Procurement of Goods and Services Strategies

procurance of Goods and Services StrategiesIntroductionProcurement is the acquisition of solids, builds and serve. The border covers a whole cycle from the identification of enquires with the tote up of the harvest-time and to the give the axe of the service contact and even the end of the pulmonary tuberculosisful life of the asset procured.This chapter explains the background of this research work, the problem sermon and the over go out of the structure embroidered in this speech.BackgroundThe speed of technological onward motion is so much straight off that no demote of the global dry land can afford to be left wing coffin nail in particular directly that the world has constrain a global village.Businesses all over the world argon hence verbalisming for strategies that leave alone position them and make them spend a penny a competitive favor whatever it takes. Such competitive advantage could be gotten from doing argumentation at a low personify ach ieving plug of savings or having an sound work corpse. That is what a good procurance outstrip practice proposal can deliver to whatever composition.many Organizations atomic number 18 now seen trying to focus on making their procural strategies as efficient and live effective as possible to tick off they gravel a competitive edge in their industries. check to root one prudence operate, LLC, (2008) the advent of Best exercise Procurement Processes has dead seen a lot of companies realizing substantial apostrophize lessenings finishedHaving a kosher understanding of the represent drivers used in de full termining total cost of witnessership.Elimination of all non-value playing puzzle out thereby Increasing efficiency across the entire provision fibril.Aggregation of demand, deliver the goodsr rationalization, strategical sourcing, and enhanced provider relationships forceing in meliorated cycle time.Electronically enabling the cut kitchen stove through the use of paperless e-Procurement tools and e-commerce portals.Reduction of carrying costs, w atomic number 18housing, hold outment, obsolescence and shrinkage through the alternative blood line ownership agreements retained consignment and vendor managed inventory. Problem discussion dissimilar strategies argon lots used in achieving the outstrip procural handlees in different industries. The need for developing countries especially Nigeria industries non to be left behind in utilizing these opportunity has necessitated this research work.For the get of this study, I exiting consider the extent to which procurement practices in Nigeria has pick out the ternary place strategies discussed in the work namely the cant deliver, the e-procurement and the special K come forth strategies as it relates to purlieual friendly policies adopted by heterogeneous organisations in Nigeria.Kirk Zylstra (2007 p 10), argued that the main objective of all add together arrange executives today is he to ensure that future business forecasts, ever ever-changing guest demand, and another(prenominal) variations across the add set up do not upset their guardedly laid cost-reduction plans. Its so far been discovered that the main obstacle to this vision is the cleverness to model budgets, accurately tie real costs to operations, and develop processes that get a abundant these plans daily. This is where the application program of operate principles to supply train operations can function.According to Len Cooper, Senior crime president of supply chain Halliburton, confirms that Halliburton is focusing generally on angle of inclination strategies with suppliers, and less so on Six Sigma because, as Cooper explains, Lean focuses on speed and throughput, which is easier for suppliers to apply and is in concomitant a goal for our suppliers.He went further to states that we would alternatively deplete our best suppliers grow with us, especial ly in these times, rather than go out and regain more suppliers in order to gain retrieve to additional capacity. We cute to component part our Creativity Over Capital ideas and experiences and returns with them.In one of the penning do by Andrea Ovans of Harvard Business report on E- procurement at Schlumberger Oilfield Services, (the worlds largest oil service follow on is using the Web to turn over the expressive style it buys equipment and supplies) on What they accomplished by moving to e-procurement?. The brain behind the system, Paris-establish Alain-Michel Diamant Berger explains that We replaced a number of different frames nearlywhat that were paper based, some that were modify with a star desktop system. Thats allowed us to streamline and speed up our entire purchase operation. He further confirmed that get supplies and equipment has ofttimes been very slow and complicated in the past, with lots and lots of cover and approval processes involved for ward executing a buy. However employees now act as their own get agents, placing orders directly through their PCs and receiving the goods they need much more quickly.The advantage here is that the e procurement single system adopted by Schlumberger which help to consolidate purchases and gain great volume discounts from our vendors.According to Derek Parker The ultimate aim is to achieve specific, measur up to(p) aftermaths that meliorate battle across the supply chain by applying sustainable nurture practices. Suppliers are often made to understand that sustainable practices mend the long term financial bottom line and in many cases the rejuvenation of supply chain has a positive interaction with a move towards lean manufacturing, and sustainable processes which are shipway of eliminating waste.From the aforementioned strategies adopted by Schlumberger, Halliburton and other organisations described as seen above, it is obvious that there is need to adopt a more aggressive s trategy as that adopted by these organisations in order to remain competitive and relevant to their respective perseverance.The purpose of this research because is to evaluate the extent to which these all important strategies have been adopted by organisation in Nigeria, noting the synthesis and the advert duty tour inhibiting these strategies.It is excessively critical to note that term sustainable Procurement