Role of Purchasing
In the Navy, purchasing and procurement branch is their own entity. For example, in order to properly plan the budget for the next fiscal year, an annual procurement budget must be established. In order to provide an accurate request, the procurement branch must submit an itemized listing of the following year’s missions. Budget allowance are allocated based on the mission and approved materials to properly support the mission. This budget allocation for purchasing also include the costs to purchase products from approved vendors.
Further research show that procurement play an important role in the global supply chain strategy. It is important to know where materials can be purchased at a lower cost. Along with purchasing materials for production, it is vital for ensuring quality materials are being used in production. The goal is “getting the lowest possible price”, (CSCMP, Tate. W. 2014), but buying the lowest priced material is not always the best thing for production. However, it will cut down the cost of production and will increase profit. There are some things that must be considered in purchasing materials for production such as reliability, quality, value for your money, security and long-term partnership. In order to keep quality materials from certain vendors, a partnership must be established. Suppliers need to know that their materials provide a quality product, therefore, the only way to achieve the proper production, materials must be procured from certain vendors.
Supply chain management can either grow the business while keeping the cost of production low, or highly impact production in a negative way and increase the cost of production. Price is important in choosing the right supplier, but making sure that the right supplier can also accommodate the amount of materials for purchase at any given time is also important. Some suppliers may not be able to fill the required material in a short notice, “it is always a good idea to meet a potential supplier face to face and see how their business operates”, (InforEntreprenuers). It is important for supply managers to know where and who to procure materials from, “having the appropriate supply base and relationships with the suppliers is like having thousands of additional people thinking of the next great idea or innovation”, (InforEntreprenuers).
CSCMP, Tate. W. (2014). The Essential Concepts of Purchasing and Supply Management. InformIT. Retrieved on May 22, 2018 from http://www.informit.com/
CSCMP. (2018). The Importance of Supply Chain Management. Retrieved on May 22, 2018 from https://cscmp.org/CSCMP/
Department of the Navy Releases Fiscal Year 2019 Budget. (February 12, 2018). Story Number: NNS180212-46. Retrieved on May 22, 2018, from http://www.navy.mil/
InfoEntrepreneurs. Supplier selection process. Retrieved on May 22, 2018 from http://www.
Wayne, J. (2018). What is the Difference in Supply Chain Vs. Procurement Vs. Sourcing? AZCentral. Retrieved on May 22, 2018 from https://yourbusiness.
Today, organizations are faced with increasing competition and financial constraints that require judicious and strategic purchasing. More than ever, there is a use of outsourcing of products and services that purchasing is also a dance of collaborative, strong relationships with suppliers. Strategic purchasing is more than just obtaining the lowest cost option, but rather ensuring the purchasing exchange follows optimal purchasing agreements. This is accomplished by organizations creating harmoniously conditions for both the purchasing department and the supplier to have a developed relationship. A recent Forbes article discusses the importance of having a “win/win” mentality when it comes to suppliers over the “win at all cost” mentality.This focus was especially noted to be beneficial in the automobile industry, which they hypothesized, could make hundreds of millions of dollars more if they strengthened their supplier relationships.The article discussed 3 important characteristics of supplier relationships.
1) There is a causal relationship between supplier relationships and profit.
2) There can be an additional economic value, beyond contractual obligation, with suppliers. For instance, team mentality results in sharing of information and products (i.e. new technology) beyond contractual obligations.
3) The economic value mentioned in number 2 can be more beneficial or profitable than the benefit from supplier price reductions.
Kasanoff, B. (2014, August 6). New study reveals costs of bad supplier relationships. Forbes. Retriev
North Carolina University. (2005, October 20). Strategic purchasing: Strategic purchasing and supply management practices. Retrieved from https://scm.ncsu.edu/scm-
Distribution is just as important as management, production and pricing of products. Before the distribution process, there are some key components that must be considered. The distribution process provides “an inlay between the producer of a product and the seller of the product”, (Exforsys, 2007). In order to properly move your product, it must be sent to a distributer. The distributer then moves the product to merchants and retailers. In the end, the retailers deliver the products to customers. Product distribution is as important as production. Without meeting the required amount for retail, there would not be enough product to distribute.
Marketing works alongside the distribution process. In order to create interest on your product, there has to be a target market, otherwise, it would be costly to produce unsold materials. It is also important to factor in the distribution process. Majority of manufacturers are “unable to sell directly to customer, as it would be way too costly for them”, (Exforsys, 2007). In today’s time, distribution management also functions as marketing. These fundamentals also include placement and promotion. The more products are promoted, there is a chance to target a better market. Placement talks about the processes of product availability, “selling your product while assuring sufficient stocks in channels while managing promotions in those channels and their varying requirements”, (Investopedia, 2018).
Promotion is effective when products are sold to the right audience, at the right time, and at the right price maximizing profit.
Exforsys, 2007. Supply Chain Management: Distribution. Retrieved on May 22, 2018 from http://www.exforsys.com/
Investopedia, 2018. Distribution Management. Retrieved on May 22, 2018 from https://www.investopedia.
Supply Chain Solutions, 2018. Distribution Management. Retrieved on May 22, 2018 from https://scsolutionsinc.
Distribution is the connection between the finished goods or services and the customer, whether it comes directly from the manufacturer or a store or market. Distribution failures can result in adverse effects such as destabilization of prices due to short supply and unmet consumer demand. Distribution, whether handled internally or externally to the manufacturing component, must keep up with customer behavior. Recent trends show that consumers are ordering in smaller volumes, but in more frequent sequences. Every distributor wants to offer exceptional customer service but in order to be competitively relevant, distribution chains must offer a balanced range of products meeting customer needs according to the 4 R’s – the right price, the right quality, right package, at the right wait time.
McKenna, M. (2008, September 1). Distributors play a critical role in the supply chain. Retrieved from https://www.pcimag.com/
Wollard, D. (2015, February 17). The importance of warehousing and distribution in supply chain management.Retrieved from https://www.dmg-freight.