Report: Purchasing Management Activities at Far East Organization

This report provides a comprehensive analysis of purchasing management practices at the Far East Organization (FEO), a major real estate developer. It examines key aspects of the organization's procurement processes, including supplier selection criteria, purchasing cost management strategies, and the integration of Information and Communication Technology (ICT) in its operations. The report highlights FEO's approach to supplier selection, emphasizing factors such as supplier reliability, ethical practices, and communication. It also delves into the methods used for managing purchasing costs, including cost analysis tools and techniques like Excel-based tools and supplier analysis. Furthermore, the report explores FEO's adoption of ICT, such as data analytics and smart building technologies, to enhance efficiency and customer service. The analysis considers relevant theories like the Agency Theory and Social Presence Theory to understand the dynamics of supplier relationships and the impact of technology on communication. The report concludes with recommendations for improving various aspects of FEO's purchasing management to ensure continued success and alignment with its corporate social responsibility goals.

Running head: PURCHASING MANAGEMENT AT FAR EAST ORGANIZATION 1
Purchasing Management at The Far East Organization
Name
Institution

PURCHASING MANAGEMENT AT THE FAR EAST ORGANIZATION 2
Abstract
This report aims at an analysis of the purchasing management activities. It focusses on
Far East Organization in Australia. This is an organization that deals in construction of
real estate properties of different types. These range from commercial, residential,
heath facilities among others. It is an organization that aims at innovation and
construction of high quality buildings. As the purchasing manager, I have carried out an
analysis of the criteria for supply selection, incurred purchasing costs, and information
and communication technologies applied by the organization. Finally, I have provided
recommendations on how the different areas can be improved.

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Purchasing Management at The Far East Organization
This report aims towards the analysis of the effectiveness of three different
aspects of the purchasing management in Far East Organization in Singapore. These
aspects include; criteria used in supplier selection, management of purchasing costs,
and the use of (ICT) Information Communication Technology in the management of
purchasing operations in the organization. As the purchasing manager at Far East
Organization, it is my responsibility to ensure an efficient and smooth running of all
purchasing activities.
The Far East Organization is a company that deals with property development. It
was founded in 1960 by Ng Teng Fong. It is the largest property developer that is held
privately in Singapore. It carries out development activities on properties ranging from
commercial, hospitality, retail, residential, healthcare sectors and industrial properties.
Far East Organization(FEO) has more than one hundred and eighty investment and
development companies some which are publicly held and others that are publicly
listed. It also has a sister company called Sino Group located in Hong Kong. Together
these two organizations own assets with a net asset value greater than forty US billion
dollars (KPMG, 2017).
The Far East Organization is a Christian company and aims to ensure the
welfare of the city. It carries out activities that reveal its corporate social responsibility.
Incidentally, it supports the needy in society as it strives to live up to the Christian value
of loving one’s neighbor as one loves themselves. They also uphold these values today
in a bid to honor the wishes of the founder of the company. The organization also
ensures that the real estate properties it provides for its customers are of excellent
quality and highly innovative (KPMG, 2017).
The Far East Organization has proved to be one of the best providers of real
estate in the world by being the only developer worldwide to win the very prestigious
FIABCI World Prix d’Excellence award. The organization seeks to inspire better lives
and carry out operations that far exceed the customers’ expectations in a bid to earn
their trust. This is the guiding principle that has enabled the company to outdo its very
impressive competitors. Some of these competitors of the Far East Organization

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include; DLF, cornerstone real estate advisers, and Falco pacific resource group. The
Far East has been able to weather the storms of bear and bull markets in the real estate
industry and is expected to continue with these achievements into the future (Akın Ateş,
van Raaij, & Wynstra, 2017).
In a bid to achieve its responsibilities, the Far East Organization requires different
resources that it needs to purchase. First, it needs to buy land on which the different
real estate buildings will be built upon. Next, it requires building materials that are
needed in the construction activities. The process of purchasing all these building
resources is complicated and can be categorized into five different sections. These are;
first, the suppliers are expected to possess the ability to provide the materials over a
given period continually. Secondly, the process of sourcing for the materials and
suppliers must be efficient. Thirdly, the purchasing strategies must support
organizational objectives and goals. Fourth, the goals that are aimed at during the
purchasing process must be aligned with the stakeholders’ interests. Finally, there
should be a well-developed supply base management (Yan, Yang, & Dooley, 2017).
Due to its corporate social responsibility, the company has a responsibility to all
its stakeholders, and that is why it has to ensure that the procurement process is well
managed. The stakeholders include; customers, shareholders, employees, investors,
and the community (Dou, Zhu, & Sarkis, 2017).
It’s my responsibility to ensure that collaborative relationships exist between the
organization and its suppliers. This enables the suppliers to see themselves as partners
in the organization and therefore act in the interest of the organization. One theory that
can be used to explain the relationship that exists between different organizations and
their suppliers is the Agency Theory. This theory states that the principal hires an agent
to perform a given task (Liang, 2015). In this case, Far East Organization is the
principal while the suppliers are the agents. The theory further assumes that both
parties act in their self-interest. In situations where the suppliers are motivated by self-
interest, there is likely to be conflicts between the two parties.
It is therefore very important for Far East Organization to make the suppliers feel
like partners in the organization. As such, they will share a common interest which is

