Logistics and Supply Chain Management: Drivers, Challenges, and Merits

The report highlights the changing nature of purchasing and supply management in different sectors. It emphasizes the drivers, challenges, and merits of this modern approach towards purchasing and supply systems within global and local organizations.

LOGISTICS AND SUPPLY
CHAIN MANAGEMENT

EXECUTIVE SUMMARY
Global purchase and supply system of corporate sector is developing with the
involvement of certain elementary components such as technologies, business software and
skilled labour. Present report highlights the changing nature of purchasing and supply
management in different sectors. It has included the fact that approach towards strategic purchase
and supply has become extremely efficient due to different drivers of this change and most
importantly the introduction to globalisation and technologies. Since the execution of all
strategic plan related to purchase and supply management has become necessary for companies,
the aspects such as quality control, inventory management, strategic recruitment it also has
linked with modern purchasing and supply chain management activities and procedures. In this
report, emphasis has laid upon the drivers, challenges and merits of this modern approach
towards purchasing and supply systems within global and local organisations.

CONTENTS
INTRODUCTION...........................................................................................................................1
Introduction to modern purchasing and supply in organizations.................................................1
Importance of purchasing and supply in organizations...............................................................2
Purchasing and supply strategies and models..............................................................................2
Drivers to change.........................................................................................................................4
Issues persists in traditional purchase and supply........................................................................5
Challenges for strategic purchase and supply management.........................................................6
Merits of strategic purchase and supply.......................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The report is about the changed nature of developed purchase and supply chain systems and will
consists of certain purchasing and supply model and strategies implemented by global
organizations. In late 1970s, the companies and personnel have started confronting the shortage
of raw materials , after which the emphasis were given on more standardized and competitive
strategies of purchasing methods (Barney, 2012). Furthermore, the report will also highlight
drivers to the changed nature of supply and purchase systems. It will involve some descriptions
related to the merits of modern purchase and supply management utilized by modern companies,
industries and organizations.
Introduction to modern purchasing and supply in organizations
Global Purchasing and supply chain changed with times and is being continuously developing
with the help of new technological advancements.
Companies have started considering the purchasing and supply as one of the most elementary
strategic operations with the involvement of various suitable corporate activities and planning.
Previously, the purchase and supply were based upon normal and routine administrative without
the execution or aim of continuous strategic improvements.
Modern or improved version of purchasing and supplying system has introduced component of
quality management and strategic activities management control in the companies. Global
companies have started using outsourcing and e-sourcing methods for maintaining cost of
ownership, data mining and analysis of purchasing and supply processes. Organizations of
country like China is continuously giving considerable challenge to service sectors with the help
of extremely advanced purchasing and supply strategies (Glock and Hochrein, 2011). With the
involvement of technologies and business software, companies have also started paying attention
towards increasing manpower efficiencies to develop and execute desired goal completion in
terms of procurement and supply chain management. Inclusion of strategic recruitment
procedure for selecting executives such as material manager, supply managers, quality control
executives and other departmental managers to look after the compliance of designed purchasing
and supply objectives have become one of the elementary function of organizations.
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Nike has adopted outsourcing for its manufacturing and raw material product procurement
activities. With the help of such strategic sourcing the companies like Nike is also reducing
carbon footprint and enhancing their CSR policies in organization
Importance of purchasing and supply in organizations
Purchasing and supply department plays a very vital role in any manufacturing company or
industry. Organizations tend to have different purchasing methods as per their requirements and
undergo for local or separate purchase and regional purchasing. With the developing competition
and components related to globalization organizations have started applying theoretical
framework to generate suitable outsourcing, purchasing and supply networks. Purchasing and
supply chain management is important as it reduces cost with the help of supplier relationship
development. This assists in minimizing cost through which better value can be offered to the
customers. It also mitigates related business or corporate risks by the help of specialized
professionals (Nair, Jayaram and Das, 2015). Organizations are being able to develop long
lasting relations with other global companies by maintaining strategic vendor management and
contracts.
Organizations have started utilizing strategic sourcing with the help of speed, market, cost and
other suppliers’ relationship management. In countries like United States, a group purchasing
organization has been developed which provides desired facilities to the businessmen, suppliers
and vendors in terms of discounts and other purchasing activities. Group purchasing are adopted
by industries, grocery, healthcare electronics and other agricultural manufacturing to procure and
purchase raw materials.
