Critique of the Purchasing and Procurement Strategies - Coursework Example

RITIQUЕ ОF РRОСURЕMЕNT АND РURСHАSING STRАTЕGIЕS University Student Id Course Date Introduction This essay is trying to critique the purchasing and procurement strategies. The majority of the common practices in the procurement process have undergone drastic changes in the current years. For instance, the traditional purchasing have now changed into supply chain management (Caniels and Gelderman, 2005). Another reason as to why there is close cooperation between the suppliers and the buyers is because of the aspect of globalization in the marketplace. However, the procurement process is mostly focused on various aspects such as the cost, delivery, flexibility, quality and also technology. Summary of key aspects There are huge costs that are usually incurred in the process of setting up deals with the new suppliers, even though the management program of the supplier relationship can do away with some of those costs. Moreover, through the cooperation in a mutual relationship which is beneficial with the main suppliers, a business enterprise can strive for the cost savings. The establishment of a good working relationship with the suppliers can bring about cost savings, by reducing delays and also quality issues (Uyarra and Flanagan, 2010). Also, through the establishment of the supplier relationship, communication between the suppliers and the buyers also improves. Also, suppliers get to understand more about the businesses they operate, thus enabling them to meet their requirements more efficiently. The decrease in the delays of the supply chain greatly improves the flow of the business operations. Besides, in case various issues arise in the ordering process, good working relationship existing between the supplier and the buyer can make it easy to resolve those issues. However, huge fluctuations in the market prices in most cases discourage consumers from buying commodities. The majority of these price fluctuations are mainly caused by the rise in volatility of the commodity prices (Caniels and Gelderman, 2005). Moreover, through the adoption of the principles for supplier relationship management, companies can take the advantage of having fixed prices for their commodities. Critique of the literature Importance of buyer-supplier relationships The major importance that is usually associated with the buyer-supplier relationship is that it always creates value for the two parties which are involved that is the buyers and the suppliers of the commodities. Another importance is that through the relationship various issues which are related to the marketing fields and also purchasing can be easily addressed (Zheng, et al., 2007). Moreover, even though the study about the buyer-supplier relationships has been conducted in different research streams, a lot of efforts have been directed on the relationship with the private suppliers as compared to the government suppliers. Cultural influence on buyer-supplier relationships The major challenge that is usually attributed to conducting business across the cultures is actually about understanding the cultural differences. Moreover, it is quite necessary to understand the cultural differences and also know how the cultural difference should be handled. However, one of the ways in which cultural differences should be handled is through adopting the both norms as well as the behaviors that are associated with the national culture of the other party (Uyarra and Flanagan, 2010). Therefore, the aspect of adaptation is one of the ways through which cultural differences in interactions can be managed between the buyers and the sellers of the commodities. Moreover, the willingness of the two parties to make adaptations is a clear implication that they understand the importance of adapting in the business activities. Also, the achievement of high congruence between the partners who have different cultures has been found to bring improvement in the effectiveness of the buyer-supplier relationship. The adaptations are quite significant since they usually signal the aspect of commitment of the two parties in the relationship which is essential for quality buyer-seller relationships. Moreover, it has been found that the formation of a partnership which successful usually require a mutual adaptation of all the members (Agndal and Nilsson, 2010). However, even though much of the knowledge pertaining adaptive behavior and also the cultural differences have been obtained in the buyer-seller relationships, the adaptive behavior is also examined in the business activity. When the cultural differences are being addressed, the cultural contexts may be different, and therefore the interaction between the two parties may have an impact on the adaptation behavior. The role of technology in buyer-supplier relationships The supplier relations are most cases undervalued by the companies since they fail to understand how a balanced relationship with the sellers can be of any benefit to the buyers. Therefore, the procurement leaders are required to maintain favorable relationships with the sellers so as to ensure high-quality services as well as effective processes. However, looking for the right supplier is the first step of making any business partnership to be successful, but looking for the supplier manually would take a lot and hence increase the opportunity of overlooking significant details (Schiele, 2007). Therefore, the technology plays an important role in simplifying the process of searching for the right supplier just within a short period. After the identification of the right supplier, the next step is usually the establishment of appropriate channels for