Procurement and Performance Management - Assignment Example

Procurement and Performance Management Table of Contents Table of Contents 2 Procurement Cycle Model and Recommendations for Dove House EngineeringPlc (DHE) 3 2.Role of Procurement Staffs and Stakeholders Engaged In The Process Of Procurement 5 3.Balanced Scorecard 8 References 15 Bibliography 21 1. Procurement Cycle Model and Recommendations for Dove House Engineering Plc (DHE) Procurement cycle is related with the whole process from production to supply. For the duration of the procurement cycle, the producer places orders for components to suppliers that fill up the inventories. The orders are made on the schedule of production. Subsequently, it is essential that suppliers are connected with production schedule. The producer may not delay production for supplier’s lead time (SBANC, 2007). Model of Procurement Cycle Source: (University of Exeter, 2011). The figure mentioned above depicts the stages of procurement cycle. In the first stage, the producers recognise the requirements, and they analyse the suppliers and the related price. Supplier appraisal is generally identified as a risk management related tool to identify the viability of purchasing from a particular supplier or firm (Erridge & Et. Al., 2001). Then, the suppliers forward a quotation to the producers. After that, the producers negotiate for price and they formulate a deal for the purchase at estimated value and suppliers are requested to despatch the product within a particular period of time. Next, the producers have to develop a healthy relationship with the suppliers for delivering the orders at earliest. After a satisfactory delivery is made, the contract is closed (University of Exeter, 2011). Dove House Engineering Plc (DHE) operates in ‘Make to Customer Order’ mode. The consultants appointed by the management of DHE have identified certain problems related with the deficiencies of finished products in warehouse. DHE management should look into this matter because they have no warehouse at all. The sole warehouse is far away from production site and there is lack of adequate rooms for filling up the inventories. DHE had not launched computerised production planning and control system yet, there production planning is still done manually. DHE is miles away from its competitors because of several deficiencies in managing their operations affluently. They do not even concentrate on the quality of the products. The procurement process still depends on conventional way. It also hampers the strategies for production process. They frequently change their suppliers that have a strong influence on the procurement cycle (Case Study, n.d.). At present, the market is highly competitive and customers look for immediate delivery and quality products in affordable rates. Thus, DHE have to enhance its capacity in warehouse so that the production as well as the delivery does not get affected. They have to build long-term relationship with the suppliers so that suppliers feel motivated to supply the necessary materials in short period of time. They should upgrade their systems for managing the production planning. DHE should fulfil all the requirements of employees as well as customers. They should encourage suppliers to supply quality materials so that they can produce quality products as per customer requirements. They are facing challenges due to scarcity of stock in inventory. They have to concentrate on fluent supply of materials needed for production so that production does not get hampered due to lack of primary materials. They have to obtain customer feedback with regard to quality and set up further strategies. They are confused regarding the production facilities; they have to select one of the production facilities which are feasible and cost-effective for them. They should establish a new warehouse closer to production site. They have to reshuffle their organisational structure. By implementing the recommendations, DHE can regain their position and sustain in the competitive business world. 2. Role of Procurement Staffs and Stakeholders Engaged In The Process Of Procurement DHE can implement proper procurement process to recover their position. The management should take initiative for bringing in the changes in overall process. Procurement has in current times turned out to be crucial weapon for any organisation which has a major impact on the performance of the business. The decision making process should be participative in nature so that all the stakeholders can participate in various decision making (Odgers Interim, 2011; Laporta, 2009). Procurement process assists organisation to obtain competitive advantage. They have to recognise the requirements of customers. They have to install advanced technology for handling the inventories as well as to maintain the stock of finished goods (Handfield, 2011). Role Played by Procurement Source: (Logistics Cluster, 2011). In the above diagram, the role played by procurement has been demonstrated. The staffs of the organisation who are engaged in the process of procurement needs to provide accurate information to the various scenarios related to management of stocks in the organisation. The internal consumers are other organisational staffs who are reliant upon the proper management of procurement by the staffs. Emergencies and on-going programs have to be kept in consideration by the procurement related staff in order to meet the demand in case of sudden rise in any emergency. Stock replenishment has to be monitored by the staff and they need to properly source required materials from the procurement sourcing who are generally the stakeholders. On-time deliveries of stakeholders play a major role in sustained and successful operation in the organisation (logistics Cluster, 2011; Walker & Rowlinson, 2008). The management needs to build long-term relationship with suppliers to acquire quality materials. Procurement materials play a significant role in the organisation. They must identify the right suppliers