Purchasing and supply strategies and models
Purchasing and supply strategies abased principally on procurement services and location of
company. Companies perform centralized purchasing and other related procurement services by
the help of purchasing cycle.
KRALJIC PORTFOLIO PURCHASING MODEL
This model and matrix was introduced by Peter Kraljic in the year 1983 to facilitate
organizations in terms of supplier, risk and financial impact. Further, the model has also
explained ways to operate purchase department and its activities by suitable strategic cost and
material management processes.
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Companies have started using Kraljic Purchasing model to increase the profitability and to
reduce cost consumption specially e in the field of purchase and supply departments. The major
items included in the section of matrix are: Leverage, strategic, non-critical and bottleneck items
persist within the company.
Companies have started using Kraljic Purchasing model with the help of which they can perform
activities like purchasing classifications, market analysis, positioning and action planning.
Suppliers and Vendor management
The management of suppliers and vendors has become easier with the help of different
technologies and software used by global companies. The compliance of all the related activities
such as making bills quotes invoices have become easier and cost plus time effective due to the
inclusion of system software air and strategic purchasing activities.
By maintaining strategic relationships with shareholders, the organizations have started building
more specified and strong bonds with suppliers to attain strategic business profits with the help
of suitable supply and purchase options.
Purchase and supply risk Management
It is one of the elementary strategy related to purchase and supply introduced within in global
companies. In such type of risk management, companies tend to perform certain suitable
corporate purchase or supply risk operations to identify the level of barriers and return on
investment by the help of business software (Barney, 2012). Therefore risk management in
purchasing and supply chain extremely focused upon reducing the distractions cost in the normal
flow of goods and materials to deduce the unwanted utilization of capital and manpower
productivity.
Global sourcing
With the introduction globalization, global sourcing has become the most common tool adopt by
international companies to exploit corporate efficiencies in terms of labour raw and different
economic components such as business tax and trade tariffs.
Green purchasing
The concept of green purchasing is increasing in present time which is another driver behind
strategizing the purchasing activity. Companies are concerned towards environmental aspect and
hence aim to procure material from sustainable supplier. With rise in environmental issue and
pressure from society and government bodies, companies are opting for green procurement with
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a motive reduce the negative effect on environment. Additionally, companies are also seeking for
recycling and disposal of wastage as part of developing eco-friendly approach. Through this,
overall efficiency of company gets improve and also assist in gaining awareness among
customers. Due to this, large numbers of companies are framing strategies for undertaking
purchase activity (O'brien, 2019). Businessmen are referring green purchasing to reduce ill effect
to human health and our environmental friendly by nature. Search type of purchasing needs
predefined strategies as per the objectives of company. Green procurement or purchasing inhibits
a principal aim of minimizing all environmental issues and to demonstrate irresponsible image in
the market.
Total Quality Management
Along with risk of supplier and vendor management there exist a principle of total quality
management which is elementary for the success of any company (Foerstl et.al. 2013). It is one
of the basic strategic steps that the organizations are heading towards and with the help of
suitable quality certifications, the companies are developing proper supply and purchase activity.
Execution of strategic supply chain management have become advanced due to the component of
total quality management. Company like Ford Motor, has utilized a suitable supply chain quality
management for it supply generation and purchasing activities.
By the inclusion of total quality management practices modern organizations are continuously
involving the principal of improvement and 0 errors with their supply and purchasing practices.
Companies are using different tools such as six Sigma, lean management and different quality
increasing tools or certifications to develop standardized supply chain and purchase
management.
Drivers to change
Introduction to new business models and improvements in terms of technological as well as
internal environment of companies have made the process of purchase and supply more strategic
than early years. There are many drivers for such advanced purchasing and supply systems
entered into to corporate sector,
Globalization
Due to increasing competition it has become important for companies 2 to increase the
efficiencies of global supply chain with the exploration of most suitable and efficient
technologies to deliver quality products and on time delivery services (Monczka et.al., 2015). It
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has become the need of organizations 2 to clear out all the complexities of purchase and supply
systems to save time and cost of company. Globalization has also introduced many challenges to
supply chain management of companies as the locations have been widespread. Due to two
continuous improvement of globalization and less availability of resources the purchasing and
supply management was facing issues.
