¶ … Purchasing, Procurement and Supply Chain Management. Explain if these processes are the same or different in the civilian and the government sector?
In the capitalist system, the profit motive is when an individual or organization is providing specific products and services to meet the demands of customers. During these situations, they will decide where there are unaddressed needs and focusing on meeting them. They are receiving the added profits they realize from these actions (Bell 2014). To achieve these larger objectives they will allocate resources and personnel where they can be the most efficient. This is when they will utilize purchasing, procurement and supply chain management to give them a strategic advantage. They are different between the civilian and governmental sectors, as one is a for profit entity and the other is designed to meet the needs of the public. This means that there is less of an emphasis on controlling costs and maximizing profits inside the governmental sector.
The Relationship between Purchasing, Procurement and Supply Chain Management
There is a direct relationship between purchasing, procurement and supply chain management. This is because all three will determine how successful an organization will be in achieving its intended objectives. Purchasing is when the organization will buy various materials and other resources to sell the end product to customers. This means negotiating the lowest costs and quickly shipping the item.
For example, Wal Mart is the world's largest retailer. They are focused on bringing the lowest prices to their customers at all times. To achieve these larger objectives, they focused on negotiating with whole sellers to purchase their items at the lowest prices possible. This meant that the company would approach them independently and negotiate to receive special deals from buying large amounts in bulk. Over the course of time, this basic strategy enabled Wal Mart to offer much lower prices than competitors (Messengill, 2013). This gives the company the ability to find the lowest wholesale costs and pass these saving onto consumers.
Procurement is when firms will outsource basic services. This is when they will work with third party providers. They are focused on offering specific solutions that will streamline the operation. This is used by both private and governmental entities to decrease their costs (Messengill, 2013).
For instance, Boeing sells and leases aircraft to different governments and private airlines around the world. This is a program that is designed to reduce the operating costs of customers and give them access to some of the most up-to-date and innovative solutions. Boeing has been successfully conducting business in numerous countries around the world. This is because they are known for quality and their state of the art solutions. In the past, these perceptions have helped the firm to become the most player in the aerospace / defense industry. Their customers range from international airlines to foreign governments. These factors helped the company to become known for the systems they are providing and the way they changed the operating environment (Newhouse, 2008).
The supply chain is used to distribute the merchandise and resources where they are needed the most. It is focused on decreasing costs and moving people or specific merchandise to designated locations in a certain amount of time. The private sector relies on its supply chain management system to give them a strategic advantage inside the global marketplace. This will determine the success of the firm in both the short- and long-term.
For example, Wal Mart mastered its supply chain management practices. The process begins with Wal Mart directly negotiating with manufacturers. They will receive a low price and have each one of them partner with organization to update and maintain its supply chain management system utilizing the vendor managed inventory (i.e. VMI). This is a platform that allows each vendor to see the inventory of the Wal Mart's various stores and distribution centers. When they are running out of product, the vendor can update the system and immediately send the items to distribution centers where they are needed. This helps to ensure that there is an adequate supply to meet the needs of each store (Messengill, 2013).
The distribution centers are strategically located within a few hours of each store. When a location is running low, they will utilize technology to manage the inventory and determine how much is needed. This information is sent in real time to the distribution center. They will load the merchandise on a truck that services different stores in the area. It will go to each location...
The basic idea is to ensure that the most in demand items are received quickly and sent to locations where their inventory is low. As a result, the overall context is to use flexibility to address these needs and maintain the lowest cost structure possible. This enhances its ability to adjust the changing needs of each store and maintain an inventory of items that will sell quickly. Over the course of time, this has allows Wal Mart to decrease it costs and maintain its low pricing structure (Messengill, 2013).
The key to Wal Mat's long-term success are directly related to the efficiency of their supply chain and distribution system. Prior to setting up operations, Wal Mart will carefully evaluate the economic viability of establishing different stores within a 250-mile region. This occurs by having a central distribution center that serves 75 to 100 retail store inside a particular region. Everything is streamlined in order to reduce costs and improve efficiency.
The process is focusing on achieving a host of objectives in order to ensure that system is working smoothly. These goals are accomplished through concentrating on a number of areas in conjunction with each other. The most notable include: cost, time, quality and flexibility. Each one plays a critical role for ensuring that Wal Mart can maintain the lowest prices of any major retailer. According to Solis (2015), this is what gives Wal Mart a strategic advantage in the marketplace. This is because it has levers to create the opportunity for reducing costs in a number of areas (i.e. inventory management, fuel and labor costs). While at the same time, it has the personnel to help the company to quickly implement these solutions in timely manner (i.e. the way the levers are pulled). This enables the company to maintain just in time inventory that understands and responds to the needs of customers. Over the course of time, this allows the firm to keep it costs down and ensure that each location has those items which are the most in demand (Solis, 2015).
To achieve these benchmarks, there are number of different areas an effective supply chain inside the aviation industry will focus on. The most notable include: research & development, concept testing, pre-launch, launch and quarterly review. Research and development is focusing on designing new products, third party intellectual / property rights and how the firm can provide them with immediate or future benefits. Testing is studying the market research, product assembly, manufacturing data and potential defects. The pre-launch involves controlling production issues, raw material costs, the quantity and developing new solutions to reduce costs. The launch is when all of the backlogs are resolved and demand begins to stabilize. The quarterly review is looking at the life cycle, demand, sales and expenses. These areas are important, as they help an organization to understand supply and demand (Bryson, 2011). This is when they will use their supply chain to address these larger challenges.
The second portion, understands how the product will be distributed and manufactured. The most notable areas include: sourcing, manufacturing, warehousing, distributions and returns. Sourcing involves those areas where the product will be developed and marketed. It is at this point, when they will be stored for a certain amount of time. Warehousing is the organization's costs for storing the end merchandise. Distribution is the strategy; the firm will use to deliver the final product to a specific location. Returns are looking at: defects, trade ins and any recycling program (Bryson, 2011). These areas allow the organization to directly connect with the customer and offer something more.
These two phases create value through identifying how organization will have added costs in creating the product and quality control issues. This allows them to sustain low pricing structure and to maximize their profits. This is significant, as consumer tastes are constantly changing. The firm can use these practices to reduce the time of delivering the items and the storage costs by quickly turning the inventory over (Bell 2014).
This is something the most successful firm will utilize to address the underlying challenges they are facing. In the case of the aviation industry, this will offer insights about factors impacting parts and the delivery of them. At the same time, it is underscoring how these methods will have an effect on the organization's ability to quickly satisfy…