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maximizing the gains for the organization and at the same time, they will be able to
maximize their gains.
More factors that Far East Organization should consider when sourcing for
suppliers include; First, the total ownership cost of materials should be considered. A
specific price quoted by the supplier does not necessarily reflect the total cost
associated with the product. There are additional costs such as logistics and
transportation that should be put into account (Foerstl, Schleper, & Henke, 2017).
Second, the quality of the products must be high. Therefore, the purchases manager
has the job of ensuring that the suppliers who are recruited provide high-quality
products. Third, the supplier should have a record of consistency. This is to ensure that
they are always time conscious and keep providing quality products (Bals &
Turkulainen, 2017). Finally, the chosen suppliers should be proper communicators with
a partnership approach. This ensures that the suppliers always provide information
required by the company and aim to work for the good of the company. Due to its
corporate social responsibility foundation, Far East Organization has to work with
suppliers who are ethical. They should carry out practices that ensure the environment
is sustainable. They should also carry out responsible retailing practices, and build a
conducive work environment for their employees (Akhavan & Beckmann, 2017).
Finally, when purchasing land, there is a need for Far East Organization to
purchase land that is strategically positioned to ensure that after construction, the
property will be purchased at good prices. This will assist in increasing profit margins as
well as reduce costs associated with marketing activities (Rajala & Tidström, 2017).
Far East Organization is a company that has incorporated information and
communication technology(ICT) in its operations. Incidentally, Far East Orchard, a
subsidiary of Far East Organization owns a range of medical suites in Novena. These
medical centers have made use of advanced technology for use by the medical
specialists. They also have different modern infrastructure in place to aid in the medical
activities (KPMG, 2017). The company has also been making use of data analytics (big
data) which aids the company in discovering insights about their customers and
competitors. This has helped the company to make more informed decisions that

PURCHASING MANAGEMENT AT THE FAR EAST ORGANIZATION 6
ensure improved profitability and increased efficiency. During the construction process,
different technologies are also used to speed up the building process and make it less
risky.
One technology that should be incorporated in the organization involves the use
of artificial intelligence. The subsidiary of the organization in health can use the
supercomputer which has proved to be an excellent diagnostic aid for use in the
medical sector. It can be used to even train medical students as well as in the treatment
of various diseases such as lung cancer. This tool will increase efficiency and enable
the organization to help the people better (Pihlajamaa, Kaipia, Säilä, & Tanskanen,
2017).
Another technological innovation that Far East Organization can incorporate is
the use of smart building technology. Smart buildings make use of information
technology to remain connected to different systems in the building, the people who live
there, and the rest of the world. They use processes that are automatic in controlling
various functions such as air conditioning, ventilation, security, lighting, and heating
among others (Kaufmann & Wagner, 2017).
Smart buildings also use microchips and sensors to collect data that is then used
in the management of various functions in the building. This type of technology is very
significant mainly in commercial property to enable the business owners to save energy,
minimize environmental effects and improve security. These are just a few of the
technologies that can be applied by this organization to reach a wider market and to
better serve the needs of its customers (Akın Ateş et al., 2017).
One theory that can be used to explain the impact of information and
communication technology to organizations is the Social Presence Theory. This theory
explains the social effects associated with technologies in communication. The theory
argues that the impact that a communication medium has depends on the social
presence that it enables those using it to have. The theory has an assumption that
increased contact improves the impact of the message.

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The Social Presence Theory also says that the use of texts and emails in
interaction, which are less social means, will not influence people as much (Yan et al.,
2017). Far East Organization takes note of this theory because it uses different means
of advertising that are more social to interact more with its clients to create trust as well
as give them first-hand information on different concerns they may have. These
platforms include; the use of social media such as Facebook and Twitter as well as
having a website where people can air their concerns and commendations.
For a business to be profitable, there is a need for profit margins to exist. This
requires Far East Organization to factor in the cost of land used for construction, the
costs of construction taking account of both fixed and variable costs, as well as the
costs associated with marketing activities. For the real estate ventures to be profitable,
the buildings need to be of high quality and should be built in accordance with the
targeted market (Sáenz, Knoppen, & Tachizawa, 2017).
The analysis of purchasing costs can take advantage of some tools. Software
that comes in handy in the analysis of purchasing costs is Excel. One such tool is the
allocation of gains of purchasing consortia. This is a tool that utilizes various practical
methods as well as game theoretical methods to output the purchasing gains. Another
tool which is more advanced is the allocation of costs and gains consortia. This tool
uses macros. This tool also uses both game theoretical and practical methods to
allocate the costs and gains of purchasing consortia. When using both tools, the
purchasing price analysis tool is useful in the determination of cost functions (Dogan &
Aydin, 2011).
To analyze quantity discounts, we can still use the purchasing price analysis tool
which also uses macros in Excel. It also uses electre two and electre TRI in the process
of selecting suppliers during the course of tendering (Chai & Liu, 2013).
In determining purchasing costs, Far East Organization needs to perform a cost
analysis. This is to examine all the costs that the real estate properties have incurred
until completion. This ensures that the price paid for the materials is not exorbitant. This
analysis involves a calculation of; the costs of construction materials and construction
costs, indirect costs, as well as overhead costs (Dogan & Aydin, 2011).

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Additionally, Far East Organization can carry out a supplier analysis and find out
which supplier is providing given products in the best quantity and quality at the most
optimal price. This may even involve consolidation of vendors to get better prices
through higher economies of scale (Hassanzadeh, Ramzi, & Zhang Gouiqing, 2011).
Indeed, the Far East Organization has been able to achieve its mission
continually, and it has also grown to be one of the best real estate investment
companies in the world. It has been able to accomplish these goals mainly due to
proper management of its purchasing activities. It has been able to work with reliable
suppliers who are also ethical. Furthermore, the company has integrated information
and communication technologies in its operation which has enabled it to experience
exponential growth over the years. Finally, proper management of purchasing costs has
allowed the company to enjoy significant profit margins as well as sell properties that
are affordable to its wide range of customers.

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