activities are common in many developed countries, the cognisance and implementation is cool it relatively low in most developing countries. While I recognise the important role that procurement policies can play to shop at of sustainable development, this research is aims to contri scarcelye to the sufferance of sustainable procurement strategy in developing countries especially Nigeria.Overview of the dissertation structureThe whole dissertation is divided into six major chapters. This chapter which serves as the introduction gives the background and overview o f the splendor of the topic, the purpose of the research and finally the research questions then introduced.The second chapter provides the subscriber the opportunity to have an insight into the books review on some the topics related to the research. This leads us to the third chapter giving the details of the methodology adopted in the carrying out the research. It explains the purpose, the approach and the strategy adopted for the research. It withal shows the epitome of how I arrived at the method I finally adopted for the research.Chapter quaternion gives the highlight of the background of the companies used for this case study and all selective information gathered in the course of the research.These data were analysed in chapter five while a final conclusion and implications was drawn in chapter six based on the findings of the data analysis.2.0 Literature ReviewWith the global economic thawing down across the nations, organisations are expected to seek a way out of thi s challenge, among others, looking for a way to reduce turn near time and cost through their procurement strategies.Competition so in todays global market is not only among different companies but in like manner mingled with supply chains attention systems. The evolvement in technological advancement and organizational forward motions are important for effective supply chain wariness however, the main cause of SCM improvements according to juril et al, (2006) is not the implementation of an information system itself, but rather a convince and an integration of business processes.Over the years some changes have interpreted place in the development of innovative procurement strategies especially in sectors like manufacturing, retail, oil and Gas, construction and even service oriented industry.Jim Scotti, (2007) believes Procurement is now evolving into a far more strategic discipline, driven in the main by a greater awareness of the financial implications of executing the use well. in that respect are different procurement strategies adopted by organisations in the market place but using the best procurement practices would warrantee the desired success for any organisation.Based on different literatures compose by authors the subject of procurement, some of the commonly adopted procurement best practices allow inCreating an efficient system that would save time and money.Creating a pre-qualified and panoptic supplier base which enables all suppliers to be uniformly and objectively evaluated.Creating a comprehensive bid specification with full details before an invitation for bids is displace to the suppliers in the supplier pool.Creating mutual acceptance of the process whereby all(prenominal) supplier in the pool knows that it can bid low on any supply.Ensuring full transparency of bids through sending bid results to all suppliers that participated in the bid.Monitoring every step of the workflow process to ensure resolve communications, at tention to every detail and a deliverable end harvesting.Ensuring that work is performed per specifications and on time.Completing the project with accurate invoicing.With the advent of Best Practice Procurement processes, a lot of companies have realized substantial cost reductions through understanding the cost drivers that determine the total cost of the supply chain and completely eliminating all non-value adding process in their supply chain lineFor the purpose of this report three strategies for achieving Procurement best practices will be considered and these include the bankers acceptance of the lean supply, e-procurement and toleration of the spurt supply strategies.While a lot of research has been done on the lean supply and e-procurement and their benefits if properly implemented, not much seems to be mentioned on the spirt supply principles and need to implement these strategies to achieve procurement best practices while considering the purlieual friendly green su pply chain management scheme in various organisations and how companies can benefit from this inevitable procurement procedure.Lean Supply StrategyLean as described by Nigel (2006) is the process of achieving the flow of products and services to meet customers demand in the sound quantity, right time, right place at the lowest wrong with no waste.The key principle focuses on maximizing customer value by producing goods and services with higher smell, fewer defects eliminating various forms of waste or any non-value adding activities through all possible continuous improvement processes.Womark (1996) described the five principles of lean, which includes refer the value demanded by customerIdentify the steps involved in the whole value streamGenerate a flow in the value streamProduce only what is pulled by customer extend for perfection through continuous improvementThe adoption of these key principles in procurement activities in order to ensure that the organisation maximises the value of every good or service purchased explains the reason for lean supply or procurement as it applies to this research.R. Stratton (2003) believes Lean supply enables flow and the excreta of uneconomic processes within the supply chain. Its focuses on continuous improvement strategies, through the elimination all non-value creating activities, cut down waste and effectively the cost of procurement.According to Lubben, (1998), lean supply aims at improving efficiency, character and delivery slaying of suppliers. It in any case focuses on removing all non value adding activities so as to reduce the cost of supply of material.For any procurement strategy to succeed the acquire bus must be able to connect the strategy with the financial implication or performance. W.D. Presutti