Engineering Procurement: Material Management, Strategies & Techniques

This report provides a comprehensive assessment of material management methods used in engineering companies, focusing on inventory valuation and logistic control. It analyzes procurement principles, emphasizing compliance and employee well-being. Various techniques for evaluating suppliers, considering price, quality, stability, and reliability, are discussed. The report also explores management strategies for maximizing purchasing power, such as centralized purchasing and just-in-time demand. Furthermore, it examines pricing management techniques, including competitive bid comparisons and prior quotation analysis, to optimize procurement decisions. This detailed analysis offers valuable insights for engineering organizations seeking to improve their procurement processes and overall operational efficiency. Desklib offers a wealth of similar solved assignments and past papers for students.

Engineering and procurement

Table of Contents
Introduction................................................................................................................................1
Assessment of different methods for managing material in engineering companies.............1
Procurement principles and consideration of ongoing requirements.....................................2
Techniques for evaluating and appraise suppliers.................................................................2
Management strategies for maximizing purchase power.......................................................3
Compression of pricing management techniques..................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................6

List of figures
Figure 1: Supplier evaluation.....................................................................................................3

Introduction
The term procurement management refers to the systematic approach used for buying
all the goods and services that required for an organization to maintain the growth and
sustainability. The effective management of procurement function is helpful for an
organization to value the business practices and improve the efficacy of the organization. The
current report will provide an assessment of the different methods that used for managing the
material in engineering companies. Moreover, the report will analyze the principles that used
for procurement, management techniques and strategies that used by the engineering
organizations for maximizing the purchasing power.
Assessment of different methods for managing material in engineering companies
For engineering organizations, the process of managing material and equipment has
the significant impact on the internal operation management functions to achieve the goals
and craft improvement in the level of efficiency. Following are the methods that used by the
engineering organization for handling the material:
Inventory valuation method:
According to this method of handling the material, the organizations are conducting
the analysis of average prices of moving, handling, and warehousing of the goods and
services. The proper consideration of prices and amount of inventory on the cost of goods
sold, gross profit and net income can be helpful for management to decision making about the
management of material1. Moreover, this method is also useful for the analysis of vital,
essential and desirable items. For example, the engineering organizations like automobile are
classifying the material into these items and managing them as per the requirements. The
vital material those that important for production, essential items involve goods and services
that can cause the delay in production for few hours and desirable items are which their
absence could stop the productions.
Logistic control:
1 He, B., Huang, H. and Yuan, K., 2016. Managing supply disruption through
procurement strategy and price competition. International Journal of Production
Research, 54(7), pp.1980-1999.
1

This method is also used by engineering organizations for managing the material
required for production and managing the demand. According to this method, the top
management focuses on the cost of transportation and labor charges for the specific period of
time in high demand and keeps the record of every purchase to make the decisions. This
method is used by the small and medium-sized engineering organization for handling the
material and buying the goods and services as per the needs at the optimum cost to keep their
operations under control to meet the business objectives. 2
Procurement principles and consideration of ongoing requirements
In order to manage the procurement functions and activities, the engineering
organizations are considering the following principles by considering their ongoing
requirements for production and management of materials according to demand.
Compliance: For engineering organizations, it is essential to maintain compliance with the
international, national and local laws for trading and managing the procurement functions.
For example, the engineering organization from construction segment makes concern over
the ongoing operations and maintains the compliance with health and safety, labor law and
supplier support.3
Employee well being and development: According to this principle, the engineering
organization needs to provide the flexible working hours for employees to maintain the work-
life balance. Moreover, training and personal development of staff is the responsibility of the
organization. This kind of approach is essential for managing the procurement functions and
effective utilization of resources. 4
2 Lines, B.C., Sullivan, K.T., Smithwick, J.B. and Mischung, J., 2015. Overcoming
resistance to change in engineering and construction: Change management factors for
owner organizations. International Journal of Project Management, 33(5), pp.1170-
1179.
3 Naoum, S. and Egbu, C., 2015. Critical review of procurement method research in
construction journals. Procedia Economics and Finance, 21, pp.6-13.
4 Oyewobi, L.O., Ija, M.I. and Jimoh, R.A., 2017. Achieving sustainable procurement
practices in the Nigerian construction industry: examining potential barriers and
strategies. ATBU Journal of Environmental Technology, 10(2), pp.63-84.
2

Techniques for evaluating and appraise suppliers
For the evaluation of supplier for engineering organizations, the top management
could use the following techniques.
Figure 1: Supplier evaluation
The engineering organizations are considering the above factors for evaluation and
appraise the supplier. According to this technique, the top management of engineering
organization is having the analysis of prices and quality of the supplied goods and services of
potential suppliers as per the requirements. The past relationship and market reputation of
suppliers also consider for developing the contract. Moreover, the reliability and stability of
the identified supplier help to make the evaluation.5 For example, the automobile
organization from the engineering industry is majorly focusing on the prices, quality, and
reliability of supplier for evaluation and making the contract for offering the goods and
material. This kind of technique is helping engineering organizations to maintain the demand
and supply curve and maintain the positive relationship with the supplier by evaluating the
approach of them.
5 Thai, K.V., 2017. Global Public Procurement Theories and Practices: An Introduction.
In Global Public Procurement Theories and Practices (pp. 1-14). Springer, Cham.
3
Supplier
evaluation
Prices and
quality
Relationship
Reliability
Stability

