The Process of Improving the Competitiveness of Organizations - Coursework Example

Strategic procurement and SCM University Student Id Course Date Abstract This paper is about the strategic procurement operations that are adopted by many organizations in the process of achieving competitiveness. It is aimed at communicating the benefits of procurement in the success of an organization considering the competitive business environments. FedEx Corporation which is an international freight company is used in the process of examining the procurement function in organizations. The current information has been used in analysing the role played by the procurement function in organizations. The procurement function has been explored in three areas that include procurement strategy, strategic sourcing and e-procurement. Through the evaluation of the three areas the role of the procurement in organizations especially in the business environment that competitive is demonstrated using the FedEx Company to represent the organizations in the freight forwarding logistics. Besides, the way organizations have been making use of the procurement function to achieve competitive advantages has been explored. The purchasing strategies that help in achieving competitiveness in the market are explored and the sourcing strategies that can be employed in procurement discussed. E-procurement is discussed to assess the role that is being played by technology in the process of making an organization competitive through procurement. Table of Contents Abstract 2 Introduction 3 Procurement Strategy 4 Core Purchasing Strategies 5 Strategic Sourcing and Outsourcing 7 Sourcing strategies 8 E-procurement 9 Ways of improving procurement 10 Conclusion 11 Reference list 13 Introduction Strategic procurement operations are important in the process of achieving competitive advantages in the market. It is through procurement that an organization can be in a position to reduce waste in procurement. The value chain adopted by the organization is what determines the efficiency of the procurement strategies employed. For instance, FedEx has managed to achieving efficiency in operations through the procurement strategies. It utilizes technology in the process of reducing the costs associated with procuring hence helping the company in minimizing the costs of operating. FedEx has achieved cost advantages as most of its procurement strategies embraces technology hence reducing the costs of production (Edler and Georghiou, 2007). Procurement optimization has been linked with numerous benefits to an organization as it is crucial in the process of achieving competitive advantages. Procurement Strategy Procurement is the act of finding, obtaining and purchasing goods and services from a source which is external through either tendering or even via a bidding process. The procurement process in most cases is used so as to make sure that buyers buy both goods and services at the appropriate prices. In addition, the procurement process ensures that the various aspects of goods and services which include; quality, location, quantity and time are considered (Gordon, 2009). FedEx makes use of procurement to position the company in a better place, the procurement process is mostly used to ensure that the company is competitive. FedEx also minimizes some of the business risks which include collusion and the fraud that affect the company performance negatively. However, in every purchasing decision made it always involves various factors such as the price fluctuations, marginal benefit and also the delivery and handling. In general, the procurement process usually involves buying decisions which are bounded to the scarcity conditions. For instance, in case a good data is available, then definitely it would be necessary for FedEx to use the methods of economic analysis which include the cost-utility analysis and the cost-benefit analysis (Degraeve, Roodhooft and van, 2005). Furthermore, a significant distinction should actually be made in order to distinguish between the analyses which have risks and those which do not have risks. Therefore, in a situation in which a risk is involved in terms of either costs or benefits, a concept for the best value is required to be used. Moreover, the procurement activities are usually divided into two categories which are the direct spend and the indirect spend. The direct spend is described as the procurement of the production process that entails all the items which are part of the finished products which include the raw materials. In addition, the direct procurement is mostly focused on the management of the supply chain which directly has impact on the production process for the manufacturing firms. In contrary, the procurement of the indirect activities is usually much concerned with the operating resources which a firm purchases in order to facilitate its operations (Matthews, 2005). The indirect procurement involves a broad variety of both goods and services which include the standardized items such as the office supplies and lubricants for machines which are costly, while the services include; the outsourcing services and the consulting services which are somehow complicated. Core Purchasing Strategies The reason as to why companies implement their purchasing strategies is to make purchasing decisions which are cost effective. For instance, FedEx makes purchases from the efficient vendors who are capable of delivering goods of high quality at the required time and also at agreeable terms. Moreover, the purchasing strategies may involve various choices such as the making of procurement savings through a centralized purchasing, thus concentrating all the procurement activities in one principal location. However, other firms may also decide to use only one source of