zone as well as intermittent power outages (Lohr et al., 2011).

Factories located within Tokyo and various surrounding districts were thus unable to meet their production targets for the month which created problems for buyers from other countries such as the U.S. and China who relied on the scheduled delivery of essential parts and components (Bunkley, 2011).

Sample Situation

The 2011 earthquake in Japan and the subsequent tsunami that followed created numerous problems for the Japanese manufacturing industry located near Sendai and Fukushima (Bill, 2011).

1. The tsunami destroyed several integral power plants and cables in the area which prevented numerous factories from operating within the immediate vicinity.
2. The resulting destruction of several roads prevented raw materials froming going to the factories that needed them.
3. The death of several family members prevented a large percentage of the workforce from going to the factories.
4. The radiation scare from the Fukushima Dai-ichi nuclear power plant made the remaining workers unwilling to go to work due to the threat of radiation poisoning (Kluger et al., 2011).

Examining the Issue

The issue most companies have with natural disasters is that they stop the process of production in businesses located in the area of a disaster by affecting not only the workers, but also the facilities themselves and the capacity of raw material; suppliers to gather the necessary supplies for their clients.

The degree of damage to production facilities can thus be considered as inversely proportional to the strategy of procurement that companies will apply. As such, this will be elaborated on in the next section in order to get a better idea of the strategies that can be employed after a disaster occurs.

Minor or no Damage to Production Facilities

Minor or no damage is the best outcome after a natural disaster since this ensures that the supply line of a company can be restored within a matter of two to three weeks while the company itself deals with the aftermath of the disaster (i.e. repairing facilities, replacing equipment, etc.) (Wimmer, 2000).

This also comes in the form of restoring the delivery of raw materials to the factory, as well as encouraging workers that have not died to come back to work as well as having to send condolences to the families of workers that had died during the course of the disaster (Wimmer, 2000).

Medium Scale Damage to Facilities

During instances of medium scale damage to production facilities, this can come in form of light to moderate damage of the facility, the surrounding machinery and possible flooding in certain areas which will need to be dealt with (Chopra & Sodhi, 2004).

In the case of medium scale disasters, it can take up to one to two months to get the factory working again. For buyers, this means that they can either wait for production to start back up or they can switch to a temporary supplier until such a time that their original components supplier can re-establish itself in their supply line (Financial performance, 2006).

Large Scale Damage to Facilities

Large scale damage to production facilities means the destruction of the building itself along with nearly all of the factory’s production equipment and machinery. During such instances, it is unlikely that a company will be able to supply anything for at least a year or more due to the necessity of having to rebuild their facilities that were destroyed (Financial performance, 2006). For buyers, this means re-establishing a new supply line with a completely different company.

Summary

There is an old saying that states that “you should not put all your eggs in one basket”, what this means for the strategy of procurement in light of the possibility of natural disasters is to diversify sourcing strategies in order to prevent the possibility of being supply blocked

There are several possible procurement strategies that could be employed in order to diversify supply lines for products, however, while each method does have its own merit, it also comes with several negative aspects that should be taken into account before creating a procurement strategy that centers around them.

Ethicality Statement

The research process for this paper primarily consisted of document analysis in order to gather the necessary facts and figures. During the entire process of research and examination, the researcher followed proper research ethics by:

1. Utilizing only relevant academic literature for examination
2. Checking alternative sources of information to ensure that the information being utilized is accurate
3. Implementing proper citation and acknowledge for the instances where information from relative academic sources were utilized
4. In no way were any research subjects (though none were utilized) harmed during the process of data collection.
5. None of the information utilized within the study has been falsified in any way.

Overall, the research can confidently state that through the aforementioned practices that were implemented, this research study has followed proper ethical research guidelines in researching and presenting information for this report.

Client Report

Possible Procurement Strategies to Avoid Supply Problems due to Natural Disasters

The first strategy that has been developed by this report would be to diversify the supply of integral components through several suppliers in diverse regions and countries instead of a single main supplier for the component (Perry, 2007). The advantage of this method is that should the area of one supplier be affected by a natural disaster, the remaining supply lines would still be viable and could “pick up the slack” so to speak of the lost supply line (Perry, 2007).

One problem with this method is the fact that by separating the amount of components supplied through several companies, the company purchasing them actually loses out on savings from buying in bulk that could have come from ordering from a single company (Dillon & Mazzola, 2010).

Based on this, procurement strategies in the future will need to take into account what they desire out of their supply lines, either constant supply reliability through diversification of buying strategies or savings through concentration in a single company (Dillon & Mazzola, 2010).

Another problem to take note of when it comes to supply diversity is the possibility of shifting quality standards when sourcing from different companies from different locations. Companies have their own set of quality standards, business culture and safety regulations that they adhere to depending upon the region in question. For example, companies within China have a much lower degree of corporate social responsibility as compared to companies within Japan, the U.S. and various European countries.

Their production processes often do not take into account the subsequent environmental impact of heavy industrial manufacturing processes which enables them to use procedures that would seem environmentally unethical in companies within countries with strong standards of corporate social responsibility. Sourcing the same type of component from Germany, China and Japan would result in two distinct differences, namely: the price of the component and its inherent standard of quality (Manuj & Mentzer, 2008).

What this means for a company that is attempting to diversify its supply chains is that there would be a distinct difference in cost between the parts supplied as well as overall quality (Manuj & Mentzer, 2008). This would result in the components of the same product being invariably better or worse than others. This of course creates a problematic situation for a company’s quality standards since the differences in component quality have to be taken into account during the quality control process.

Another possibility that could be taken into consideration is that assuming the quality standards of the suppliers a company is sourcing a single component from are the same the company could merely source the same component from different locations to avoid interruptions in the supply chain. The inherent problem with this situation is the differences in cost due to the distance of delivery.

If a company were to source products from different suppliers yet all of them are located in the same general area this makes the concept of supply diversity useless since they would all be hit by the same natural disaster. One method around this would be source products from different regions or better yet different countries (Skoufias, 2003). The advantage of this method is that it would prevent natural disasters from hitting all suppliers at one time.

As mentioned earlier, the problem with this is the differences in overall costs in delivery with some locations that are nearer obviously costing less than those that are far away. In cases such as this, companies would then choose to have a majority of their supplied components coming from locations that are nearby thus lowering the cost of transportation (Skoufias, 2003). In this situation, it is assumed that all components cost the same and that it is the cost of delivery that causes differences in prices.

Another approach to the problem comes in the form of simply obtaining suppliers from locations that are not prone to natural disasters thus there would be little risk of disruptions. While this method of procurement is sound, there is still a problem as to whether there would actually be a components manufacturer in an area that is not easily affected by natural disasters.

Work Log

Work Log 1

During this week it was determined that while there are a variety of possible solutions available to prevent interruptions in the supply chain, they are not without significant setbacks.

The inherent problem with trying to prevent any and all supply chain interruptions while taking into account the possibility of natural disasters is the fact that there are too many factors at work to actually create a 100% effective plan that can mitigate all problems. It was discovered that the best possible solution would be diversify the supply chain to such an extent to ensure that production does not stop completely should a supplier be affected by a natural disaster.

Work Log 2

While it was mentioned in the earlier work log that diversification would help to reduce the potential threats brought about by natural disasters, it was determined that this would cause problems in terms of profitability as compared to sourcing from a single supplier. The fact remains that anchoring a supply chain to a single lone supplier can and will cause problems to a buyer should an outside event affect their production capability as seen in the case of Apple Incorporated and their suppliers in Japan.

Work Log 3

Research into possible areas not directly affected by natural disasters shows that areas located in the Middle East have fewer natural disasters as compared to other locations around the world. Unfortunately, their industries are neither agriculturally nor industrially based and, as such, would prove to be viable locations for sourcing only if a company was dealing with petroleum based products. If not, they would not prove to be useful at all.

