Challenges Associated with Globalization - Essay Example

? Project Risk and Procurement Management Introduction Challenges associated with globalization, the environment and technology directly influence how successfully businesses manage their own supply chains. The study evaluates IBM’s committed to decreasing costs of procurement through developing and utilizing a highly automated supply-chain system across the globe. IBM strategically created an environment of cooperation with the suppliers by having the suppliers convey products and services to IBM’s internal procurement system, which ensures a hands-free procurement of products and services. Enterprises around the globe reap benefits associated with better supply chain management through IT supply chain management programmes because the programmes decrease costs and lead times, increasing productivity and quality as well as strengthening relations and collaboration across supply chains. The study investigates global catalogue facility in IBM that supports strategies aimed at offering IBM innovative catalogue solution for indirect purchases while supporting all teams in need of catalogue functionality. Issue at hand Procurement teams face challenges as well as opportunities from the increased competition, accelerated globalization and growth of services as essential differentiators in the marketplace, it is essential for organizations have to reassess their prevailing strategy and constantly validate its efficiency based on current and expected future business environment. At the core of IBM’s integrated supply chain is its global procurement’s value coming from its people and technologies that secure goods as well as service in support of internal partners and external clients in development and delivery of quality products and offerings (Williams, Lueg & LeMay 2008). IBM’s global supply chain involves a large number of suppliers is used to address every product and service offering the company produces. Devising supply chain of this dimension and complexity while attaining end-to-end perceptibility and total incorporation is not a small task. Collaboration with suppliers and business partners remains crucial for the company in today’s business because it enables communication in the supply chain and ensures that suppliers are agile and responsive. Currently, the company’s supply chain is complex and functions much like a multi-point network configuration with movement of goods, processes and communications essential to the network (Baraldi 2008). Concept of supply chain management Supply chain management in the past few decades became extremely essential to companies operating in the competitive global marketplace. Although there are many definitions on the concept of supply chain, supply chain entails the context in which goods, services and information flow from the supplier to the end user; however, in recent past supply chain expanded to include flow in the opposite direction. Therefore, supply chain management entail effective and efficient supervision of the supply chain and relationships between parties taking place in the chain. The significance of supply chain management is often associated with benefits it offers to organizations in the chain because it offer benefits like decreased costs, boosts revenue, increases satisfaction in customers and improves delivery and product or service quality. The benefits arise from various factors associated with supply chain management like information sharing, coordination and the resulting synergies between organizations (Baltacioglu, Ada, Kaplan, Yurt & Kaplan 2007). Moreover, through supply chain management, market data needs can efficiently be monitored and changing consumer needs and demands can easily be accessed and satisfied through proper production processes. As well, providing the right products and services at the right time and location offers customer satisfaction, and this potentially increases sales and revenue. Supply chain is essential considering that in the current global market it is impossible for a firm to survive when isolated from others because it enables achievement of competitive advantage both in national and international contexts. Globalization and its consequences boost the significance of and the necessity for efficient supply chain management in order to improve operations (Baltacioglu, Ada, Kaplan, Yurt & Kaplan 2007). Key Business Value Findings Before organizations devise efficient means of decreasing supply chain risks, managers have to first understand the various risk categories as well as events and conditions that drive them (Giunipero, Hooker and Denslow, 2012; Juttner, 2005). Armed with clear knowledge regarding the crucial risks, companies are able to precede with the selection and tailoring mitigations strategies that effective. The various risk categories include disruption, delay, system, forecast, procurement, intellectual property, catalogue and capacity. Managing risks in supply chain is difficult since risks are often interconnected; hence, efforts for mitigating one risk can end up in aggravating another. Supply-chain risks can end up being fully-fledged supply chain problems that cause unanticipated alterations in flow because of disruption or delay. Prominent corporations like IBM deal with these assortment of supply-chain threats by holding supply chain reserves that include excess inventory, capacity and redundant suppliers. However, the largest challenge for managers is mitigating the risks intelligently through positioning and developing supply-chain reserves while maintaining the profits (Chopra and Sodhi, 2004). In the last 40 years, private and public sector organizations have been employing utilising IT systems to streamline their purchasing and other processes; however, only in the last decade has e-procurement systems attracted attention (Schneider and Wallenburg, 2012). Although there is debate regarding the emergence of e-procurement, it is clear that the use of e-procurement offers several advantages compared to early inter-organizational tools. Reputation of the internet considerably influenced corporation’s aim to employ new inter-organizational systems technologies like e-procurement. Procurement In procurement, chief procurement officers achieve success by focusing on several areas like becoming business partners and not just buyers, which means that they overcome the pervasive buyer mentality by acknowledging procurement and responding proactively to broad business