procurement strategy which involves acquiring good services from a single vendor. Moreover, these purchasing strategies are more predominant when sourcing for the information technology or during indirect purchasing which include office supplies and cleaning. However, despite of the company size, there are usually a number of purchasing strategies which are mostly implemented by the majority of the companies (Matthews, 2005). The purchasing strategies that are used to achieve competitive advantages can include the following: Supplier optimization: A company selects an optimum mix for the vendors who are capable of supplying goods and services at the best prices and agreeable terms. Therefore, it means that, those suppliers who are not able to provide goods and services of high quality and at the required terms and prices are definitely discarded. Importantly, this is the most common purchasing strategy which is in most cases used by many companies including FedEx. Total quality methods: This strategy usually needs the vendors to offer an ever rising quality service which has no error (Ryals and Rogers, 2006). Therefore, the supplier makes sure that there are best practices for purchasing by employing a number of tools which include the six-sigma. FedEx ensures that high quality services are offered to the customers to achieve competitiveness. Risk management: Since majority of the companies usually acquire their supplies for goods from other countries which include China and India among the others, they are therefore much concerned to the risk management for their supply chain (Puschmann and Alt, 2005). However, even though these countries can actually supply goods at best prices, the supplies can be negatively affected by a natural disaster or even human disaster. Global sourcing: The multinational companies which are extremely large usually view the world as a single large market which has source from a large number of vendors, despite of their country of origin (Puschmann and Alt, 2005). For instance, FedEx has ensured that there is good network all over the world concerning the company. Vendor development: Some of the companies usually hold a belief that in most cases they work hand-in-hand with their vendors. Therefore, these companies spend some of their time in creating processes which can help their vendors, in case when they mostly rely on a single supplier for their goods (Azambuja, Ponticelli and O’Brien, 2014). Moreover, if a supplier is not able to perform at the set standards, then the purchaser may establish processes for improving their procurement cycle. Green purchasing: This purchasing strategy is mostly used by governments and the local governments. The green purchasing strategy usually champions the necessity of recycling and also purchasing the products which have negative effects on the environment (Tomino, Park and Hong, 2012). Therefore, every company always selects a purchasing strategy which promotes best practices for procurement such as the maximizing quality, minimizing costs and also ensuring delivery of quality products on the required time. Strategic Sourcing and Outsourcing The strategic sourcing entails the institutional procurement process which continuously develops and also evaluates the purchasing activities for a given company. In the industries which provide services, the strategic sourcing is also known as the strategic partnership which is a service solution which is particularly customized to meet the personal needs of the clients. Moreover, in the field of production strategic sourcing is usually considered as one of the parts of the supply chain management. However, the modern professional for the supply chain management have laid a lot of emphasis on distinguishing between procurement and the strategic sourcing (Fernández and Kekale, 2007). The modern professional have argued that, the procurement operations provide support to the daily transactions which include the issuance of the purchase orders to the suppliers while strategic sourcing involves strategic planning, contract negotiation and also the supplier development among the others. Therefore, the term strategic sourcing can get defined as the procedure of improving supply channels at a total cost which is low, not only purchasing goods and services at the lowest prices. Sourcing strategies Comprehensive BPO: The comprehensive BPO strategy for sourcing is a complex, long-term and also a demanding relationship which a company can have with his or her supplier. Comprehensive outsourcing usually means that the company is engaging with a partner who is training for a period of two years in order to strategically manage a set of processes in the organization (Hong and Kwon, 2012). However, comprehensive does not actually mean that a supplier carries out everything which is related with training for the company. Selective BPO: Selective BPO strategy is also complex but not more than the comprehensive deal since it involves its engagement in less integration for the functional processes. Moreover, in the selective outsourcing, a company usually engages with a training partner who tries to manage double processes under a single functional area for training. Licensing Agreement: The licensing agreement strategy is a kind of out-tasking which is used during the sourcing of a tangible asset which includes the technology or even real estate for the training. However, the licensing agreements for the technology in most cases take the software form of service contracts. In general, the license agreements contracts usually involve purchase orders which have defined terms. Contracting: The contracting strategy is also a kind of engagement for the out-tasking as well as the most common type of outsourcing in the industry of training. In addition, the contracting