Work Log 4

In this work log, the viability of sourcing from a single supplier was examined. Unfortunately, as it was stated earlier, this means the supply line is isolated to that particular supplier and should anything happen to that company as a result of a natural disaster the production capabilities of the company sourcing that particular component would grind to a halt.

Overall Summary

Through this activity, I have come to learn that businesses do not operate within a vacuum and, as such, business managers and product sourcing specialists need to take into consideration a plethora of different factors when it comes to ensuring the integrity of their respective supply chains. While natural disasters cannot be anticipated in their entirety, the fact remains that plans can still be established which should help to lessen their impact on a company’s supply chain.

Reference List

Bill, O 2011, ‘Japan Hit by Massive Earthquake’, O’Reilly Factor (FOX News), Academic Search Premier, EBSCOhost.

Bunkley, N 2011, ‘Japan’s Automakers Expect Longer Delays’, Academic Search Premier, p. 1.

Chopra, S, & Sodhi, M, 2004, ‘Managing Risk to Avoid Supply Chain Breakdown’, MIT Sloan Management Review, vol. 46, no. 1, pp. 53-62.

Dillon, R, & Mazzola, J 2010, ‘Management of disruption risk in global supply Chains’, IBM Journal of Research & Development, vol. 54, no. 3, pp.1-9.

Financial performance 2006, ‘Supply chains after disruptions an event study’, Supply Chain Management, vol.11, no. 1, pp. 25-33.

Japan Earthquake, 2011, ‘Thoughts and Implications’, Emerging Markets Monitor, vol. 16, no. 47, pp. 1-3.

Kluger, J, Harrel, E, Powell, B, & Walsh, B 2011, ‘Fear Goes Nuclear’, Time, vol. 177, no. 1, p. 34.

Lohr, S, Bunkley, N, & Kopytoff, V 2011, ‘Supply Disruptions of Power and Water Threaten Japan’s Economy’, Academic Search Premier, p. 1.

Manuj, I, & Mentzer, J 2008, ‘Global supply chain risk management strategies’, International Journal of Physical Distribution & Logistics Management, vol. 38, no. 3, pp.192-223.

Perry, M 2007, ‘Natural disaster management planning A study of logistics managers responding to the tsunami’, International Journal of Physical Distribution & Logistics Management, vol. 37, no. 5, pp. 409-433

Shuguang, L, Jun, L, & Hayes, K 2010, ‘An agile and diversified supply chain reducing operational risks’, Competitiveness Review, vol. 20, no. 3, pp. 222-234.

Skoufias, E 2003, ‘Economic Crises and Natural Disasters Coping Strategies and Policy Implications’, World Development, vol. 31, no. 7, p. 1087.

Stecke, K, & Kumar, S 2009, ‘Sources of Supply Chain Disruptions Factors That Breed Vulnerability and Mitigating Strategies’, Journal of Marketing Channels, vol. 16, no. 3, p. 193.

Wimmer, S 2000, ‘Procurement Pros Stay Afloat in Wake of Natural Disasters’, Government Procurement, vol. 8, no. 2, p. 7.

Winslow, G 2011, ‘Japan Quake Shakes TV Equipment Suppliers’, Multichannel News, vol. 32, no. 12, p. 25.

A public private partnership (PPP) is a corporation between a public sector and private sector party where the private sector and the government work together on projects involved with agreed risks and task division and each sector maintaining its responsibilities and identity.

In a PPP contract, private sectors are committed in providing public services which were traditionally represented by public institutions both financially and operationally. Thus, the private sector assumes any operational, financial and technical risks accompanying the project and in most cases, it bears the service cost which would otherwise have been borne by taxpayers in traditional procurement.

In addition, the private parties do seek government assistance in where they get into contracts of providing goods and services during capital investment, with government contributing either whole amount or part of it. In other cases, government may opt not to provide its contribution in cash but rather in kind; a service known as “transfer of existing assets.”

Where the private sector gets involved in projects concerning public goods such as infrastructure, the government extends it contribution by subsidizing the required capital in a one-time grant form. The government also supports the private sector by reducing their tax with provision of guaranteed partly or fixed revenue. This has greatly attracted private investors in provision of public services. (Akintoye, Matthias & Hardcastle 2007, p. 163).

Unlike the traditional public procurement which obtained only a substantial value for money, PPP has been able to obtain this value in a great measure. This has enabled the PPPs to acquire a capability of implementing public services and works faster, distributing risk in a good way, minimizing the cost of life-cycle as well as improving the quality of its service accompanied by increase in revenue streams.

Furthermore, the public-private partnership has been able to utilize the qualifications of the management improving the efficiency of the private sectors, with maintenance of the output’s quality standard. The main objective of PPPs adoption was to enhance the provision of different services to the public, ranging from the construction of infrastructure, to health and education amenities with other services like waste management, criminal justice, water supply and management as well as environmental management.

The contracts between the private and public sector are characterized by long-term service provision to public parties by the private ones, with these contracts may taking as long as 30 years. During this time private sectors conduct most of the services as well as provision of assets (Grimsey & Lewis, 2007, p. 37).

PPP is involved in various models which range from private sector involvement to transferring public risk to the private sectors. The first model involves Service contract. This involves the public and private party’s agreement on requirements pertaining short-term and simple operations.

Here, the private sector employs a short time asset management, procurement and operation with the public bearing the investment and management duty. As a result the public party bears both the financial and residual value risks but on the other hand acquires technical expertise and save the cost with affecting the quality of output.

The second model is Operation and management contracts. In this model, the private sector carries the responsibility of asset management and operation. The period involve in the agreement is short though it is adjustable. In this mode the private sector is involved in reducing overall cost by improving the service quality as well as minimizing the demand risk around the operation stage.

As a result it allows acquisition of efficiency gains together with technological sophistication investment. On the other hand, the financial and investment risk remain on public sector. This model has significant benefits in stimulating more private participation in delivering services.

The third model is Leasing; the private sectors trade the public generated income streams with a fixed lease payment and assurance of maintain and operating the asset. This gives the public sector an incentive of achieving operational efficiency as it is accompanied by a transfer of demand and commercial risk to them.

Thus, for the private sector to make profit and maintain the set level of service provision, it needs to reduce the operation costs. On the other hand, the financial, network expansion and capital improvement related risks are borne by the public sector. This model is more beneficial on the infrastructures generating independent revenue streams such as public transport. Additionally, the model lightens public sector’s burden as the private sector bears all construction risks.

The forth model is Build-Operate-Transfer (BOT). In this model the construction, designing and operation responsibilities are allocated to the private sector. This enhances greater efficiency gain from the integration of these aspects under one entity. Additionally, the public budget is made simpler by elimination of maintenance issues.

Moreover, this enables the private sector to come up with a better plan and management for service as it deals with both the asset operation and design stages. Because the asset remains to be public owned, the desired results are obtained specialization of quality output emphasized by public.

Finally, the In Design-Build Finance-Operate (DBFO) model; the public entity dictates on the form of the asset or service, and the private partner designs it accordingly. The private sector then facilitates the implementation of the asset through the set design stage and then carries out the operation of the facility. Later, this asset can be given back to the public party once the PPP contract is over.

This model is an incorporation of all the other models’ implementation and operational efficiency methods, although it is involved in capital provision. The DBFO concession involves the designing, financing, constructing as well as operating infrastructures which generate revenue by the private sectors, with a condition that they will be entitled to the revenue for a set time-period which can be up to around 30 years. This model suits projects such as roads, user-charge services and waste and water projects.

Therefore, PPP have attained skills that assist in attaining value and ensuring that low cost is realized with maximum leap of benefit to the private and public parties. Additionally, the PPP have experts who provide necessary advice to government departments, with elimination misleading information concerning the management responsibilities towards these departments.

However, in doing this, they usually mix policy formulation with technical support, making it difficult to choose project from getting the units very closer to political authority. (Grimsey & Lewis, 2007, p. 137) notes that “PPP units have been criticized for undermining other procurement process because they are approved as “policy tool of choice” through creation of the units.”

