Considering Transaction Concerning a New Vending Machine Installing - Assignment Example

132400 Has Simon good reason to query this transaction Yes, Simon Cove has very good reasons to question the transaction. Even though Fred Gibson, General Manager of one of the depots had decided that a new vending machine should be installed, Simon seems to be unaware of his decision. Fred has not discussed the matter with the Purchase Manager, or Assistant Purchase manager, that being Simon himself. The particular company seems to be working in the hierarchical way of management, and naturally, having been used to this particular system of management, Simon did not like the idea that the proposal should come from Ron Brookes, who was only an assistant buyer. No doubt, Ron has done the work delegated to him by the section head in the proper working order. But we are not informed that Simon is aware of Fred Gibson's requisition. Hence, a conflict can arise here, as Simon would think that Ron has taken the initiative to hire the vending machine, because he saw only the usual contract letter, sent to him by Ron for authorising the hire. Purchasing department has its own rules and regulations of weighing the commodity and grouping the supplies. "To bring the user and supplier in direct contact, purchasing must establish the business framework. The buyer researches each commodity and groups the items by family or by possible sources of supply," Harding 1990, p.119). Ron's mistake, although could be unknown to him, is that he did not inform Simon that the vending machine was according to instructions of Fred Gibson, who found the deal cheap and reasonable at only 32 per week as hiring charges. Fred has recommended that Snackshop Vending Machine should be hired from one of the known suppliers, A B Drinks System. Fred, in his requisition slip has also mentioned that he has already spoken to the said suppliers and Mr. Pearce, the Sales Executive of the potential suppliers has agreed to pay 625 for the old snacks vending machine that is being currently used on site and Fred has clearly recommended that the weekly rent and purchase of old machine, both are on the side of their company, and should be attended to immediately. To Simon, this has come in the most unconventional way and not as the usual purchasing function as part of supply chain. "The purchasing function should ensure an optimal supply system, which must be geared towards the needs of production and materials planning. In other words, the purchasing function is a very important link in the production and supply chain of organisation," Weele (2002, p.25). In many traditional organisations, managers do not realise that Procurement management need not be always 'by the book'. It can change in many ways and the main logic behind its constant change is the ultimate service and ethical profit for the company and within this framework, there could be many different approaches. "The overall conclusion must be, however, that there is no simple blueprint which can be applied to successful procurement management. One cannot argue that collaboration is superior to competition, or that partnership sourcing and just-in-time offer a simple route to success," Lamming and Cox (1995, p.20). But many managers like Simon do not look at it from that angle. In the capacity of General Manager, Fred Gibson is within his rights while handling the issue. Perhaps he went slightly wrong in not going through proper channel. Usually people like Simon are conventional while dealing with other people at work place. They usually feel threatened to go out of the written rules. They do not like to create precedents, as they are unsure of workers' temperament. They will be apprehensive about further demands of workers, if more liberty is granted to them. They are usually insecure in their places and guard the connected prestige and hierarchy with great zeal and changing these attitudes is not always easy. "The real problem is to get people to fundamentally change their behaviour so that they become the actors who will operate in such a way that 'best practice' is second nature," Lamming and Cox (1995, p.15). If Simon had known Fred's involvement in the deal, he would have signed the contract letter, even though he would have felt slighted by not being informed directly by the general manager. If it had come from his own manager, he would have been more comfortable in signing it. But it came from Ron and Simon is not obliged to sign it, without knowing its entire background. The pedantic behaviour that Ron had noticed earlier in Simon would not allow him to be in easy terms with employees working under him, and hence, he does not ask Ron directly about the whereabouts of the proposed contract. Instead he deals with Ron officially, only through writing. It is a centrally organised company with every matter coming down in the ordained hierarchical route. He can clearly see the advantage in the situation and deal. But he wants it to come through the usual, and according to him, highly proper channel. He does not want to create extra rights for people working in Ron's cadre, which might become one of their precedents. Ron's mistake could be named as not informing Fred's involvement in the deal to Simon. At the same time, Ron is aware that he should not annoy Simon in any way, as he is hoping to get promoted to the higher cadre of buyer, for which he needs Simon's recommendation. Ron has not managed the situation very well, though he has his own reasons for not doing so. He thought he is doing it properly as he was asked by his section head, who was in turn asked by Fred Gibson. Simon also might consider it a kind of insult to purchase department, because Fred has overstepped their authority by directly dealing with the vendor machine suppliers and has made all decisions himself without involving the purchase department, the legitimate buyers, in any way. There is an important process while doing any purchasing or hiring, like making an agreement, describing the intended commodity or machine, quantities, product description, value or rent, down payment etc. and this process gives legal status to such a transaction. "The description of the purchasing process clarifies once again that a buyer must be an all-rounder with sufficient technical knowledge, a feeling for the commercial side of the process, and be familiar with the basic of logistics and administration," Weele (p.70). Talking about the important role of the Purchasing Department Waters (1994) says: "It is a machine for deploying money in exchange for goods and services at the lowest ultimate cost. Like any other machine, kit needs managing and controlling," (p. 2). Perhaps Simon felt that due importance was not accorded to his Department. 