Jr. (2003)Benefit of adopting lean procurementOrganizations within a lean supply chain are able to leverage their own lean journey more easily, delivering recrudesce customer value by responding mor e efficiently, quickly, and predictably to customer needs. That, in turn, facilitates the operation of the lean supply chain, creating a virtuous cycle that ultimately translates to superior financial performance for these organizations.In the article Halliburton pushes Lean Six Sigma to its supply base (2009), the use of lean six sigma between 2004 and 2008, tripled their output from its manufacturing plants without any meaningful development in the total capital footprint for those plants. The companys manufacturing cycle times were reduced, change magnitude their asset utilization out of all their equipment.According to Len Cooper, who is the Senior Vice president of supply chain management in Halliburton states that the lean process alleviated the need for more capital coronation to support the token of output growing they experienced with the adoption of lean six sigma.Generally, the adoption of lean supply gives a lot of other benefits which includes achieving a minimum take aim of defects in supply, frequent deliveries.( Handfield, 1993)He further argued that because there are smaller number of suppliers, this could lead to developing a long term relationship between the buy and supplier which eventually leads reduced products price that would benefit the purchasing organisation.Strategies to adopt a lean supply systemIn becoming management of the procurement process adds cost and adversely violations customer service. In the current competitive environs such inefficiencies can no longer be tolerate. It is therefore necessary for organisations to focus more on their supply chain management system and adapt the concept of strategic lean supply chain management to their internal systems so as to eliminate all non value adding process.Sidney Hill Jr (2008) argued that the lean supply chain system cannot just happen. They emerge from strong working relationships between supply chain partners i.e the purchasing organisations, who are thoroughly com mitted to continuous improvement processes. Organisations especially the multinational expected to help their train their suppliers to fit into the require ideal for supply. This could be organising training for their staff and help setting up some infrastructure that would encourage the lean practice.E-procurement StrategyE-procurement can be seen as a very valuable tool for organisations experiencing difficulties in their supply chain. If properly implemented, e-procurement can be used to connect a interrelate between companies and their business processes with suppliers while managing all interactions between them. It encourages management of correspondence, bids, questions and answers, prior pricing, and multiple emails sent to multiple participants.Defined in different ways by many scholars. Presutti, ( 2002) describes electronic-procurement as the productive use of the internet to improve the effectiveness and efficiency of the supply end of the supply chain.Davila et al. (2002) describes it as any engine room designed to facilitate the acquisition of goods over the internet.Most literatures write on e- procurement addressed various issues in their definition. While some such as Brunnelli, (1999), Carabello, 2001 and others limits the definition to acquisition of goods over the internet, Scott and Westbrook (1998) New and Payne, (1995) believes that it should have a broad definition which includes the entire value chain, including materials and supply chain management from the extraction of raw materials to its end of useful life.In most recent times, there has been a change of focus from the strategic view of market to an internal re engineering discovered in supply chain management.This is obvious because e-procurement provides a set of built-in monitoring tools to help control costs, maximum supplier performance and deliver value to the purchasing organisation if adequately maximized.Benefit of e- procurement strategyThe use of e-Procurement sys tem help managers make decisions through access to catalogues of many suppliers keeping surmount of all government agency of bids while leveraging on knowledge to draw better pricing. It provides organised, standardized and footmark able information with the elimination of the use of paper work.Kalakota and Robinson, (2000) explains that the main objective of any companys e-procurement strategy is to better manage the firms operational costs.Basically, the strategy of e-procurement could be seen under two broad umbrella the effectiveness and the efficiency of use- Davila et al, (2002) and Presutti (2002). Dai and Kauffman, (2000) however argues the benefit in e-procurement in terms of the high returns on investment (ROI) achieved through reduced operating and search cost.A view of benefit of e-procurement adopted by Davila et al, (2002) and Presutti (2002) explains the efficiency and effectiveness of using e-procurement. This includes a better managed inventory level, cost effec tiveness and savings achieved, improved efficiency of the procurement process, reduced maverick spending and better flow of information between vendees and supplier.According to Davila et al (2002), the main reason for the investment on the technology platform used for e-procurement is to achieve cost saving. He confirms that the adoption of e-procurement technologies describe a savings of 42 per cent in purchasing action costs.A summary of the various benefits associated with e-procurement as seen in many of the literatures includes but not limited toBetter value for money.Its helps to reduce inventory level and therefore serves as a cost saving measure for the organisation. The managers often know the product, the bid prices and the supplier to contact whenever the product is needed.Completely reduces transaction cost such as requisition, ordering administration and storage cost.E-procurement radical helps firms to interact with a wider supplier base and gives firms the oppor tunity to reach the extraterrestrial but qualified source of suppliers. It also provides the spirit of fair play.There is reduced duplication