Contrary in traditional procurement, though they have been involved in construction of infrastructures, public building, schools and hospitals as well as providing services like maintenance, the design phase is separated from the construction phase.

This method therefore adopted by architects, who design the project and plan construction documents which are to be used by the constructor to finish the project. In this procurement method, contracts such as Design-Build were made by the public and private parties, where the private sector was required to design the project according to government requirements. Thereafter, the government would take the responsibility of operating and maintain the project (Lee 1998, p 182).

However, it would involve some contracts such as management or service which would help in funding some of the operations and maintenance. However, these undertakings by the government ignored the economic signals which the private parties were open to.

This was so because the means which the government used to raise its cost were out of connection with the project risks as well as its success or failure. In cases of project failure, the involved part in the contract were blamed from the outcome of their decisions though the politicians themselves and government senior officials whose involved in the project contributed to the same failure.

Elimination of their personal responsibility during negative outcome eradicated the potential of necessary incentives in modifying the plans and management as well as changing their behavior. The tradition procurement method denied private sectors ownership or control rights to properties, land and facilities, something which contributed to lack of incentive from these parties hence uncertainty of investments paying off.

More importantly, the tradition method failed to consider risk transfer from the public to the private sectors, thus motivating effective production. The government has no considerable risk undertaking and it needs no risk management techniques into the project. However, the government is involved in low capital employment on the project because of the possibility of transferring the risk to taxpayers as well as to end users without compensation.

This paralyzed the traditional decision making as it detached it from incentives needed to reduce cost as effectively operating project. However, the tradition procurement method enables the contractor to mingle with designers during the design stage and through sharing of plans to come up with an integrated construction document. Additionally, it enhances a good environment for designer’s techniques approval by the stakeholders, an aspect that creates a room for amendment to unsatisfactory design (Lee 1998, p 182).

In conclusion PPPs provides more benefits in comparison with traditional methods. Because it ensures effective project delivery speed at low cost, as well as benefits public service users by utilizing the state assets more effectively.

In addition, through regulatory scheme, PPPs have accountability of giving high quality services to the public, in a more innovative and diversified manner. Also, the PPP models have enabled acquisition of a reduced life-cycle costs, additional revenue, more effective risk allocation as well as faster facilities implementation (Yescombe 2007, p. 72).

Reference List

Akintoye, A, Matthias, B & Hardcastle, C 2007, Public Private Partnerships: Management risk and opportunities, Wiley-Blackwell, Malden.

Grimsey, D & Lewis, M 2007, Public private partnership: the worldwide revolution in infrastructure provision and project finance, Edward Elgar Publishing, Northampton.

Lee, K 1998, The traditional procurement methods: the choice of Hong Kong private sector clients for residential projects, University of Hong Kong, Hong Kong.

Yescombe, E. R 2007, Public-Private Partnerships: principle of policy and finance, Butterworth-Heinemann, Woburn.

The ever-expanding technologies, changing customers’ needs, and the establishment of fresh business enterprises have led to the abrupt increase in development opportunities related to procurement. It is worrying to note that a number of entrepreneurs are uncertain about how to make over their procurement companies to decrease costs and at the same time make the most from supplier dealings.

To make the best out of these opportunities, we are planning to open a procurement service in Oregon, United States. Four members will be responsible for the service. Each of the members will be in charge of one part of the service. Our business majorly targets the Chinese customers who want to buy luxury goods.

As we plan to be one of the leading providers of procurement service in Oregon, we aim to help our customers to cut down their procurement cost, improve their shareholder worth, and realize improved productivity by cutting down their operation cost.

We will leverage our relations with local and foreign businesses to ensure that our customers get value for their money and get access to technology-based edge services. These abilities combined with our business-dedicated personnel will see our clients save much of their spending.

We plan to have our own website. Thus, customers can place their orders online. Through our online services, a client can log into our website, look through the available goods, and initiate their orders. Thereafter, the client can wait for the supplier’s approval.

In general, undertaking procurement online has many benefits for our clients because the system has integrated many features tailored at easing purchasing processes. As such, our systems will contain online catalogs. These catalogs hold a number of luxury goods from a number of suppliers.

In this regard, our clients will be required to confer with one place to locate their required products. In addition, our website will offer our clients with multiple means of communicating with their preferred suppliers. By doing so, they can select their preferred means of delivery.

Once our clients access their products through our online-based procurement method, they will recognize the advantages without more ado. Their usual administrative cost met with their individual purchases will be cut down.

This will be realized because the majority of the paperwork will be done with the use of software rather than the workers themselves. In addition, the usual lengthy time between initiating an order and delivery will be significantly decreased.

Automation will make more efficient the sharing of the essential information. Given that our services will enable consolidated purchasing, our clients can keep track of their transactions.

Another reason to procure with us is that our clients can shop online without having to worry about meeting taxes on their products. This service paired with cheap shipping cost, make procuring with us cheaper compared with conventional procurements.

We will work hand in hand with our customers to add value and surpass their expectations by enhancing our customer service, tools, organization, and the proficiency of our personnel.

With our exclusive mixture of abilities meeting all features of procurement, we will come up with a robust delivery scheme to ensure that our clients are satisfied and enhance their dealings by delivering real, substantial, and continued solutions.

In general, we believe that our integrated services will distinguish us from our competitors. Ultimately, we hope to be one of the leading providers of procurement service in Oregon and beyond.

Project Rationale and Summary

This project is aimed at developing a decision support system (DSS) for a newly-opened retail chain that sells such consumer electronics goods as audio equipment, digital cameras, telephones, and so forth. It operates in the area where I am living. This DSS has to facilitate procurement of goods in this organization.

While making decisions about procurement, the management has to consider the following issues:

1. the quantity of goods that has to be purchased from suppliers;
2. the frequencies of such purchases; and
3. the storage of goods.

Those people, who are responsible for this task, take into account the following types of data:

1. the current supply of stocks;
2. the level of demand for a product; and
3. historical sales.

In this case, the decision-making process consists of such parts as

1. collection of data regarding sales and stocks;
2. analysis of this information;
3. prioritization of procurement tasks, and
4. action.

This retail chain has to resolve two types of problems. On they have to reduce stock-out time. Very often their customers want to buy a certain product, yet; it is not available. This problem is familiar to many retailers and it can lead to considerable revenue losses (Blauwens, De Baere, & Van de Voorde 2008, p. 217). The second type of problem that they have to address is oversupply of some products. Overall, failure to forecast the demand is one of the reasons why they have to cope with these difficulties.

In turn, the main objective of the DSS is to optimize the supply chain and minimize the likelihood of stock-outs and oversupply. This application will enable them to keep low level of inventory. It will also help this organization reduce their procurement costs. One can identify several stakeholders participating in the decision-making process, namely; supply chain managers, who guide and monitor procurement, and sales staff who provide information about demand for a product. These people will be the ultimate users of this DSS.

The Organization

This retail chain was opened approximately a year ago. It grew out of a small shop that retails consumer electronics. To some extent, the rapid growth of this organization can be explained by their efficient service, diversity of products, reasonable prices, and after-sales services.

However, now when its structure has expanded, they face several difficulties related to procurement. Previously, this company could be regarded as the economy of scope which means that their strategy was based on product diversification (Nooteboom 2009, p. 126). At the moment, they are gradually transforming into an economy of scope which also emphasizes price leadership and reduced operational costs. Such transformation is impossible without effective functioning of the supply chain.

On the whole, the decision-making related to supply chain management and procurement can be illustrated with the help of this chart:

This chart indicates that supply strongly depends on the accuracy of information provided by sales personnel. These people provide information about the demand for a product. On the basis of these data, supply chain managers take their decisions. Certainly, they also rely on historical sales records.

