: Purchasing and Strategy - Case Study Example

Case: Purchasing and Strategy Table of Contents Case: Purchasing and Strategy Table of Contents 2 Case Summary 3 Case Commentary 3 Reference 7 Bibliography 8 Case Summary Sainsbury, one of the leading supermarket chains in UK, has introduced supplier financing program to enhance the cash flow to the suppliers. At the same time the company also gets benefited from the system as it frees up more working capital and enhance the liquidity position of the company. Through this initiative, which has been started back in the year 2007, the suppliers of Sainsbury have been benefited from the earlier payment immediately after the approval of invoice statement. The suppliers, from now onwards, will be able to access invoice information online which will enable them to fetch the information in a much quicker way. This will also enable the suppliers to get their payments in a much organised and regular way (Procurement Leaders, 2009). To enhance the supplier financing program, the company has been able to sign up the Royal Bank of Scotland to offer funds for the programme. The company has seen a noticeable growth in the numbers of the suppliers moving towards the online platform in a much larger extent. The collaboration with the Royal Bank of Scotland is supposed to offer further scope to cultivate the programme and enhance the liquidity position through a proper development and maintenance of supply chain (Procurement Leaders, 2009). Case Commentary What does this case demonstrate/illustrate? The case illustrates that with the help of online platform companies are much more enable to take care of their suppliers. After introduction of the suppliers’ financing programme online, it has been easy to avoid the unnecessary gap between the invoice generation and offering the payment to the suppliers. The existence of this programme has been quite helpful for the suppliers as they can now access the information regarding their payment online. At the same time, the suppliers have been able to enhance their cash management system, as the gap between the generation of invoice and the offer of payment has been reduced. Another key issue, which this case has put forward, is that the organisation has enhanced the suppliers’ financing system with the inclusion of the Royal Bank of Scotland. Inclusion of this bank to the previous programme ensures the growth of this programme; and hence ensures that both the suppliers and the organisations can fetch their shares of benefit from the same. Describe relevant theory, model, and technique. It is apparent from the case that most of the companies find it crucial to take care of their suppliers’ needs. There has been an increased concern within the companies regarding their suppliers as the suppliers are being seen as one of the key stakeholders of the company and hence very much crucial for the organisational performance. This is in alignment with the Stakeholders theory which says that all stakeholders’ interests should be considered as inherently valuable (York University, n.d.). In today’s complex business environment, risk is inherent in the supply chain system. Companies find it quite difficult to select the suppliers and maintain a long term business relationship with them. As the suppliers are very much crucial for the company, it is very much necessary to mitigate the risk in the supply chain. The suppliers’ financing programme would mitigate the supply chain risk and ensure enhanced cash flow. Any programme would have funding requirements to grow on further. To fund any programme, the organisation can look for several strategies; signing up a bank to fund the requirements is one of the key financing strategies that the organisations move with (Civicus, n.d.). Sainsbury has also moved with the same kind of strategy to finance the programme. In the future the organisation may add some new sources of finance to enhance their relationships with their suppliers. Why is it a good example? The case has been quite a good example of the online suppliers’ platform and suppliers’ financing system. The example is interesting in the sense that the organisation has given an intensive thought to enhance the value for the suppliers. It is a motivating instance for the suppliers that they are recognised as crucial and influential for the organisational performance. In a situation, when the supermarkets are showing their powers to shrink the price for the suppliers, it would be a piece of good news for the suppliers to enhance their involvement in their respective organisations. As per news, the supermarket chains in UK have the higher bargaining power and they do exercise the same on their suppliers to get products on minimal cost which have been quite unprofitable for the suppliers (Arnold, 2004). These types of news in air would have snatched away the suppliers’ trust from the supermarket owners, if companies like Sainsbury would not have created a mutually beneficial platform for the suppliers. So this is good to gain the faith from the suppliers of the organisation and at the same time encourage their involvement in the organisational operations to enrich the firm value. What can you learn from it? The learning has come using different viewpoints, through accumulation of assorted information available in the given case. Previously the big supermarket chains used to exercise their higher bargaining power to squeeze the price for their suppliers. However as the days are moving on, the organisations have intensively realised the importance of their suppliers in the organisational structure. Another lesson was much related to the online platform which the company has used to connect with their suppliers. The online platform has given the organisation an opportunity to enhance the suppliers’ value by reducing the bottlenecks which used to come in between the invoice generation and the payment to the suppliers. This has been a major obstacle which prevented the suppliers to get their payment in time. As a consequence of this the productivity of the suppliers was bound to decline; the same would happen with the organisational performance. Introducing a mutually beneficial platform, where the suppliers can access the required information in a much lesser time, has established a better relation between the suppliers and the organisations through a better supply chain management. Inclusion of the Royal Bank of Scotland is an appreciable initiative as this would ensure the growth of the programme. Hopefully the other supermarkets will soon follow the herd towards a better supplier-buyer relationship. Reference Arnold, J. September 2, 2004. Farmers struggle with the supermarket squeeze. [Online]. Available at: http://news.bbc.co.uk/2/hi/business/3594908.stm [Accessed on March 19, 2010]. Civicus. No Date. Developing a Financing Strategy. [Pdf]. Available at: http://www.civicus.org/new/media/Developing%20a%20Financing%20Strategy.pdf [Accessed on March 19, 2010]. Procurement Leaders. June 10, 2009. Sainsburys and RBS to provide supplier finance. [Online]. Available at: http://www.procurementleaders.com/learninggroups/supplier-relationship-management/supplier-relationship-news/sainsburys-rbs-supplier-finance/ [Accessed on March 19, 2010]. York University. No Date. Stakeholder Theory. [Online]. Available at: http://www.istheory.yorku.ca/stakeholdertheory.htm [Accessed on March 19, 2010]. Bibliography PublicOrgTheory. March 25, 2008. Stakeholder theory and practice. [Online]. Available at: http://publicorgtheory.org/2008/03/25/stakeholder-theory-and-practice/ [Accessed on March 19, 2010]. Read More