2) What action should be taken now The obvious action that should be taken now is rerouting the requisition in proper channel. If the requisition of Fred Gibson could be returned to him with a request for rerouting, Fred will definitely see the sense in Simon's questioning of Ron's contract letter and will re-channel his requisition through the Purchase Manager. Then it can come down to Simon and with his authorisation to Ron's section head, ending up with Ron for a contract letter, which would definitely be signed by Simon, as Simon would have been aware of the impending hiring of new vending machine as per Fred Gibson's requirement and suggestion. Quality management in organisational behaviour is very important in any company, where people like to be firmly in control of their area. One of the oldest human resource management theories still persisting in Japan, and had been appreciated as one of the most effective theories, is the one with centralised control. No doubt, today it is a bit outdated, mainly because western countries have moved into more individuality and cohesion. In Japan, it is considered to be too democratic and less disciplined. It is also seen as waste of time, pacifying every vocal member of worker community. According to this theory, it is the duty, almost the right of the worker to do exactly what had been handed down to him by his immediate superiors. Considered in this way, Ron has exactly done that, implemented the order of his Section Head. This theory of management is connected with 'arts of getting things done through people'. This in turn, is connected with planning of a work, organising people to do it, leading them towards execution of that work, co-ordinating with the workforce if necessary, and controlling the activities to see that the work remains focussed. It is directly connected with the Egyptian pyramid builders and in modern times, it is part of human resource management. This does not establish a high workplace democracy, but it does establish a very healthy and workable hierarchy and this theory is giving way to Human Interaction Management today more than Command Hierarchy. "The majority of any organization's problems are human performance problems. Yet more attention and resources have been directed toward solving machine-oriented problems," Connellan (1978), p.41. After the onset of globalisation, in every organisation, changes in management, Human resources and transformation are being slowly introduced. "Organizational transformation may be accomplished when executives shift their human resource efforts from activity-based to outcome-based solutions," Gilley and Maycunich (2000) p.126. Professionals can be asked to focus mainly on the outcomes and not on activities leading to outcomes and this can bring an overall change in the organisation. Again the difference between a formal procedure and an informal one can also occur. There are a few genuine arguments against formal procedures like formalisation reduces flexibility and every situation looks for a precedent. Years of hierarchical work can induce a psychological mindset and any suggestion out of the routine could be questionable. Developing a proper communication system instead of usual memos and requisitions, might bring a much desired change into the organisation. Personal communication increases the importance of professionals working in lower cadre and can create more pride in their work. Hiring external resources and managing them can be tricky at times, because many points have to be considered while hiring external resources. "At the time a purchase order or contract is awarded, the buyer should decide whether routine or special attention is appropriate. On many orders on non-critical items, simply monitoring the receipt of receiving and inspection reports may be adequate," Dobbler and Burt (1996, p.427). It is important to check references of supplier to make sure that they are capable of providing continuous and unbroken service. "The concept of performance to be discussed evolves around a particular notion of the firm as an organisation with a varying degree of capability in enhancing X-efficiency," Sako (1992, p.30). Moris and Imrey (1992) feel that British manufacturers ignored the interrelationship between plants and external suppliers. "British producers have traditionally operated buyer-supplier relations through a system of 'adversarial' contracting, a 'hands off' process which involves open tendering, with the focus predominantly on price competition," (p.7). Also it is advisable to be reassured that no other conflict of interest exists, like being a long-term supplier of a competitor company. It should be also confirmed that supplier has sufficient resources to perform his part of the contract. Evaluation of payment and expenses has to be done, because it is important to know a company's capability and reputation. "With the great flood of new products in recent years, the question has been focused more sharply around the extent to which ka company's generalized reputation affects its ability to launch new products," Levitt (1965, p.1), Cooperation of the management and workers is necessary in an external resource hire contract and they should be informed accordingly. In the present context it is also necessary to value the old vending machine by a qualified valuer, before selling it to new supplier to assess his offer. BIBLIOGRAPHY: 1. Connellan, Thomas K. (1978), How to Improve Human Performance, Harper & Row Publishers, London. 2. Dobler, Donald W. and Burt, David N. (1996), 6th edn., Purchasing and Supply Management, The McGraw-Hill Companies, London. 3. Farrington, Brian (1994), Managing Purchasing, organizing, planning and Control, Chapman & Hall, London. 4. Gilley, Jerry W. And Maycunich, Ann (2000), Beyong the Learning Organization, Perseus Books,. Cambridge, Massachusetts. 5. Harding, Michael 1990), Profitable Purchasing, Industrial Press Inc., New York. 6. Levitt, Theodore (1965), Industrial Purchasing Behaviour, Harvard University, Boston. 7. Lamming, Richard and Cox, Andrew (1995), Strategic Procurement Management in the 1990s, Earlsgate Press, London. 8. Morris, Johathan and Imrie, Rob (1992), Transforming Buyer-Supplier Relations, Macmillan, Hampshire. 9. Sako, Mari (1992), Prices, Quality and Trust, Cambridge University Press. 10. van Weele, Arjan J. (2002), Purchasing and Supply Chain Management, 3rd edn., Thomson, UK. 11. Read More