We should also discuss the culture of this company. It can be characterized as a flat organization which means that their workplace hierarchy has relatively few levels (Dubrin 2011, p. 274). This structure implies that the relations between the employees are egalitarian. Furthermore, in this company every member of frontline personnel can easily contact senior management. Overall, this egalitarian culture and flat structure speeds up the exchange of information and decision-making within the company.

Finally, it is important to speak about the influence of power and politics on the decision-making process. The supply chain management in this company is affected by trade quotas imposed on foreign importers, and taxation policies of the government. The most important issue is the trade tariffs which are paid by manufacturing companies. This factor shapes the price of products. Thus, prior to purchasing these goods, supply chain managers should determine whether they will be affordable to the buyers.

Decision support system proposal

This DSS can supplement various aspects of the decision-making process. It will facilitate the collection and dissemination of data. This application will enable sales personnel to enter sales records into a database. Thus, the supply chain manager will be able to see the changes in demand and supply. Secondly, this application will be particularly useful for the analysis of this information. This tool will help the management answer several important questions:

1. What products are most likely to be out of stock?
2. What kinds of goods tend to be oversupplied?
3. When or on what days does customer’s demand reaches its highest or lowest levels?
4. What is the minimum and maximum quantity of a product that the company should always have in store?

Thus, this DDS will provide tools analyzing the demand changes. The researchers working in this area believe that in such cases, decision-support systems can rely on several methods, such as time series, trend estimation, exponential smoothing, and moving average (Ruan, Montero, & Martinez 2008, p. 74). Yet, these methods can be successfully applied on condition that the company manages to collect historical sales data.

Finally, we need to speak about prioritization of tasks. This application will link the information about demand and supply, and the managers will be able immediately see what kind of products can be out of stock in the near future. So, they will make necessary purchases. Many scholars argue that effective supply chain management is possible when one can see real-time changes in demand (Cheng & Choi 2010, p. 96). This DSS will offer this opportunity to the company.

At this point, it is difficult to determine in which area this application will be most useful. At the beginning, it will assist the management in tracking the changes in demand and supply. Yet, at later stages when this organization collects historical data, this DSS will be able to perform analytical function.

Overall, a data-driven DSS will be most suitable for the needs of this organization. According to Daniel Power, such applications are intended for the analysis of structured data (2002, p. 13). These systems enable decision-makers to cluster data and track real-time changes (Schuff 2010, p. 27). These are the tasks that our DSS to do. On the whole, data-driven DSS can be of great use when an organization has to manage large amounts of data.

Nonetheless, one should not forget that this system also has to perform some other functions. It will have to trace the relations between such variables as time and demand for the product. Therefore, this DSS will have to adopt different analytical and statistical models, and this feature is more typical of model-driven decision support systems (Power 2002, p. 13).

Moreover, this type of DSS is of great use when a person has to find the most optimal solution to a certain question (Schuff 2010, p 27). One of such tasks is to estimate the minimum quantity of a product that the company should purchase in order to avoid stock-outs. This example shows that our application will be a combination of data and model-driven DSS.

Supply chain management At this point, we need to show how various actors or entities will interact with this decision support system.

Thus, in this context diagram, we have identified the main users of this DSS. It is also important to show how data will be used by this system.

In this case, special attention should be given to the inference engine. This component of the DSS will analyze and identify the patterns of demand and supply. It will also examine historical sales records. This element will enable the management to identify the changes in customers’ demand and optimize procurement.

At this stage, we need to describe hardware and software requirements for this system. It will be based on Intranet connection. The main role will be played by DSS server that will have at least 6 gigabyte of RAM in order to operate in a real-time regime and organize data. The hard disc drive ought to have at least 500 gigabytes in order to host enclose various data structures.

Furthermore, this system can function effectively only if it is supported by a software application that allows exchange and processing of data. Moreover, it must be able to use supply chain optimization algorithms. These are the key functions that this software has to perform.

This DSS system will incorporate database management system. The data dictionary will contain the names of lists and spreadsheets stored in the server. With the help of data dictionary, the management will be able to categorize data into clusters such as: 1) names of manufacturers; or 2) types of products.

Moreover, this dictionary will help categorize sales data, for example, daily, weekly, monthly, and annual sales. The goal of data dictionary is to describe and categorize information used by the DSS (Coronel, Morris, & Rob 2009, p. 75). The data dictionary that we have proposed will improve the storage and retrieval of information.

Secondly, this system will achieve better results if it will adapt object-oriented data model. The main advantage of this approach is that it allows to describe the data in terms of attributes, classes, and associations between them (Singh 2009, p. 82). For example, such class as products will have such characteristics as quantity, serial number, or name of the manufacture. Moreover, this data class will include information about historical sales. The main advantage of object-oriented data model is its ability to draw connection between various types of data (Singh 2009, p. 82).

Successful implementation depends on the use of various analytical models. The most important role will be played by optimization model. The thing is that the main task of this DSS will to determine the optimal amount of product that has to be acquired in order to avoid oversupply or stock-outs.

This analytical model can of great use to retail chains and supermarkets (Zarate, Belaud, & Camillieri 2008, p. 81). Provided that this system makes an effective use of different optimization models, this organization will be able to minimize its costs related to the procurement of goods.

Conclusions and Recommendations

Therefore, the main purpose of this project is to improve the functioning of supply management in a growing retail chain that offers consumer electronics to the clients. We have identified two types of problems, namely, stock-outs and oversupply. This can be explained by lack of analytical tools that identify the trends in sales.

The proposed decision-support system will be able to link the information about supply and demand. This application can be characterized as a data-driven DSS; however, it will make use of optimization models and methods. The database management will be based on object-oriented data model. These are the key features of this decision support system.

This tool can bring various benefits to this company. First of all, it will speed up the exchange of information within the organization. This DSS will allow the management to better track changes in demand and procure necessary products when it is necessary. This application can enable them to avoid losses which are often associated with stock-outs and oversupply. These are the main benefits that the management can expect from it.

Reference List

Blauwens, G., De Baere, P., & Van de Voorde E. (2008). Transport Economics. Amsterdam: De Boeck Hoger.

Cheng, T.C. & Choi, T. (2010). Innovative Quick Response Programs in Logistics and Supply Chain Management. Munich: Springer.

Coronel, C., Morris, S., & Rob, P. (2009). Database systems: design, implementation, and management. NY: Cengage Learning.

Dubrin, A. (2011). Essentials of Management. NY: Cengage Learning.

Nooteboom, B. (2009). A cognitive theory of the firm: learning, governance and dynamic capabilities. London: Edward Elgar Publishing.

Power, D. (2002). Decision support systems: concepts and resources for managers. NY: Greenwood Publishing Group.

Ruan, D., Montero, J., & Martinez, L. (2008). Computational intelligence in decision and control: proceedings of the 8th International FLINS Conference, Madrid, Spain, 21-24 September 2008. NY: World Scientific.

Schuff, D. (2010). Decision Support: An Examination of the DSS Discipline. London: Springer.

Singh, S. (2009). Database Systems: Concepts, Design and Applications. Delhi: Pearson Education India.

Zarate, P., Belaud, J. & Camillieri, G. (2008). Collaborative decision making: perspectives and challenges. London: IOS Press.

Introduction

Project procurement refers to the venture management that relates to the systematic acquisition of goods and services. The process defines how institutions obtain various products that propel operations in their business units with an aim of leveraging performance.

The process is initiated to enable the acquisition of standardized goods ad services from the outside companies. Evidently, institutions with strong performance aspirations are under obligation to perform effective procurement process in the acquisition of core business items.

This is critical since the items hold the capacity to influence general performance of the institutions. According to researchers, most institutions perform dismally due to inferior procurement procedures that fail to enable the acquisition of quality products that are cost effective.

It is identified that cost efficiency and acquisition of quality products can only be attained if credible procurement process is undertaken through conventional techniques.

The techniques define procedures of item evaluation and the company that produces the products to establish their suitability. Managers in the institutions should follow due procurement process to facilitate purchasing and supply of superior products that matches the user’s needs.