for acquiring the quality materials. There should be a co-operative environment and must develop a strong association with other functional areas such as operation, marketing among others (Handfield, 2011). They should establish a new warehouse to store the finished products and they have to increase the capability of existing warehouse so that they may not face the scarcity of finished goods and they can supply as per customers’ requirements (Case Study, n.d.). The procurement staffs can put pressure on management for installing technologies to execute the operations effectively and efficiently. Procurement staffs have to analyse the risks regarding the inventories such as cost among others. The staffs also have to identify the available opportunity for the organisation in relation to procurement (Semanik & Sollish, 2007; NC State University, 2011). Procurement staffs have to ensure the customers about the quality of the products. In DHE, they focus on the quality when suppliers deliver the material and again after preparing finished goods. However, the organisation found high percentage of defects and the quality of the product had gone down (Gopalakrishnan, 2001). Customers, suppliers and distributors among others are considered as the stakeholders of an organisation. For this case, mostly distributors are the immediate customer for DHE (Bishop & Et. Al., 2003). Suppliers are responsible for supplying quality material and they should build a strong relationship with manufacturers so that the process can be easy. In this case, DHE frequently changes their supplier, so there is communication gap between both the parties. Organisation should take the customer feedback as customers also are the stakeholders of the organisation. DHE got negative feedback regarding the quality after consultants made a survey among customers. In today’s customer-centric business scenario, if customers are not satisfied then an organisation fails terribly (Case Study, n.d.). Ideas from the customers can also be sought for the betterment of quality. They can assist the organisation to build a long-term relationship with suppliers. They can force company for upgradation of the technology to maintain the quality as well as for smooth operational activities (Chinyio, 2010). 3. Balanced Scorecard Balanced scorecard is used to enhance communications internally as well as externally and to align the activities of the organisation against objectives of organisation. It was developed by David Norton and Robert Kaplan (Balanced Scorecard Institute, 2011). Balanced Scorecard Model Source: (Kaplan & Norton, 1996). Balanced scorecard has four perspectives such as customer perspective, internal business perspective, financial perspective and learning and growth perspective. Learning and growth perspective is regarded as bottom line for an organisation. Performance measurement as well as management has given rise to the need of utilising balanced scorecard in an organisation (Media Wiley, 2003; Rohm, 2008). In this outlook, training of the employees and attitudes are highlighted. In present context, technological aspects are rapidly changing and organisations have to set up upgraded technologies to sustain in competitive business world (Balanced Scorecard Institute, 2011). In this case, as part of the learning and growth perspective, it is found that they are lacking in technological aspects. They have to set up advanced technology to deal with the challenges and to perform fluently with the help of technology. In the internal business process perspective, the organisation should scrutinise the areas that are hindering their path to excel to obtain competitive advantage. It can be done through assessing the satisfaction level of the customers and productivity of employees among others. In this perspective, organisations can recognise the core competencies and strategise for further development (Scherer, 2002). In this case, DHE has failed to obtain the competitive advantage because there were a number of deficiencies. There is a communication gap between the management and employees as well as among management and suppliers. DHE failed to recognise their target markets and core competencies. They can use the just-in-time (JIT) technique for production. They can relinquish the traditional practices for buying materials from suppliers. They can adopt feasible strategies for purchasing and for building relationship with suppliers. Balanced scorecard can be used as a strategic measurement based tool and also as a strategic control related system by DHE (Nørreklit, 2000). Customer perspective refers to the way customers expect the organisation to perform. Today’s business is typically customer-centric. If customer is satisfied then the organisation can lead towards success (Scherer, 2002). In this case, customer feedback is adversely affecting DHE because DHE failed to deliver in time and the quality is not up to the mark. DHE have to provide attention on quality control. They should also consider customers’ profitability aspect in order retain customers. This will help to correlate success of the customers with improvement in financial aspect (Kaplan, 2005). Customer value analysis (CVA) as well as customer relationship management (CRM) can enable a business to develop the overall performance. These methods provide organisations with improved measurement related capability to identify customer scenario in a superior way (Johnson, n.d.). In the context of the case study, from internal business process perspective, DHE can adapt several initiatives to obtain their position. DHE can adapt for Total Quality Management (TQM) to meet the requirements of customers according to global quality standard of ISO 9000 (Hoyle, 2006). They can establish a warehouse and can increase the capacity of the existing one. The layout of the production site must be improved by installing technology. The organisational structure has to be reorganised for getting more control over the operations. They can learn from their own deficiencies which can enhance the reliability as well as consistency. They can conduct a survey to analyse the employees’ attitude and rate of enhancement for individuals as well as for organisation. They can take employee suggestions for further enhancement. From customers’ perspective, they can measure satisfaction level of the customers and can reshuffle their target market. By maintaining the quality of the product, the market share can be increased. 