Reducing constraints
With continuous development of competition and demands in manufacturing and service sectors,
the introduction of constraints like time consumption selection of suitable route selection of
facilitator extra had to be strategic (Glock and Hochrein, 2011). Therefore, the need of increased
purchase and supply system had to be involved with the procurement activities.
Inventory management
Inventory management is the principal aim of any company and therefore to be highly specific
and strategic with the investment and capital flow, the need of strategic purchasing and supply
has become elementary (Christopher, Mena and van Hoek, 2018). By emphasizing on reduced
distribution and planning cost and developing suitable purchasing and suppliers relation,
organizations have attain desired inventory management objectives.
The development of ERP systems, advanced procurements, strong IT support and infrastructure
and involvement of various organizational external and internal researches.
Increasing competition
Rise in competition: Further, there is significant rise in competition in market place due to which
company need to frame strategy for purchasing (Nair, Jayaram and Das, 2015). Company need to
cope-up with the strategy of competitors also and therefore it is required to procure the material
in strategize manner as part of reducing overheads. Moreover, there are certain unforeseen events
such as change in consumer needs, disruptive innovation, new technology and other related
which also affects the purchasing strategy. To meet up with these changes, company needs to
procure material in right amount so that overall cost of operation remains low (Meehan and
Bryde, 2011). Also, by developing sound strategy for purchasing, company is able to save its
working capital that can be used in other segments such as marketing, promotions and other
related. Through this, competition can be tackle in effective manner.
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Issues persists in traditional purchase and supply
Traditionally, global purchase and supply management used in organizations were highly based
on manual calculative and operational procedures. Low involvement of business software
provided hurdles in performing strategic activities such as instant payments, standardized cost
analysis and other feasibility analysis desired by the company (He, Huang and Yuan, 2016).
Apart from the above, quality was also the least focused component in traditional purchase and
supply system. The factors such as transactions, accessibility to payment options were
inadequate.
Challenges for strategic purchase and supply management
There are number of challenges that me introduced to perform strategic purchase and supply
chain activity.
First of all, lack of resources in terms of capital and manpower is one of the biggest challenges of
any company for implementing a strategic purchasing and supply chain (Meehan and Bryde,
2011). Strategic recruitment and training to improve the efficiency of manpower power in terms
of handling technological and business software operations has become one of the important
steps to proceed towards strategic purchasing and supply chain objectives.
Organizations may face challenges by having poor team of management and supporting staff to
implement design purchase and supply chain (Christopher, Mena and van Hoek, 2018). Poor
vendor and suppliers relationship management is also one of the risk or challenge to the
company for performing a strategic supply chain management and purchasing operations.
Global companies are now outreaching and outsourcing its purchase and supply with the help of
experienced and efficient manpower (Tang, 2006). The requirement of capital and related
investment is also a challenge for companies. The demand of stakeholders is increasing and
inclusion of technologies is also developing therefore, generating or building a technological
friendly organization has also become a need for strategic supply and purchase management
department and activities.
Merits of strategic purchase and supply
With the help of such strategic purchase and supply activities, the company becomes extremely
focused towards its corporate objectives of improving their current corporate supply chain and
purchasing activities (Mentzer, Stank and Esper, 2008).
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With the improved version of corporate purchasing and supply, the companies have become
more prompt in decision making, selecting vendors, approaching to feasible platforms etc. By the
help of modern purchasing plan, it has become easy for organizations to reduce the cost on
acquisitions. Focused approach on quality control and management has increased the way of
strategic purchasing and supply.
Organizations have also started paying attention towards social responsibilities of suppliers and
maintaining transparency in their operations and process with vendors (Melnyk et.al., 2010).
With the help of modern purchasing and supply systems, companies at global level have started
reorganizing the foundation of their future capabilities in terms of supply and purchasing.
CONCLUSION
From this report, it has been concluded that purchase and supply chain have become most
crucial aspects of modern organizations and industries. The report analysed that with the
application and inclusion of software such as SAP and ERP, quality of suppliers and vendor
management has enhanced certainly. The modern organization has also started utilizing
supplier’s relationship models to generate suitable business bonding with their stakeholders.
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Tang, C. S. (2006). Robust strategies for mitigating supply chain disruptions. International
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