It is proper for the managers to establish the evident gaps and varied needs in the institutions that require integration before the initiation of the procurement process. This is to ensure that the right products are purchased to bridge the gap within the operating sequence to advance productivity.

Due to magnitude and cost related involvement in the procurement process; it is significant for managers to acquire adequate information on the items to be purchased from the users. That is the process should be user centered to guarantee purchasing of relevant items.

Variably, feasibility nature of the items needed and the company’s capacity should be evaluated to ascertain the ability of the administration to meet the user needs in a sustainable manner.

There is a clear-cut procurement procedure that managers should follow to eliminate loses and acquisition of technologically compromised equipments. In particular, there should be a detailed contracting system that entails creation of requirements needed in diverse business units to aid production and request for seller responses.

As noted, request for seller responses entails the identification of vendors and their geographical set up including the products they supply.

The selections of appropriate seller that follow vendor evaluation where the procurement officer chooses the most reliable institutions to execute the delivery of the items under requirement form a crucial step.

Similarly, contact address where detailed relationship with company is sought by the procurement department that leads to closure of the transaction is paramount.

This is a credible process that institutions should follow to ensure proper acquisition of the needed items to serve respective purpose in the pursuit for customer satisfaction and growth.

This paper evaluates project management procurement where purchasing and suplly administration, steps and etc is discussed.

Purchasing and Supply Management and Importance to the Business World

Purchasing and supply management is a critical element that institutions must execute with at most diligence and adherence to the procurement sequence. This is to ensure that needed items are stocked and timely supplies are made to consumers.

Indeed, purchasing and supply management is the process of procurement, storage and monitoring of goods sold or disposed to various consumers. The process remains crucial since it influence the overall performance of the institution (Johnson, Leenders & Flynn, 2010).

It is advisable for managers to institute purchasing and supplies department in institutions to control and coordinate the purchasing procedures.

This is to ensure reliability and effectiveness in the administration of the process. Supply and purchasing is critical due to the cost involved to ensuring success of the processes.

Purchasing department in institutions should be administered by experts in diverse field of operation to aid performance of comprehensive evaluation of analysis of the companies and items that are sought based on quality ideals.

The experts should include pricing analyst, market researchers and market personnel with requisite professional potentials to advance effectiveness.

Purchasing involves acquisition of relevant items that are required to propel activities in the production process and in turn lead to good revenue generation (Johnson, Leenders & Flynn, 2010).

The process is cost involving due to the relevant procedures that must be undertaken to ensure its success. This calls for its professional administration through credible systems that are devoid of inconsistent or malpractices.

Supply system requires effective formulation and identification of reliable distribution network that hold the capacity to reach out to customers promptly.

Inferior distribution channels may delimit the institutions achievement of set goals interns of return on investment (ROI).

The two elements are integral success drivers in institutions that administrators should undertake using superior procedures. There should be a perfect match between sales and purchasing of goods in the institutions to facilitate proper accountability and exemplary performance (Johnson et al, 2010).

As noted, institutions cannot meet excellent performance benchmark with inferior match between expenditure and income.

That is administrators should monitor customer behavior to ensure that items under purchase meet their needs and facilitate effective supply.

This is to ensure effective administration and coordination of the inventory that result to the realization of high returns.

Steps of the creation of a project supply, service, and material budget

Creation of a credible project supply system is paramount as a performance measure to ensure effective coordination and control of resources. The process should be undertaken in cognizance to the set steps to ensure engagement of suppliers with unquestionable business operatives.

This is to ensure acquisition of quality and reliable items with immense capacity to serve the rightful need of the users in propelling production (Trent & Roberts, 2009).

Scholars asserts that inferior procurement procedures leads to immense loses and acquisition of substandard products with low functional capacity.

Managers should follow set guidelines of purchasing to achieve a perfect match between quality and the resources used in purchasing.

Major steps that administrators should consider include performance of a comprehensive contracting process. The process requires stakeholder involvement to ascertain the needs of the users.

This is achievable through monitoring of procedures and execution of research on the various needs that are hindering effective performance and delivery of efficient services.

The needs are initiated by users to enable purchasing of relevant products to improve user efficiency. It would also reduce stock hold up in storage facility since purchases are made and sales are executed systematically.

This limits wastage of resources and storage space that causes low performance (Trent & Roberts, 2009). Comprehensive research on the supplying institutions and the state of the condition in terms of operation form a paramount step that purchasing department is under obligation to evaluate.

The research should be done using available resources for example the internet on the diverse institutions that trade in the identified products needed. This enables the procurement department to develop a list of vendors over which probable choices are made to execute the supplies.

This stage will advance the establishment of the institution s operating settings, geographical location, distribution network and their reputation in the global arena (Barrar & Gervais, 2006). This is to establish their credibility and reliability in service delivery.

Systematic evaluation of the venders forms the next step in the purchasing process. The step provides clear strategies of scrutinizing the supplying agency based on diverse factors that influence buying decisions.

It has to be noted that buyers are influenced by product quality, reliability of the items, price, serviceability and the technological process involved in the production chain.

These elements are crucial since they contribute in defining products suitability and the institutions reputation.

According to Trent & Roberts (2009) purchasing department should make negotiations with the institutions that hold favorable business operating guidelines that emphasizes on quality and fair pricing to avert over expenditure.

Therefore, evaluation entails ascertaining the price levels of the products needed in various companies. The establishment of the quality standards, distribution network, procurement procedures and suppliers core business line of operations paramount.

These are crucial information that helps in identifying credible institutions to engage in business contracts (Johnson et al, 2010). The evaluation process is fundamental since it enable the acquisition of quality and price effective goods with limited cost implication (Trent & Roberts, 2009).

In addition, establishment of the institutions primary customers and its financial stability is a relevant step that purchasers should undertake to enable formulation of viable and informed buying decisions.

How to select the most qualified suppliers

Procedures of selecting qualified suppliers are designed to promote fairness and to ensure that consumers are compliant to the binding guidelines.

Evidently, the practice is used by purchasers to advance competition and ensure that relevant transaction principles are employed in the procurement process.

The guidelines are to equip consumers with pertinent knowledge and understanding of the purchasing process as provided by the vendors (Johnson et al, 2010).

This is to facilitate communication and a guiding purchasing checklist that assist consumers in obtaining accurate price quotes of products.

Due to the complex nature of selecting appropriate suppliers, there are superior strategies that individuals can adopt to facilitate the identification of credible institutions with superior products (Trent, 2007).

The major strategy is the execution of comparison shopping through request for Quotation (RFQ) from various institutions.

The quotation document entails fundamental information of the institutions and the products. The inclusive information that is included in the document explains all the factors that determine individual’s choice to certain products.

It aid decision making since it gives information on the quality, price, useful life and the operating capacity that eases purchasing choice making.

The benefits and costs of outsourcing, and the growth

Outsourcing is a business practice where institutions acquire operating items based on temporary agreements. The agreements can be referred to as “lease contracts” that require superior negotiation.

The program facilitates effective administration of resources and elimination of unwarranted systems or costs that may compromise exemplary performance.

Indeed, outsourcing of resources for example expertise and technological equipments at lower costs is enabling small institutions with limited resources to gain good performance (Trent, 2007).

It is a practice that if done objectively, holds the capacity to revolutionize operation in institutions. It presents immense advantages that include effective utilization of available resources.

The practice provides requisite guideline where an institution only acquires what is needed to execute certain activity at the time of want.

This reduces the daily maintenance cost incurred in the management of the equipments that translate to colossal amount on yearly basis that may be unsustainable.

It focuses on the core activities of the business to ensure the achievement of maximum returns. This explains why managers outsource equipments based on the needs for specified period of time to propel the execution of activities in the core business units.

Variably, it advances efficiency in savings that is fundamental for growth especially in small institutions (Trent, 2007). Savings in operating cost is vital since high expenditure of operating procedures is detrimental to the realization of exemplary performance.