Management strategies for maximizing purchase power
In order to maximize the purchase, the engineering organizations could use the
following strategies:
Centralized purchase:
For engineering organizations, it is essential to develop and maintain the centralized
purchase system. This system is helpful for identifying the needs, available material and
market demand of the particular product and service. The proper consideration of inventory
and warehousing capacity through the centralized system is helping to have better control
over purchasing and increase the power by having good knowledge. 6
Just-in-time demand:
This approach is helpful engineering organization to overcome the cost of inventory
and maintenance of the goods and services. The proper analysis of required material and just
in time purchase will be beneficial for the organization to make the decisions. For example,
the just in time buying process can be based on the Lean manufacturing which includes labor
cost, raw material and operational functions that helps to overcome the customer lead time
and support in increasing the purchasing power. 7
Compression of pricing management techniques
The engineering organizations have the high demand for goods and services for
manufacturing and meeting the demand of customers. For procurement, the pricing of raw
material plays a critical role in decision making of organizations. The strategies that
engineering organization use are as follows:
Comparison of competitive bid:
6 Kar, A.K. and Rakshit, A., 2015. Flexible pricing models for cloud computing based
on group decision making under consensus. Global Journal of Flexible Systems
Management, 16(2), pp.191-204.
7 Wright, R.J. and Shiner, J.M., 2017. Managing Collaboration in E-Procurement.
In Digital Governance and E-Government Principles Applied to Public
Procurement(pp. 75-98). IGI Global.
4

This strategy is helpful for analyzing the valid prices of goods and services by asking
more suppliers about the cost of the required goods and services. The comparison of prices of
the different supplier is helpful for determining one for buying the goods. 8The consideration
of the lowest bid and quality of the product will be helpful.
Comparison of prior quotation
This strategy is also used by organizations for buying goods. According to this, the
top management makes the comparison of 24 hours quotation and purchases the goods. The
critical solicitation of comparative quotes will help to make the decisions for buying the
goods and services for production.
Conclusion
From the above study, it has been carried out that procurement is an essential process
for engineering organizations for managing the production and demand. The report has
discussed different methods of purchasing and techniques for pricing comparison for
improving the buying power.
8 Kosgei, O.K. and Kinoti, J., 2018. THE ROLE OF FRAMEWORK CONTRACTING
ON PROCUREMENT PERFORMANCE OF STATE CORPORATIONS UNDER
THE MINISTRY OF ENERGY AND PETROLEUM IN KENYA. International
Journal of Supply Chain Management, 3(1), pp.60-75.
5

Bibliography
He, B., Huang, H. and Yuan, K., 2016. Managing supply disruption through procurement
strategy and price competition. International Journal of Production Research, 54(7),
pp.1980-1999.
< https://www.tandfonline.com/doi/abs/10.1080/00207543.2015.1074297>
Kar, A.K. and Rakshit, A., 2015. Flexible pricing models for cloud computing based on
group decision making under consensus. Global Journal of Flexible Systems
Management, 16(2), pp.191-204.
< https://link.springer.com/article/10.1007/s40171-015-0093-1>
Kosgei, O.K. and Kinoti, J., 2018. THE ROLE OF FRAMEWORK CONTRACTING ON
PROCUREMENT PERFORMANCE OF STATE CORPORATIONS UNDER THE
MINISTRY OF ENERGY AND PETROLEUM IN KENYA. International Journal of
Supply Chain Management, 3(1), pp.60-75.
< https://www.iprjb.org/journals/index.php/IJSCM/article/view/632>
Lines, B.C., Sullivan, K.T., Smithwick, J.B. and Mischung, J., 2015. Overcoming resistance
to change in engineering and construction: Change management factors for owner
organizations. International Journal of Project Management, 33(5), pp.1170-1179.
< https://www.sciencedirect.com/science/article/abs/pii/S0263786315000095>
Naoum, S. and Egbu, C., 2015. Critical review of procurement method research in
construction journals. Procedia Economics and Finance, 21, pp.6-13.
< https://www.sciencedirect.com/science/article/pii/S2212567115001446>
Oyewobi, L.O., Ija, M.I. and Jimoh, R.A., 2017. Achieving sustainable procurement practices
in the Nigerian construction industry: examining potential barriers and strategies. ATBU
Journal of Environmental Technology, 10(2), pp.63-84.
< https://www.ajol.info/index.php/atbu/article/view/177560>
Thai, K.V., 2017. Global Public Procurement Theories and Practices: An Introduction.
In Global Public Procurement Theories and Practices (pp. 1-14). Springer, Cham.
6

< https://link.springer.com/chapter/10.1007/978-3-319-49280-3_1>
Wright, R.J. and Shiner, J.M., 2017. Managing Collaboration in E-Procurement. In Digital
Governance and E-Government Principles Applied to Public Procurement(pp. 75-98).
IGI Global.
< https://www.igi-global.com/chapter/managing-collaboration-in-e-procurement/175575>
7