goals. Moreover, procurement officers achieve success by exploring new value frontiers; hence, they end up reorienting organizations that are based historically on buying raw materials and supplies and converting their thinking and activities to fit the different demands of capability and sourcing (Ellram, Tate and Billington, 2007). As well, procurement officers pull suppliers inside in order to have full potential in contribution by strategic suppliers and taking practical steps in seeking value outside the supply chain. In addition, procurement officers pursue low-cost sources hence procurement organizations are prepared to leap hurdles posed by borders and geographic differences to tap into more cost-effective sources around the globe. As procurement influences increase, performance in the essential areas dictates the position of industry leaders; besides, often procurement organizations focus on one aspect of their role while ignoring the others. For instance, procurement organizations often focus on supplier management and end up neglecting stakeholder management, which results in tremendous supply-side value (Johnsen, Johnsen and Lamming, 2008). Regarding global businesses, steady market pressures continue, budgets cuts are the norm; deregulation and globalization are disturbing the competitive equilibrium as companies feel the squeeze from increased material costs (Johnsen, Johnsen and Lamming, 2008). Meanwhile, the usual structure of corporations is changing as companies spend more in third parties and at the same time outsourcing many more functions that traditionally were carried out in-house. Across the enterprise, the increased contribution of suppliers is increasing more value as well as risk and these two factors have increased the significance of procurement. Currently, procurement more than ever has a broad and direct impact on corporate performance, which makes procurement feature prominently in boardroom agendas across the globe. Although procurement savings are extremely significant to organizations, cost saving is online part of what procurement offers to the bottom line; hence, procurement officers have initiated their quest on how procurement can become a competitive weapon and contribute to increased shareholder value. To overcome the buyer mind-sets, procurement organizations aim at the big picture as well as the overall objectives of the enterprise and the way they help customers in achieving objectives. Therefore, procurement strategies are shaped by business strategies and require much flexibility in order to adapt to the changes in business strategies (Johnsen, Johnsen and Lamming, 2008). Transformation of IBM supply chain In the past 10 years, IBM managed to transform its supply chain by transitioning from static business units to incorporated value-creating capability. In 2002, the company established an integrated supply chain organization that integrated customer fulfilment, global logistics manufacturing as well as procurement operations. The key reason behind the makeover was to convert the roles of procurement from administrative activities to value-adding and competitive differentiators (IBM Global Business Services, 2006). In the new business institution, sourcing is not any more devolved because superior and dedicated sourcing councils regulate and run global supplier relations. To ensure communications are clear and consistent, the company established a few simple metrics that include measures that reward the new culture as opposed to the old one. As the culture of value creation evolved in IBM over the past years, the company was able to shrivel maverick purchases from 35% to 0.2% and doubled internal client satisfaction from 40% to 82% (Kahkonen and Lintukangas 2012). As procurement officers reflect on their capabilities and challenges ahead, they contemplate if their procurement organizations will bask or bake considering the increased corporate attention. Procurement performance has the potential of significantly influencing a company’s bottom line as well as strategic positioning in the marketplace (Kahkonen and Lintukangas 2012). In companies where procurement offers a true competitive edge show that the procurement officers won the talent contest, turned buyers to be business partners, considered capability sourcing routine, took suppliers deep into their operations and constantly explore low-cost sourcing options in case they emerge (Harrity, Higgins and Minahan 2006; Slobodow, Abdullah and Babuschak 2008). E-procurement Procurement in the last decade witnessed widespread use of information and communication technology within managerial and decision-making procedures. Given the strategic role of procurement processes for effective use of resources as well as spurring competition in markets, e-procurement remains a far-reaching tool for innovative policies in developed and developing nations (Aberdeen Group, 2005). E-procurement is an end-to-end solution that integrates and streamlines many procurement phases like searching, sourcing, negotiation, ordering and invoicing. In early 1990s, IBM had a tough time and a significant part of its recovery was facilitated by transformation of the way the company managed its supply chain, procurement and the essential suppliers (Tassabehji and Moorhouse 2008). E-procurement offers a fresh communication means that connects business partners and influences the relation between participating organizations. E-procurement offers more information that facilitates mutual understanding making it possible to have positive impact on relations because it provides high satisfaction in bargaining situations because of complete and accurate information (Aberdeen Group, 2005). The use of e-procurement results in high channel cooperation owing to the impacts of information exchange and channel formalization. Moreover, increased percentage of transactions using IT complements the overall closeness of a buyer-supplier relation; as well, e-procurement significantly reduces transaction costs. From the potential saving offered by e-procurement it is becoming obvious that it is a viable and valuable way of doing business hence its adoption in both small and large premises (Tassabehji and Moorhouse 2008). IBM’s E-procurement IBM’s e-procurement strategy involves exploiting the web in all aspects of global procurement process through worldwide replicable solutions. Electronic supply chain interlock in IBM is an e-business portal that facilitates communication, collaboration and management of the flow of data