It also leads to the reduction of overhead cost of executing back-office functions that consumes immense resources.

This explains the imperativeness of outsourcing of the resources that can be moved with ease. Consequently, outsourcing whose application is gaining momentum enable the development of effective operational guidelines and staffing flexibility.

It advances consistency in service delivery and risk management that eliminate uncertainty in the supply processes.

Although, outsourcing present noble operating incentives it fails to guarantee continuity in the production process since the equipment are only hired when need arises.

This limits daily production and performance that is necessary for growth. As noted by Trent (2007) it compromises innovation and creativity in institutions in terms of service delivery since it delimits holistic and consistent nurturing of employees to high levels of creativity.

Additionally, it may lead to the acquisition of equipments with compromise operating capacity.

Evaluation of the purchasing benchmarks in institutions

Authorities in diverse settings are currently emphasizing the adoption of credible procurement procedures especially in the current environment that is characterized with severed economic complications.

In particular, multinational companies, for example Nokia, sum sang and Toyota ltd are practicing the conventional purchasing procedures that define acquisition process for relevant items that advances their productivity.

The institutions recognize the significance of the purchasing and supply systems that guides the identification of products, quotation procedures and the ordering process.

Clearly, the institutions operate well staffed purchasing departments that coordinate supplies and buying of diverse equipments that propel service delivery (Barrar & Gervais, 2006).

The departments are formulated with clear mandate of ensuring perfect match between expenditure and return on the investment (ROI).

This is achievable through designing credible sales and distribution network to reduce stock ties and wastage of resources.

The department for example in Nokia company is made up of pricing analysts with the responsibility to evaluate price tags on diverse products as presented by various vendors.

Variably, market researchers who are to perform effective research on the consumer needs are integrated in the department.

This is to ensure that comprehensive research is carried out based on diverse factors that influence procurement decisions. It is imperative to note that the companies operate under defined procurement procedures that enhance their contracting engagement with suppliers.

This enable them to adequately evaluate institutions based on purchasing guidelines for example quality, price and reliability hence develop superior buying decisions.

Conclusion

Indeed, institutions that seek to leverage their performance should adopt superior procurement procedures to streamline their purchasing and supplies.

This is a fundamental aspect since inferior execution of procurement procedures is detrimental to organizational growth.

Therefore, it is professionally advisable for managers to institute purchasing department in their institution s to coordinate the acquisition process of diverse commodities.

References

Barrar, W. & Gervais, R. (2006). Global outsourcing strategies: An international reference on effective outsourcing relationships. Aldershot: Gower

Johnson, P., Leenders, M. & Flynn, A. (2010). Purchasing and supply Management. Boston, MA: McGraw-Hill Irwin.

Trent, R. & Roberts, L. (2009). Managing global supply and risk: Best practices, concepts, and strategies. Ft. Lauderdale, FL: J. Ross Pub

Trent, R. (2007). Strategic supply management: Creating the next source of competitive advantage. Ft. Lauderdale, FL: J. Ross Pub

Procurement planning involves activities carried out by institutions or companies in their process of acquiring goods or services. This plan is always scheduled for a specified period of time. It defines all the activities and steps that a company will use to purchase goods or services needed.

Planning or scheduling of activities, which involves the procurement of goods and services in organizations enables them to purchase quality goods or services. It also ensures that an organization is able to acquire the products or services with the least cost possible.

Organizations are able to meet purchasing objectives easily when they have a procurement plan than those companies that do not have a procurement plan (Heldman, 2011).

The purpose of a Procurement Plan in Organizations

The main purpose of a procurement plan is to inform the companies involved in procurement process how they will carry out the process of product acquisition. It states how the acquisition will be organized, executed and managed throughout the process.

Scheduled activities always help the organization to manage time and measure the quality of the services or the products purchased. It ensures that the work is completed within the stipulated time frame (Berry & Milosevic, 2005).

Logistics Services

In the case of Silwan Food International and AGS Logistics LLC, where these two companies are under an agreement, the procurement plan will ensure that the companies follow the conditions provided in their agreement until their contract is over. It will also ensure that AGS Logistics LLC performs the services as required by the agreement and that they follow all steps needed (Berry & Milosevic, 2005)

Procurement Definition

Silwan Food International is a company that supplies milk powder, dried nuts and fruits, cocoa, gear and other products. The company decided to source logistics services to enable it concentrate on other important services to the customers. Through a review of available logistics providers in UAE, the company approved AGS Logistics LLC to be their logistics providers.

This company uses technology to transact their business and to provide the services to their customers. This is why the company has been able to maintain its position as a logistics provider in the market. Their goal is to use innovative approaches to meet the needs of their customers (Saxena, 2008).

Silwan Food International requires logistics services that also include loading, warehousing, and offloading among others. The companies have customers from outside the country and therefore freight services are required. AGS Logistics LLC will provide freight services for the Silwan Food International to take the products needed outside the country.

Assistant managers in the procurement department of Silwan Food International will have the authority to authorize transactions in the absence of the procurement managers. This is because all terms and conditions are provided in the logistics agreement signed by the two companies (Berry and Milosevic, 2005).

Type of Contract to be Made

All products transported to the customers will be sold on the organizations fixed price. The procurement teams from both companies will determine the maximum quantity that AGS Logistics LLC will transport at a time as required by the contract.

As per the agreement between the Logistics Company and Silwan Foods International, they will negotiate the price, which will be charged for those three activities required to be performed as specified on the first part of this plan. This is to ensure that the exercise will use the least cost possible.

AGS Logistics LLC has shown its ability to perform their duties effectively by transporting as per the orders of customers. It saves Silwan Foods International a lot of cash since they only release to order therefore do not make oversupplies or buy a lot of products which are not needed by the customers (Turner & Simister, 2001).

The logistics providers are required to transport the right product to the right place while maintaining the quality and condition of the products at the minimum cost. Bids from the qualified suppliers are solicited to acquire the services or goods within the agreed time frame (Berry & Milosevic, 2005).

Contract Approval Process

Before a company decides on outsourcing goods or services, cost analysis should be conducted for a purpose of comparing costs. If a company gets that outsourcing is much economical than providing the services themselves, then they are free to outsource.

The main reason why companies outsource the services is to enable them to concentrate on their core activities of meeting the needs their customers and also in meeting the objectives of the firm.

For a company like Silwan Foods International to outsource logistics services from a logistics provider, its aim is to reduce excess inventories, warehouses and to reduce labor cost. This also reduces the working capital investment and fixed costs.

The company needs to analyze the costs of services that they are planning to outsource and compare them with the costs of providing it internally. Solicitations are sent to vendors who provide the goods or the services the company wants to outsource. The vendor who meets the criteria set by procurement team is identified (Saxena, 2008).

For the transaction between Silwan Food International and AGS Logistics LLC, purchases below $ 5000 can be approved by the procurement managers. Any transaction which exceeds such amount of money must be approved by the joint agreement of the board of contract review.

It will require the board to meet for them to determine which of the contract they will take for the transactions exceeding $ 5000. The board must be made by individuals from the all the departments of the company who understands the goals and objectives of the company (Turner and Simister 2001).

Decision Criteria

Decision criteria are used to determine the reliability efficiency and effectiveness of the organization that has been awarded the contract to provide the services. Silwan Food International must evaluate the accountability of AGS Logistics LLC in providing the logistics services to them.

The performance of AGS Logistics LLC must be evaluated against the expectations of Silwan Food International. The company must ensure that logistics providers enable them to meet their objectives of meeting their customer’s needs within the least time possible. Firm’s performance is affected by a lot of factors which includes its structures, environment, strategies resources and learning.

Performance of any organization can be measured under different categories. Demand-oriented capabilities involving delivery, reliability, after sale services and responsiveness to target markets are among the factors which are used by many organizations to measure performance. The supply oriented capabilities include reduction of distribution cost of the organization and the geographical coverage (Turner and Simister 2001).