leading to a more efficient purchasing.It increases the magnate to track strategic information and data on procurement including purchasing patterns.E-Procurement systems also allow multiple access levels and permissions help managers organize administrative users by roles, groups, or tasks. Procurement managers do not need to be as highly trained or paid because such systems are standardized and easy to learn.The system also links together the companys procurement unit/department around the world and allows them share information about their best suppliersAccording to (Presutti, 2002) , the e-procurement system enables firms to more efficiently and accurately capture and aggregate budget spending in various purchasing product area, allowing the firms to bring what may be significant buying power leverage to market.The online real time of e- procurement technology no inquiry provides buyers and sellers with the opportunity to share information in building specification of products which add value to resulting product and build strong relation. The larger the base of participating suppliers, considering the benefits to both sides, the greater will be the business value of e-procurement solution. (Presutti, 2002)In conclusion, every organisations goal is to achieve a good return on investment. According to OSD (2001), e-procurement enables the reduction in cost of goods procured and procurement processing time and cost have direct impact on return on investment (ROI).E-procurement guess managementAs seen from the legion(predicate) literatures on e-procurement, the research on the adoption of e-procurement has been made tremendous impact in many organisation, unfortunately not much as done on the try management of e- procurement, especially within the industries considered in Nigeria.Douglas Hubbard ( 2009) describes pretend management as the identification, assessment, and prioritization of risk followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. Risk management is the finding out the possibility of a wrong happening, how it can be avoided, fixed or reduced to the barest minimum whenever it occursDavila et al (2002), agrees that new e-procurement technologies has become an vital part of supply chain management activities and that the rate of adoption will accelerate as aggressive users share their experiences and perceptions of low risk.He went further to argue that the actual benefits and risks of e-procurement technologies and mangers evolving perceptions about the benefits and risks will determine the speed at which the technology moves from its developmental infancy to the adoption and the maturity stages.E-procurement is no doubt growing in most industry and this is out-of-pocket to the com petitiveness in most industry and the ever changing nature of the demands of the customers.Some of the risk identified in different literature includesExternal business risk This happen when theres no effective communication between the organisations e procurement system and the customers and suppliers. External parties such as suppliers need to be able to develop internal systems that facilitate the communication through electronic means (an issue that demands technology investments as well as incentives) connected to the e- procurement system.To achieve a successful e-procurement technology, suppliers must have an electronic access via the Internet and should provide sufficient catalogue choices to satisfy the requirements of their customers-purchasers.Although most suppliers, especially in low margin industries, may be undecided or even unable to meet such demands without guarantees of future revenue streams. And also since some of the business models associated with e-procuremen t technologies (e.g. auctions, consortia, and exchanges) may be thinking of using suppliers with whom the buyer has not previously transacted business, companies need to develop mechanisms that provide the buyer with assurances that the supplier meets or exceeds recognizable and industry enforced standards relating to supplier quality, service, and delivery capabilities. study risk This type of risk occurs when theres a gaolbreak of data that can damage an organisations reputation.Reputation risk occurs for example, when there is duplication in the information on the system which jeopardizes the reliability of the informationImplementing e-procurement strategy requires not only having a successful purchasing process in place but also the ability to commix all existent infrastructures. Okah et al (2007)Technology risk As the growth of e-procurement advances, most organisation fears the lack of a widely accepted standard and a clear understanding of which e-procurement technologies best suit the needs of each company. This lack of generally acceptable standard serves as a bridle to the use of commonly fluxd software across all e-procurement activities.This project that an acceptable and open standard would be required to fully integrate all facilitates among the various organization using the e-procurement technologies. Without widely accepted standards for coding, technical, and process specifications, the adoption of e-procurement technology will be slow and will drop to the desired benefits.Process risk Frew (2005, p 397) explains that process risk are risk associated with the security and control of the e-procurement process itself. There is need to provide evidence to non users that this technology will not breach control or security or any privacy issue. Organizations must be confident, for example, that unaccredited actions will not disrupt production or other supply chain activities when committing to e-procurement technologiesInternal Business r isk According to Davila, et al, (2002) certain risk that are linked with the adoption of e-procurement need to be addressed before these technologies are widely accepted. Although, e-procurement in itself reduces the risk of human factor, maybe due to loss of certain document or misappropriation of data, but there is still a human interface which can also result to a form of risk or misapprehension. Okah (2008) describes it as human error risks.In conclusions risk are sometimes unavoidable but adequate measure should be in place to mitigate any kind of such