communication and the payment processes too, all of which are handled through technology. Besides, those businesses which are looking for a way of improving their buyer-supplier relationship should put into consideration the implementation of various technologies so as to advance their business operations. However, looking for the right supplier can be a grueling process in case the appropriate technologies are not available. Besides, the electronic sourcing tools create room for a business enterprise to carry out a comparison between various suppliers thus making the selection process to be more effective. Therefore, through the electronic sourcing solutions, buyers do not necessarily need to depend on the word of the seller when selecting their supplier (Uyarra and Flanagan, 2010). Therefore, this kind of a platform creates room for the procurement leaders to determine the best fit of suppliers. Importantly, the aspect of technology can optimize and also reduce the stress that is usually associated with the payment process through storage of the payment information. Moreover, the payment technologies enable business enterprises to compare the prices as well as the charges. Issues and challenges of buyer-supplier relationships Shipments and Delivery: The shipment, as well as the delivery of commodities, can bring friction on the buyer-supplier relationship. For instance, the buyers can make a complaint that the suppliers are delaying very much in the shipment of commodities and also that they are not always sincere concerning the delivery time of the products (Ahola, et al., 2008). On the other hand, the suppliers can make complains that, the buyers are not giving them an earlier notice about their purchase orders. However, the aspect of technology can, therefore, enhance the effectiveness of the supply chain, whereby the two parties can know the exact place where the product is. Also, when the information pertaining purchase orders is shared, then the planning process about the delivery of products can be made easier. Quality and accuracy: Both the aspect of quality of product and the shipment accuracy during sometimes buyers usually complain about them. Therefore, to ensure delivery of the right quality of a product, close examination of the commodity during packaging is required (Zheng, et al., 2007). Performance: Similarly to the proactive actions in business, the trends of performance should be monitored so as to ensure that there is good decision making in the business operations. However, the performance of the buyer-supplier relationship is not mostly monitored. Power dominance and trust in buyer-supplier relationships In the field of economics and especially in the industrial organization, the term market power is usually defined as the ability of an enterprise to profitably increase the market prices for both services and products over the marginal cost. Moreover, in the market places which are perfectively competitive, the participants of the market who are the buyers and the sellers have got no market power. However, a business enterprise which is granted market power can be at a position of increasing their product prices without even losing their customers. The participants in the market who are usually granted market power are most of the times known as the price makers whereas those market participants who do not have market power are referred to as the price takers (Gelderman and Semeijn, 2006). Also, a significant market power takes place in a situation whereby the market prices rise beyond the marginal cost, thus making firms which are price makers to enjoy the economic profits. Moreover, a business enterprise which has got the market power is in most cases able to affect the prevailing prices for goods and services in the marketplace (Caniels and Gelderman, 2005). However, in sometimes the price makers usually face a demand curve which is downward-sloping, such that increase in price results in low demand of quantity. Conclusions Buying and supplying are always fundamentals in the field of economics, and they usually play a significant role in the supply curve and also in the demand curve. The buyer-supplier relationship is always of great importance in any business transaction since the relation fosters smooth running of the business activities. However, the relationship that exists between the buyer and the seller is usually maintained constant by the two parties. References Agndal, H. and Nilsson, U., 2010. Different open book accounting practices for different purchasing strategies. Management Accounting Research, 21(3), pp.147-166. Ahola, T., Laitinen, E., Kujala, J. and Wikström, K., 2008. Purchasing strategies and value creation in industrial turnkey projects. International Journal of Project Management, 26(1), pp.87-94. Caniels, M.C. and Gelderman, C.J., 2005. Purchasing strategies in the Kraljic matrix—A power and dependence perspective. Journal of Purchasing and Supply Management, 11(2), pp.141-155. Gelderman, C.J. and Semeijn, J., 2006. Managing the global supply base through purchasing portfolio management. Journal of Purchasing and Supply Management, 12(4), pp.209-217. Schiele, H., 2007. Supply-management maturity, cost savings and purchasing absorptive capacity: Testing the procurement–performance link. Journal of purchasing and supply management, 13(4), pp.274-293. Uyarra, E. and Flanagan, K., 2010. Understanding the innovation impacts of public procurement. European Planning Studies, 18(1), pp.123-143. Zheng, J., Knight, L., Harland, C., Humby, S. and James, K., 2007. An analysis of research into the future of purchasing and supply management. Journal of Purchasing and Supply Management, 13(1), pp.69-83. Read More