Quality of logistic services provided by the AGS Logistics LLC will be measured by comparing the performance with the expectations and on the basis of the contract between the two companies. Customer’s feedback is a requirement to gauge the effectiveness of the services. One of the Silwan Food International is to meet the needs of the customers efficiently.

The speed in which the products enter to the market can win the company a competitive advantage or leads to customers shifting to the competitors. The perception of Silwan Food International customers may be affected negatively if they do not get the products they ordered in the right place and at the right time.

Quality of logistic services provided by AGS Logistics LLC can be measured against the number of orders gotten from the areas served by the company (Shadrach & Ekeanyanwu, 2003).

Past performance and history of the organization can determine the future performance. Past performance is a key indicator of the ability of the organization to meet their duties well. It places the organization in a better position to forecast the quality of the services which is to be provided.

This performance indicator enables the suppliers uphold high performance in providing goods and services. This indicator enables organizations to recognize strengths, weaknesses and capabilities of their supplies (Turner & Simister, 2001).

Silwan Food International can be in a good position if it is able to determine the capability of AGS Logistics LLC through the review of its past performance. Performance evaluation of suppliers is vital since it guarantees the organization with quality service and customer satisfaction.

If AGS Logistics LLC past performance had not been good and there are records showing inefficiency of logistics services, then Silwan Food International would get the reason to turn down agreement. The two companies have the right to disclose information about their past performance and this information should be used to determine each company’s future expectation (Shadrach & Ekeanyanwu, 2003).

According to Saxena (2008), Comparison of in-sourcing and outsourcing cost is used to reduce operational cost in organizations. This is because the organization is able to make a decision on whether to outsource or in-source. Before a company decides to outsource, they consider the benefits each decision will make to the organization.

The fee charged by the service providers assists organizations in making decision. Some organizations fail in making an outsourcing decision by considering the suppliers with the least cost without considering the effectiveness and quality of services. Quality of services provided by AGS Logistics LLC made the Silwan Food International to select it as their main suppliers of the logistics services (Turner & Simister, 2001).

The last performance measurement in the decision criteria is the date of delivery. A company may be able to select its suppliers based on how well they meet the deadlines set. Suppliers who fail to meet deadlines are not support to be considered for contracts. This is because they can cause mistrust from the customers if their needs are not met in time.

When supplies deliver the products or services in time, they save the organization a lot of operating cost and they are also winning that organization a competitive advantage. The organization is able to reach more customers and satisfy them. AGS Logistics LLC company provides high services to other organizations within the agreed time.

Their past performance in delivery of goods has shown that the organization is able deliver large amount of stock to the customers in the right time that the customers need them. Its association with prominent and well performing organizations in UAE has placed it in a position that every organization wants to outsource the logistics services from them (Shadrach & Ekeanyanwu, 2003).

Term and Termination

The conditions of the agreement start from the date that the agreement was signed between the two companies. The agreement will take a period of three years if the two companies do not a reason to terminate it. During those 3 years, there will be a meeting every first day of May to negotiate the charges. AGS Logistics LLC will give a report on any increase in charges in 45 days before they meet to negotiate.

The increase in warehouse charges will also be presented in writing to the Silwan Food International 15 days before the date of negotiation and at least 5 days before the transportation date. All notices required by this agreement will be made in writing.

Any other parties under this agreement can file a request to terminate the agreement. This may be due to default materials. If one of the parties writes a notice containing the details of the default and the other party ignores the complaint or fails to rectify the default within 20 days, the company can terminate the agreement and seek other reliable companies.

The termination of the agreement can also happen if one party fails to vacate the appointment of the other party within the agreed time in the contract. After the termination of the contract, the AGS Logistics LLC will return all the copies of documents, data, records which belong to the Silwan Foods International.

Silwan Foods International will have an obligation to return the document to the AGS Logistics LLC upon the termination of the contract. The notices which will be made with regard to this agreement will be delivered directly to the company not longer than one day. The addresses of each company are given in the details sheet presented with the contract document.

Vendor Management

In this section, the roles of every person involved in the procurement of services and products will be stated to ensure that every person has a role to play in the acquisition of products in the organization. Quality and appropriateness of the products or services are verified by the procurement team to ensure that they are of good quality and that they are in quantities which the companies agreed.

Vendor management ensures that the suppliers continue to supply the required goods and services of good quality as it is stated in the agreement. Procurement managers are responsible to manage vendors and to schedule for meetings to monitor the progress of their progress.

Key performance indicators enable the manager to evaluate the work done by the suppliers whether they have met the requirements in the agreement. In a contract agreement, the parties indicate the time, venues and dates when they will be meeting to evaluate their progress.

Communication is vital in vendor management because errors which might arise or changes that must be made are solved early before they cause unsatisfaction. Project specifications guide procurement teams from both organizations in checking the quality and effectiveness (Saxena, 2008).

The agreement of AGS Logistics LLC and Silwan Food International stated that they will be meeting one in six months to monitor the progress of their contract.

It is during these meetings that procurement managers and his team from Silwan Food International value the quality of services that AGS Logistics LLC provides to them and whether they meet the requirement of customers in delivering them their products which they have ordered.

Any changes in price charge fro the suppliers are communicated at the meeting for negotiation purposes (Saxena, 2008).

Performance Metrics for Procurement Activities

Metrics to be used in assessment of the performance of the procurement activities are stated in this section of procurement plan. These metrics ensures that the suppliers observe the schedule that they agreed in supplying their products and services. They are used to measure the supplier performance.

Procurement team uses them to compile data on procurement activities of the organization to guide them in choosing a supplier in future.

Procurement departments develop their own performance metrics which guides them in selecting future suppliers and also ensures that the performance of the current suppliers is within the schedule of the organization. Rating tables are developed by the procurement team for a purpose of building past performance database (Turner & Simister, 2001).

Each company in the agreement has the obligation to protect the other party’s information” (2006, p. 35). One party can gain access to the other party’s information without the consent of the other party. The company is, therefore, obliged to use the information only in the performance of the duties in the agreement but not for other purpose whatsoever.

They are bound to disclose the information only to their employees who needs in the process of providing the services. However, the parties are free to disclose the confidential information if and only if the information is needed by law.

If under any circumstances, the information is being needed by law, the disclosing party has to inform the other party through writing and ask for assistance in the disclosure of the information. If the disclosing party informs the other party before it discloses the information, this will not be regarded as a bleach of contract since both the parties will be aware of the disclosure

Rating table

Scale 1-3 where:

1. Unsatisfactory
2. Acceptable
3. Exceptional

Procurement managers from Silwan Food International manages their performance metrics to monitor and measure the performance of AGS Logistics LLC so that after their contract is over, they can be able to decide on whether to renew that contract or get other logistics suppliers.

The metrics summarizes the whole performance and progress of the suppliers and also gives them a challenge to deliver quality goods and services for the fear that their contract may not be renewed.

Project plan must be approved by the sponsor and signed by the procurement manager.

References

Berry, A. & Milosevic, Z. (2005). Extending choreography with business contract constraints. International Journal of Cooperative Information Systems, 6, 131-179.

Heldman, K. (2011). Project management jump-start. New York, NY: John Wiley & Sons.

Saxena, A. (2008). Enterprise contract management: A practical guide to successfully implementing an ECM Solution. New Jersey, NY: J. Ross Publishing.

Shadrach, B. & Ekeanyanwu, L. (2003). Improving the Transparency, Quality and Effectiveness of Pro-poor Public Services Using the ICTs: An Attempt by Transparency International, pp 120-138.

Turner, J and Simister, S (2001). Project contract management and a theory of organization: International Journal of Project Management.PP.457-464.

Lead-in statement

Created by Aiden Platt, the presentation titled “Procurement: An Emerged Profession” concerned the specified phenomenon and covers the significance of procurement within an organization, as well as defines the role of the former in a company.

Platt also discusses procurement methods as applied to a very specific area of entrepreneurship (i.e., the production and provision of liquor burners)¹.