risk whenever it arises and that is the purpose of risk management as it applies to procurement.Davila et al, (2002) also described some risk associated with the integration of technologies with existing information systems, with the business models that these technologies impose on supplier-customer relations and with the security and control mechanisms required to checker their appropriate use.Avery, (2002) however believes that e-procurement are essentially global, many of its limitations come from the geographic, ethnic and organizational limitation of the underlying businesses in which they are adopted.Green Sustainable Procurement StrategyThere has been increased awareness in our environment as its affects global warming, production of non recyclable packages and some toxic substances.A lot of Organisations have been seen applying the green principle to their organisation activities including the supply chain activities.A Green Sustainable Supply Chain can be defined as the process of using environmentally friendly inputs and transforming these inputs through change agents whose by-products can improve or be recycled within the existing environment. This process develops outputs that can be reclaimed and re-used at the end of their life-cycle thus, creating a sustainable supply chain.- Patrick P (2007)According to Seuring, (2004), Green supply chain management, could be referred to as environment al supply chain management or sustainable supply chain management. This includes green purchasing, green manufacturing/materials management, green dispersal/marketing and reverse logistics (Sarkis, 2005)The environmental sustainability according to Madu, et al., (2002) has gradually become part of the overall corporation culture and, in turn, has helped to restructure the strategies of corporationsWith this increase awareness in environmental sustainability, companies are beginning to streamline their operations and look for means of reducing their excess inventory, determine the optimal right-shoring plan, and reduce burn expenses and logistics costs while reducing overall carbon emissions.Purchasers are therefore faced with enormous task of focusing on the design and packages of the products supplied by their suppliersThe act of purchasing activities that include the reduction, reuse and recycling of materials is therefore overriding to organisation competitive existence in the marketplace- Carter, et al. (1998)Procurement officers are now trained to go for product with less non recyclable bye products or packages. Study has shown that the cost of most goods are in the packaging, thus if the packaging can be reduced, perhaps made to be recycled, the cost of the product will eventually be low. According to Faith-Ell, et al., (2006) the environmental performance of products and services can improve if purchaser express environmental elections through the so called green procurementWalton, et al., (1998) Zhu and Cote, (2004) confirms that organisations that adopt the green supply chain management system may generate environmental and business performances. Following various legislation by different Government, consumers are beginning to have preference for product or services produced by environmental friendly organisations.Purba, (2002) also confirm that the practise of a green supply chain, can result in an improved environmental performance through the reduction in waste and emissions as well as better environmental consignment while improving competitiveness (better product quality, increase in efficiency, enhancing productivity and cutting cost), resulting to a better economic performance (new marketing opportunities and increasing product price, profit margin, market share and sale volume). This was supported by Derek Parker who confirms that the ultimate aim of green supply is to achieve specific,measurable results that improve competitiveness across the supply chain by applying sustainable development practices.It is therefore clear based on all the stipulations from the various authors like Walton, et al. (1998), Zhu and Cote (2004) and Purba (2002), as well as other procurement experts, that organizational performance is considered to include environmental and financial performance.The pressure is therefore on all organisations to improve their environmental performances which is a result of the worlds globalization rathe r than localization (Sarkis and Tamarkin, 2005).Benefits of green supplyThe benefits of Green supply goes beyond the reduction in waste and emission to the environment but it also benefits the organisation in terms of cost savings.Stevels, (2002) categorised the benefits of green supply into three folds the financial implication, the company reputation and the societal perception.The financial implicationThe green supply chain management practice helps in lowering cost prices for supplier and in turn results to a lower cost for their customers overthrow cost of ownership for customer.Better competitive advantageResult to more customersIn terms of reputationLess rejects for supplierBetter obligingness for societal values.Confirms technological and environment awarenessin terms of societal perceptionGreen supply chain management helps motivation of stakeholder for environmentbetter image for supplier and producerfeel good and quality of life for customerMake industry on the right tra ck for society.Green supply chain management helps in lowering the environmental load for environmentDuber-Smith, (2005), also highlighted ten reasons why organisations should adopt the green supply strategy target marketing, sustainability of resources, lowered costs/increased efficiency, product differentiation and competitive advantage, competitive and supply chain pressures, adapting to regulation and reducing risk, brand reputation, return on investment, employee morale, and the ethical imperative.Supplier Evaluation/ plectrumThe responsibilities of buyers or purchasing Managers has changes significantly especially in this competitive environment from purchasing products and service to meet customers needs. It has become necessary for purchasers to provide quality products, delivered just in time by working with adequate numbers racket of suppliers.Suppliers therefore play a key p