Purchase and Procurement Management

Purchase and
procurement
management

Contents
Case study........................................................................................................................................2
Alternative structures...................................................................................................................2
Potential obstacles to change.......................................................................................................3
Business benefits after a change in purchasing structure.............................................................3
Topic 6: Sourcing and Buying at the right place.............................................................................5
9.1. The Role of procurement in managing inventory.................................................................5
9.5. Procurement implications.....................................................................................................5
10.6. Cost of monitoring and evaluating the performance of suppliers.......................................5
11.11. Pricing agreements............................................................................................................6
Topic 7 Procurement performance and ethics.................................................................................6
17.11 Comments..........................................................................................................................6
17.12 Situation analysis...............................................................................................................7
17.18 Procurement and inventory management...........................................................................7
Topic 8. Contrasting approaches and buying from overseas...........................................................7
13.1 Potential risks when purchasing offshore............................................................................7
13.4 Selection of freight agent.....................................................................................................8
16.7 Buying new capital equipment.............................................................................................8
Topic 9. Negotiation........................................................................................................................8
14.1 Negotiation is some situations.............................................................................................8
14.2 Negotiation in purchasing IT software.................................................................................9
14.3 Rough Order of Magnitude..................................................................................................9
14.4 Negotiation and consultation...............................................................................................9
Reference.......................................................................................................................................10

Case study
Crank is running a business since the 1920s and they have manufacturing operations at three
locations which are Leicester, Southampton, and Glasgow. In the organization, the procurement
process is decentralized. During the operations there are some common purchases for all the
locations of the organizations. The company has not implemented any strategy for procurement
and purchasing management. in the organization, no tender stays more than two years in any of
the locations. The company includes the new process of logistics practice like Just in time and
On-time in full methods. In the purchasing teams of the three different locations, there are no
communication and cooperation facilities between the teams.
Alternative structures
The company can adopt various alternative structures for the procurement and production
management. It is necessary for the three different locations to manage the procurement. A new
structure for the company can include the corporate head of procurement and having a central
team of the procurement specialists can help the company in managing the procedure of
purchasing material for all the locations. The corporate head is required for managing and taking
decision-related to buy and make the group purchase contracts for removing and errors and
conflicts. In the organization, five major purchases are included and number of suppliers is 40.
The suppliers must be reduced by critically analyzing all the products and prices, suppliers
number can be reduced which can help in reducing the confusion and building good relations
with the suppliers. The corporate head can be created who will be responsible for making the
strategic directions and decisions of the procurement in the crank. In the organization,
procurement can be outsourced from the specialist providers (Walker and Phillips, 2009). The
main purpose of effective procurement procedure is to minimize the errors and opportunities of
lost savings. The procurement system can be implemented and organization can make an
investment in the software as it helps in decreasing the errors, delays, and over-payments of the
organizations. It will increase the productivity of all the locations and errors can be minimized by
reducing the redundancy. The payments can be tracked and help in meeting the standards in
purchasing. E-procurement structure will be effective for the organization as new software and
system can help in making effective decision and resources can be used effectively and
efficiently (Gospel and Willman, 2003).

Potential obstacles to change
Crank is facing the obstacles which are required to be changed. The site directors of the company
are losing autonomy. Proposed changes are required in the business but the purchasing staff at
the different location are not familiar with the change and it is necessary to bring the change for
the modernization and adopting latest technology and necessary for achieving the goals and
objectives and provide the material for further production to another department (Grzegorz,
2008). As all the capital equipment is purchased by the group chief engineers and in making the
decisions they are not relinquished.
With the implementation of a new structure, the various suppliers will feel threating with the
introduction of tendering method. The organization will face the strategic challenges and it is
necessary for the expertise to overcome the challenges and consider the issues and try to reduce
the errors which may occur after the change in the methods and techniques of procurements
(Kim and Shunk, 2004). With the change in the program and structure of the procurement and
purchasing management, it will surely impact the performance of the manufacturing for some
time till the implementation takes place successfully and also some loss may occur and take
some time in implementing the system and software successfully. In case of e-procurement
implementation, the employees will be worried more as the work will be done automatically and
company will require to reduce the number of employees (Krause, et al., 2009).
Business benefits after a change in purchasing structure
New Purchasing structure will provide the various business benefits to the organization as it will
help in formulating the long-term procurement strategies which are required for achieving the
long term goals and objectives of the organization. In order to manage the risk of procurement,
change of purchasing structure will provide this benefit to crank. If the organization adopts the
latest technology in the organization, it will help in automating the process of supply and also
helps in bringing essential benefits in the bottom line of the company and increase productivity,
more visibility and cost efficiency (Minner, 2003). When the procurement structure will be
updated it will help in creating effective communication with suppliers and centralizing the
tracking and lower the costs. The change in structure of the procurement will help the company
in uniforming the processes and policies of the procurement which are required for the strategic
decisions. Experts with high skills and levels can be hired for the team of procurement. E-