Insights on topic of reflection

The fact that the significance of negotiation is emphasized several times throughout the presentation leaves a lot of food for thoughts. I have always felt that negotiation affects the success of procurement strategies, yet I have never managed to put my finger on why it does.

Therefore, when watching the presentation, I felt finally relieved, as the secret was eventually disclosed. Platt recognizes the significance of negotiation fully by mentioning the importance of negotiation in his presentation several times.

The fact that negotiating allows for increasing the amount of orders processed from 25 to literally thousands per day² served as an eye-opened on the significance of negotiation in procurement for me. It seems that negotiation used to be taken for granted by most of the students up until the presentation in question changed their perception of the phenomenon, which impresses me beyond belief.

Relation to theory/ Prior knowledge

It would be wrong to claim that the presentation in question has broken new grounds in strategizing the company’s performance. Quite on the contrary, the significance of negotiation as an essential process in the company’s organizational and production processes has been discussed in a range of papers.

For example, the article by Huang, Kauffman, Xu and Zhao mentions the need for a company to develop a viable negotiation strategy³, which allows fur suggesting that the issue raised by Platt has a solid theoretical basis.

The theory of negotiation, in its turn, is quite old. Presupposing that the perfect approach towards negotiation (compromising) occurs at the cross-section of the four key strategies (competitive, integrative, avoiding and accommodating ones), the traditional Negotiation Theory allows for defining the method of communicating with the organization’s key stakeholders.

Concept in future

The information concerning the role of negotiation in procurement has clearly been a good lesson for me. The description of negotiation as viewed through the lens of a procurement specialist has shed a lot of light on the responsibilities of the latter.

This information will help me become a more efficient [procurement specialist and develop unique approaches for solving specific problems related to procurement. To be more specific, I will be able to train my flexibility and consider specific conflicts and issues related to procurement from different angles, therefore, being more objective.

Finally, Platt’s presentation has encouraged me to reconsider the negotiation approach, which I currently adopt in the situations that need a conflict resolution. While previously, I relied on the accommodating approach admittedly too much, after seeing the presentation, I finally decided to introduce several competitive elements into it as well.

It seems that the presentation has helped me change not only my perception of the negotiation process, but also my entire idea of the goals that the negotiation process pursues. The emphasis has clearly been shifted from the need to maintain perfect relationships with the parties involved to the need to make sustainable decisions.

Bibliography

Huang, He, Robert J. Kauffman, Hongyan Xu and Lan Zhao, “Mechanism Design for E-procurement Auctions: On the Efficacy of Post-Auction Negotiation and Quality Effort Incentives,” Electronic Commerce Research and Applications 10, no. 6 (2011): 650–672.

Platt, Aiden. “Procurement: An Emerged Profession.” Presentation at the ChE 423 Process Economics & Management.” Booragoon, Western Australia, 2014.

Footnotes

1. Aiden Platt, “Procurement: An Emerged Profession,” (presentation at the ChE 423 Process Economics & Management,” Booragoon, Western Australia, 2014).

2. Aiden Platt, “Procurement: An Emerged Profession,” (presentation at the ChE 423 Process Economics & Management,” Booragoon, Western Australia, 2014), p. 14.

3. He Huang, Robert J. Kauffman, Hongyan Xu and Lan Zhao, “Mechanism Design for E-procurement Auctions: On the Efficacy of Post-Auction Negotiation and Quality Effort Incentives,” Electronic Commerce Research and Applications 10, no. 6 (2011): 652.

Uniform Commercial Code (UCC) is an act which enables uniformity in commercial code, in relation to particular commercial transactions or concerning personal property as well as contracts and documents relating to them. They include commercial papers, sales, credit letters, and deposits in banks, collections, and transfers in bulk, lading bills, and other title documents. Consequently, UCC eliminates regulations in agency acquisition unnecessarily repeated and paraphrases or restates FAR.

It limits these regulations to the necessary guidelines required to implement policies in FAR and the procedures within the agency in question. Model Procurement Code (MPC) involves the statutory formations and guidance in policy for controlling and managing supplies procurement, construction and services, and enhances public satisfaction (Jordan, 2009).

Supply chain management includes optimization and the oversight in acquiring various inputs that necessitates purchasing and conversion of raw materials into finished products. Ideally, such initiatives play a vital role in enhancing the optimization of various outputs in enhancing planning. FAR enhances planning of acquisitions as one has to list down all potential considerations, buying rules, material handling rules as well as transportation of official supplies and equipment rules have to be followed strictly.

The Purchasing and Supply Management Department and the Legal Department have adopted the use of lawyers where the legal experts advise on some complex aspects.

The common legislation undertaken includes interpreting complex legislation, providing guidance as well as advising on precedence and drafting of terms and conditions regarding contracts. They have also to ensure that each state follows its purchasing law rules. Such an example is the state of Mississippi which has rules for purchase figure starting from purchases not exceeding $3500.00 (Jordan, 2009).

The Federal Acquisition Regulations requires that the Federal agencies should influence the acquisitions of the various agencies in fostering markets in order to enhance sustainable materials, technologies, services, and products. Federal agencies are normally required to enhance implementation of high-performance through sustainable construction, repair, renovation, maintenance, and management.

In addition, the organization should consider deconstruction practices that will ensure reliability and efficient distribution of resources. Contractors in the organization will ensure that the agency’s goals are, ultimately, achieved. Each inventory shall contain a complete and accurate record of all controlled substances on hand on the date the inventory is taken, and shall be maintained in written, typewritten, or printed form at the registered location. An inventory taken by use of an oral recording device must be promptly transcribed.

Consequently, manufacturing resource planning (MRP II) incorporates effective planning strategies that enhances planning and distribution of resources. This will ensure effective utilization of resources in the manufacturing company. It looks at operational planning in terms of units as well as financial planning.

In addition, it is capable of answering the questions of “what-if” during the process of simulation, and ensures that the extension that regards closed-loop MRP can be utilized effectively. Purchasing and procurement also denotes a function of, as well as, the responsibility in procuring supplies, materials and services (Johnstone, 2006).

Cost-based pricing only looks at the product cost. This can lead to a decline in sales especially where consumers are not concerned about the price but focus on other aspects such as product design or quality. Market-based pricing always leads to miscalculations especially for firms which have not stayed in that particular market for a long time. The basis of consumer’s value-pricing may be different from the firm’s basis.

For example, the firm could be basing its judgment on quality while consumers look at quality. On the other hand, Life cycle pricing is based on the stage of life cycle of the product. Most consumers are ignorant of this stage and may deem themselves overcharged at some point. Segmented pricing segregates the market or products and prices products differently. This is a limitation when consumers get information from other consumers (Johnstone, 2006).

Customer-driven pricing is a situation where the market forces of demand from customers determines equilibrium prices in the market. In contrary, competition-driven pricing is where entities raise or reduce their prices based on their competitor’s price. This has often led to price games between competing firms.

However, both of these have an effect on the buying organization’s willingness and ability to purchase a good or service. For example, consumers could put their level at a price below the purchase price, leading to that product becoming a cash-cow and its purchase abandoned.

Large companies issue mandates that force compliance and do not offer smaller partners the active role of improving. Supply chain managers exist to solve this problem. As a supply chain manager, one is compelled to keep a constant relationship between suppliers and company.

These professionals are not supposed to reveal confidential information to suppliers. An instance is payment delay information in the cash conversion cycle which could lead to bad firm-supplier relationship in future if revealed. Such is an example of the gate-keeping role of supply and management professionals. Supply chain professionals influence the firm’s decision on purchases and thus indirectly influence the firm as decision-makers on product and supplier selection as well as price acceptance.

References

Johnstone, N. (2006). The Environmental Performance of Public Procurement: Issues of Policy Coherence, London: OECD Publishing

Jordan, D. (2009). Free Course Book for Course 3: Statutory Law and Intelligence 2011, London: Routledge