4. Quality Assurance Issues Quality assurance refers to the extent to which the quality will be or and how the quality can be controlled. The chief quality standard is considered to ISO 9000 series of standards for automotive industry and it is issued by International Organisation for Standardisation (HCI, n.d.). ISO 9000 refers to the prevention for the problems due to quality. Labelling prevention performance, the same as quality assurance, may have adverse effects upon the quality (Hoyle, 2000). Quality control and quality assurance are two significant concepts related with quality. Quality control depicts activities related to quality and it is a method to validate whether the delivered materials are of expected quality or not. Quality assurance represents the process familiar with generating the deliverables. Quality can become a major success factor for an organisation (Mochal, 2005; Rashidy, 2009). Quality assurance in relation to procurement is a comprehensive concept that encompasses a number of aspects that collectively or at times individually control the quality related to any product (World Health Organization, 2011). The prequalification aspect related quality assurance which considers purchasing, manufacturing, storage as well as distribution are complicated stages where quality needs to be adhered. The other aspects in relation of quality assurance system purchase, storage and distribution of products where quality has to be monitored (World Health Organization, 2007). DHE has faced several challenges for compromising with the quality of the product. They have to concentrate upon quality issues, otherwise they cannot sustain in highly competitive market. Earlier, they focused on quality while suppliers delivered the materials and during the delivery of finished goods. However, the quality control is not strictly followed by the company that is the reason they failed to meet the requirements of customers. They have to follow the quality control measures to regain their position (Case Study, n.d.). Suppliers are responsible for delivering quality materials for finished products. DHE have to be strict with its suppliers, if they find significant deficiency in quality, they must discuss about it with the suppliers and suppliers need to be asked to resolve the problems at the earliest. But at the outset, they have to build a healthy relationship with suppliers because they frequently changed suppliers that adversely affected on production (Kirchhoff Automotive, 2010). They can introduce quality assurance department to control the quality and it would assure customers as well as management about the quality. The staffs of the department would determine the risks regarding the quality and they would decide the strategies to be implemented to control the quality. DHE should maintain the standard developed for quality assurance (ISO 9000 series) (Hoyle, 2000). DHE must take immediate initiatives for quality control. They must install advanced technologies for quality control as well as inventory control. The suppliers must be informed to look after the problems regarding quality issues. They are required to take charge of the production process to stay away from customer complaints. They have to ensure customers about the quality of the finished products (Case Study, n.d.). Suppliers must make compulsory tests and provide reports at the time of every delivery. Suppliers have to provide certificates of quality materials delivered. DHE also have certain responsibilities to control the quality of finished products. The quality-relevant features are required to be checked properly during the procurement process. The responsibilities depend upon both the parties i.e. DHE and suppliers. DHE has to set a standard of quality, and the suppliers are responsible to fulfil the requirements set by the organisation. Otherwise, the contract can be cancelled by the management (Kirchhoff Automotive, 2010). References Balanced Scorecard Institute, 2011. Balanced Scorecard Basics. BSC Resources. [Online] Available at: http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx [Accessed July 30, 2011]. Bishop, P. & Et. Al., 2003. Management, Organisation, And Ethics In The Public Sector. Ashgate Publishing, Ltd. Case Study, No Date. Dove House Engineering Case Study. University Of Salford. Chinyio, E., 2010. Construction Stakeholder Management. John Wiley and Sons. Erridge, A. & Et. Al., 2001. Best Practice Procurement: Public And Private Sector Perspectives. 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Using the Balanced Scorecard to Align Your Organization. Balanced Scorecard Institute, pp. 1-4. Rashidy, H., 2009. Knowledge-Based Quality Control In Manufacturing Processes With Application To The Automotive Industry. Herbert Utz Verlag. SBANC, 2007. Procurement Cycle. Supply Chain Management. [Online] Available at: http://www.sbaer.uca.edu/publications/supply_chain_management/pdf/07.pdf [Accessed July 29, 2011]. Scherer, D., 2002. Balanced Scorecard Overview. Articles. pp. 1-5. Semanik, J. & Sollish, F. 2007. The Procurement And Supply Managers Desk Reference. John Wiley and Sons. University of Exeter, 2011. Procurement Cycle. Procurement Services. [Online] Available at: http://admin.exeter.ac.uk/corporate/procurement/manual/process-cycle.shtml [Accessed July 29, 2011]. World Health Organization, 2011. Quality Assurance. Areas. [Online] Available at: http://www.who.int/medicines/areas/quality_safety/quality_assurance/en/ [Accessed August 16, 2011]. World Health Organization, 2007. 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