between IBM and its suppliers in a secure and organised workflow environment. The communication tool extends the supply chain all-day through online access to supply chain information like product management (IBM, n.d). The company’s e-procurement allows electronic communication and information exchange; offers user timely, accurate and reliable information; encompass supply-chain processes and integrates with the company’s strategic procurement systems. The system allows a common procurement process for global procurement in IBM and eliminates redundant management of information because information resides in one location. Moreover, opposed to the traditional procurement methods, e-procurement in IBM improves efficiency and data integrity, decreases administrative costs and cycle time as well as offering global secure access (Tassabehji and Moorhouse 2008; Hartmann, Kerkfeld and Henke 2012). Electronic data interchange in IBM offer the company a competitive advantage because electronic data decreases acquisition costs, improves precision, fast communication, responsive, flexible, supports other manufacturing strategies, enhances business partner relations, improves cash flow and reduces inventory (IBM, n.d). IBM’s use of the internet in purchasing and other e-commerce activities is far ahead of where other companies are and derives its value from people, processes and technologies that secure goods and services and support internal partners in developing and delivering products. The benefits to the company include cost reduction while increasing profits, improvement of satisfaction in internal partner and customer due to improvements in supply continuity, superiority and value of goods and services received and optimised cash flow. Procurement is a competitive differentiator because procurement organizations lower material costs and increase process efficiencies (IBM, n.d). Opportunities lie across the procurement process with multiple options available in various points. IBM in 1993 was in a severe financial crisis but the company adopted a holistic approach to reduce the costs that was critical in the company’s turnaround (Juttner 2005). The approach encompassed strategic, operational and tactical initiatives; as well, the company used supplier relations management in order map suppliers into appropriate relations. Supplier relation management together with the support of the appropriate technology paid rich dividends to IBM. E-procurement applications enable transformation process and ensure organizations have sustained benefits and owing to e-procurement, IBM was able to realize significant benefits. Supply chain management and Risk management There is little controversy regarding the growing significance of supply chain management as an essential way of making contemporary business processes resilient and agile resulting in the businesses being more competitive. Supply chain management comprises of various advantages and opens new perspectives for progress in the global markets; however, as global supply chain management become more complex and fragmented, their management and governance become critical. Organization survival relies on diligent operations and supply chain management because supply chain management has become important after recent changes in global business. Attaining competitive advantage is the aim of the most advanced supply chain like that of IBM and its essence remains with the contribution of product or service competitiveness and improving performance (Lewis, Brandon-Jones, Slack and Howard 2010). Two superior ways of businesses to succeed include customer satisfaction and shareholder value and are essentially dependent on supply chain competitiveness. In many cases, risk management is considered a parallel process to the core one; however, risk management process has various distinct structures, procedures and objectives (Manuj and Mentzer 2008). Nevertheless, processes of risk management refer to different processes; therefore, they are implemented in adequate core processes, which indicates that risk management and core processes coexist (Machowiak 2012).IBM success in its e-procurement management system has been as a result of on-demand business model and considering the system to be a competitive weapon (Kraljic1983). The companies supply chain management system is considered an enterprise that integrates business processes end-to-end throughout the company band with key partners, suppliers and customers; moreover, the system is capable of responding with flexibility and speed to any customer demand, market opportunity or even external threat (Aberdeen Group, 2005; Chang, Tsai, and Hsu 2013). Conclusion Once procurement within an organization is in a mess, the company has to embrace it and wrestle to sort it out as shown by the way IBM fought to end its financial crisis of early 1990s. However, after improving the condition, managing every spending across the company, having the right contracts and right people, processes and systems then the company enabled the supply chain management to develop its competitive advantage. IBM procedures and measurement-oriented culture shows a clear understanding of the value of good procurement because the enterprise gained benefits associated with e-procurement. Moreover, e-procurement technology frees procurement professionals and makes them true supply managers at enterprises; hence, altering the purpose of procurement by reducing the cost of developing supplies value for the company. In the study, it is clear that e-procurement has a huge impact when applied intelligently like in the case of IBM and results in various benefits associated with it. References Aberdeen Group. 2005. Best Practices in E-Procurement: reducing Costs and increasing value through online buying. 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Tassabehji R. and Moorhouse A. 2008.‘The Changing Role of Procurement: Developing Professional Effectiveness’ Journal of Purchasing and Supply Management, 14, 55-68. Williams Z., Lueg J.E. and LeMay S.A. 2008. ‘Supply chain security: an overview and research agenda’ The International Journal of Logistics Management’ 19, 2, 254-281. IBM Global Business Services, 2006. ‘Supply Chain Management procurement services: Gaining competitive advantage through effective enterprise spend management’. IBM, n.d, Global Procurement. Available at http://www-03.ibm.com/procurement/proweb.nsf/contentdocsbytitle/United+States~Global+Procurement [Accessed 29 October 2013] Read More