UNIT NO. 41
Assignment Number : 1
8 June 2009
Cost reduction pressures have demanded that purchasers form relationships that simultaneously improve delivery, quality, and payment terms all for lower and lower prices. For many firms, extreme competition from the entire world has caused management to focus on the pounds spent and the services provided by the purchasing department more than ever before—forcing ALL major purchasing decisions to become strategic. In fact, the function of purchasing has transformed itself to a new level which many are now calling “Supply Chain Management” in order to reflect the broader scope and increased responsibility for purchasers to help meet the strategic goals of the firm. 1. Source location.
2. Budget control.
3. Order placing service.
4. Sales relationship management.
Due to the need to keep on top of the purchasing activities, it is important to have a method or system in place to collate the information, even small scale businesses need to keep records, as the is a need to present accounts if the turnover is above £55k.
Systems or processes can assist with the handling of the data, the key methods to assist suppliers * Past performance - How they have performed, quality of product, credit terms, quality of service. * Reputation within the industry sector
* Visits and appraisals – Assessment of supplier
* Third party accreditation – ISO 9000, UKAS
* Evaluation and sample products – Technical evaluation of new products.
It is also important to identify what strategies are used to with the procurement product(s), is the product manufactured or bought in, can the product be sourced from one supplier or will it need multiple suppliers. Also it is important to understand what sourcing can be made from the overseas market.
The system could have a vendor rating system, which would identify a clear understanding of the vendors, possibly accepting that some products are more expensive, but could be a better or reliable. Supplier evaluation can also assist, by identifying whether the supplier is trading with competitors, how they ensure that confidentially is maintained, is there support from the supplier. Are they up to date and investing, and how any investment will affect you.
Is the supplier equipped for electronic data interchange, such as Just in Time ordering, can the supplier meet the technological requirements to ensure cost effective ordering. Does the supplier have the correct cultural fit, such as meeting or exceeding the environmental commitment.
The last few decades have changed the way that purchasing decisions are made, this is mainly due to the growing world economy, and the easier methods to contact and purchase off suppliers.
Purchasing is a crucial as well as expensive factor in the manufacturing of end products, ensuring that the budgets are in place for the purchasing of products which allow for shortages of raw material and fluctuations of raw material cost during differing demands. Having the ability to observe costs to make educated decisions to over buy or delay purchasing. Having a understanding of the raw material markets to negotiate attractive prices.
Other financial aspects that need to identified are as follows: * Certifying invoices, ensuring that the correct invoice costs are paid. * Reduce costs by eliminating paperwork, by removing waste activities, such as ordering processes, where automated systems could be used such as just in time. * Effective stocktaking, to identify value and ensuring that there is no waste * Correct insurances are in place to the real value,
The market conditions need to be constantly monitored to ensure that the market prices and raw materials are...