strategy is mostly used when a supplier is sourced in order to manage a project (Thai, 2005). However, the contracting strategy is also referred as the labor engagement, whereby a contractor is paid to perform a certain task. E-procurement Technology has played an important role in the process of improving the procurement in organizations. For instance, FedEx has ensured that technology is used to achieve efficiency in the procurement process. The electronic procurement which is also referred to as the supplier exchange refers to the purchase and also sale of goods and services via the internet as well as through networking systems which include the electronic data interchange and the enterprise resource planning (Gordon, Rentell and Geere, 2008). Moreover, the value chain of the electronic procurement usually comprises of the indent management, electronic tendering, electronic payment, electronic invoicing and the catalogue management among the others. However, indent management refers to the workflow which is involved in the process of preparing tenders. In addition, the value chain of the electronic procurement is always optional, whereby those individuals who are procuring departments usually define their indenting process. For instance, in the electronic procurement, both administrative approval and the technical sanctions are always acquired in an electronic format, whereas in the goods procurement, the activity of the indent generation is performed through online. Moreover, in the public sector majority of the organizations make use of the electronic procurement in their contracts in order to accrue benefits which include; increased efficiency, improved transparency and also cost savings in the procurement services. In addition, the electronic procurement has drastically developed in the current years in the public sector. However, the projects of the electronic procurement are in most cases part of the government efforts in its process of serving its citizens better in a digital economy (Cheung, Wang and Lee, 2004). Also, the procurement results into the usage of the instruments of the electronic procurement in the public procurement. Furthermore, the implementations of a system for the electronic procurement usually benefits all the various levels of a given organization, whereby these systems provide improved visibility of spending and control thus assisting finance officers in matching purchases with the corresponding purchase orders. Importantly, the electronic procurement system is also held responsible for the management of tenders via a website, whereby all tenders are able to access this system in any part of the world thus improving its accessibility for the tenders. Ways of improving procurement Evaluating the past-performance to make the necessary improvements: In order to improve on the procurement function, it is quite necessary to put into considerations the performance of the past to understand how you can improve such kind of performance (García and Levine, 2008). In addition, the regulation language of the federal acquisition should be eliminated in order to create a room for the contractors to give a critique concerning their evaluation on the past performance. Rewarding vendors when they suggest cost-saving ideas: Before the issuance of the proposal requests, the potential bidders should be given chances in order for them to suggest which requirements changes are more likely to bring about large cost savings in a little performance (Snider, 2006). Moreover, the vendors should be rewarded because of recommending good ideas for the cost-saving. Reviving share-in-savings for contracting: In a kind of contract where there is share-in-savings, vendors are usually paid in accordance to the savings which are generated through a contract. Therefore, through the share-in-savings the procurement function can be greatly improved. Making use of contests as the best procurement technique: In various situations which are appropriate, contests are in most cases as a result of efforts from the industry also the individual inventors that are disproportionate to the government cost. Therefore, through the usage of the contests as procurement techniques, the procurement function can be improved. Improving the management of contracts: Making successful contract management experience a promotion criterion for program officials. Through managing contracts successfully, the function of the procurement can be greatly developed (Murray, 2007). Conclusion Procurement is important in the process of improving the competitiveness of organizations. Organizations like FedEx can be able to achieve cost advantages in the market through coming up with procurement strategies that are able to help in reducing the cost advantages. For instance, FedEx has ensured that it has low costs of production through ensuring there is efficiency in the procurement strategies formulated. The strategies formulated for procurement in FedEx are aligned with the organizational goals to make sure that the organizations can achieve the set objectives. The procurement function is said to be important in making sure that organizations can compete well in the market through reducing the costs of production. Technology has played important role in the process of achieving efficiency in procurement process. Reference list Azambuja, M.M., Ponticelli, S. and O’Brien, W.J., 2014. Strategic procurement practices for the industrial supply chain. Journal of Construction Engineering and Management, 140(7), p.06014005. Cheung, C.F., Wang, W.M., Lo, V. and Lee, W.B., 2004. An agent‐oriented and knowledge‐based system for strategic e‐procurement. Expert Systems, 21(1), pp.11-21. Degraeve, Z., Roodhooft, F. and van Doveren, B., 2005. 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