Managing a Purchasing - Essay Example

Managing a Purchasing] [Name] [Course] [Lecturer] [Date] There is a very big advantage in managing intra-company cooperation between two or more business units in the area of purchasing and supply management and this is what is referred to as purchasing synergy (O’Donnel, 2000) and this is the case in World Editions Group. Managing purchases is very influential in the financial performance of any form for when it is matched with the product strategy; there are high chances of financial performance. However when this matches is not adhered to; poor financial performance is likely to be experienced. Since the strategies developed by purchasing assist in achieving the overall goals and objectives of an organizations, the purchasing managers therefore have an obligation of reporting to directly to the board of directors (O’Donnel, 2000). Synergies in purchasing perspective refer to initiatives to pool negotiating power across business units. Sharing knowledge, information, experiences, insights and best practices across independent business units also lead to corporate advantage. Potential purchasing synergies across business units have a behavioral soft side. In the World Edition group and its units, starting up corporate initiatives will require changes in the way tasks, responsibilities and authorities are divided within the organization (O’Donnel, 2000), and this will ensure that the cost production is lowered. While implementing this on the other hand, will require change management approach which requires logic and a serious consideration of the emotions and hidden interests among all the stakeholders. As noted earlier, potential synergies in the area of purchasing in the business units have hard and soft side. Making plans together, designing structures that encourages communication and solving of conflict interests, working in cross divisional, cross functional teams are components that can be pre arranged to enhance competitive advantage (Chan & Holbert, 2001). In World Editions Group sourcing contributes to the competitive advantage of the organization. Much of the sales volumes realized are spent on purchasing of raw materials, components or even services (Lo & Yueng, 2004). This is reflected in the World Editions case study data where by most printouts are done outside the company. When sourcing costs are reduced, then the returns on investments will increase by increasing profit margins and asset turnover rate. An international purchasing strategy stretches beyond acquiring good and services but also in contributing to the organization in reducing costs and adding value through better operational links with suppliers, by putting at bay the competitors through better quality inputs and by shortening lead time ( Roth & Pullman, 2008) The competitive advantage need to be realized through harmonizing the technical aspects of the operations in all units in World Editions. Technical harmonization refers to unification of technical standards, legal regulations and procedures for assessing compliance of properties of products and services that are regulated by the entire regulations or standards (McDonough, 2000). It is worth noting that, this harmonization is directed to removing technical barriers of business existing due to different international requirements. For instance, having their own printers can be a very good strategy towards having all books printed at the same point. Harmonizing of technical regulation and standards is a very important aspect for the economic development of World Editions Group. This is due to the fact that it is aimed at supporting and creating conditions for increased market share. There is a need to create a harmonious market through the creation of the new bodies, tools, processes and procedures of coming up with the books. When this is implemented, all the operations in World Editions units will be a level higher which cannot be matched by the competitors (Trent & Monczka, 2002) Above all, the need to have bulk printout on the other hand will reduce the production cost. This calls for having all the books with similar specifications to be printed as a bulk as this will reduce the cost. However, keeping to the standard required by the customers is very important. The quality should never be compromised and therefore books should be printed in accordance to their specifications (Rozemeijer, 2003). Due to competition which is high, the quality and the standard of the books should be directed to the customer desires to protect them from going for the alternatives. Purchasing services consume a large portion of the expenses incurred in World editions. As much as much effort is being done to cut the cost of purchased materials, there is also a need to cut the cost of purchased services. There are very many strategies that can be implemented to help this organization reduce the cost of purchased services (Rozemeijer, 2003). For instance there are only a few printing companies that are owned by World Editions Group. These are World print Australia, world print Germany, GPU UK, and Calder USA and not all books are printed in these facilities. Other units like Spain and France rely on purchased services. These calls for owning printers that will enable them print it by their own and reduce the cost of purchasing that service. There is a need to include volume aggregation, commitment to supplier development, an integrated sourcing and purchasing strategies that will increase control over services purchases. In World Editions Group, units buy the same type of service from different suppliers or even the same type of service from the same supplier at different prices. For instance Argendol printers print several books for Germany World Editions Unit. If these purchases are consolidated into one buying the purchasing price will be lower (Palmer, 2000). In this case, books with the same specification should be printed in the same place, as a bulk for this will bring down the cost of their production. For instance hard covers with 96 pages, with tail band go for 26,400 while printed in World Print. The same book but with 192 pages is printed at Druckerei Damp at a cost of 24,080. Since this books have the same specification despite the difference in the number of pages, should be printed in World Print all together, for this will lower the cost of purchasing that service while they can do it themselves at a lower cost when handling the whole task as bulk. In any given organization, there is a need to have a globally competitive supply chain so as to be globally competitive. Supplier development and relationship management efforts leads to closer cooperation and trust between buying organizations and suppliers. With increased levels of cooperation and communication, buyers and suppliers can indentify ways of cutting cost, reducing waste and reducing non value added activity (Sanchez-Rodriguez, Martinez-Lorente & Clavel, 2003). All purchasing departments should be integrated. This will increase the level of purchasing control and compliance by having the purchasing department being responsible for all the purchases. Savings tend to lack in supply management and other areas of any company due to communication breakdown. This happen in areas like: purchasing compliance, contract compliance, financial controls and payment efficiencies. The units should also have strategies connected to service payments that are referred to as payment efficiencies. In many organizations, there are long and costly service payment schedules (Sanchez-Rodriguez, Martinez-Lorente & Clavel, 2003). These schedules may cause them to miss opportunities for reduced costs like early payment discounts. Considering group buying is also an option in managing the purchases. In this case different organizations combine their purchases for increases volume and in the long run reduce prices (O’Donnel, 2000). When the purchases are not enough to negotiate low rates, then combining with other units which need the same product will add up to a commendable volume and buying power and in the other hand reduce the cost. in this case, all the material for books with the same specification should be purchased as a bulk. This will attract discounts and lower their cost in the long run. World Edition Australia’s unit, prints hard covers type 118”188, 118”188. 125”206, 224, 288 and 256 in number, at 12,650, 13,700 and 23,920 consecutively; if the products are purchased bulkily, then their cost of production will be lowered. There are various challenges that are associated with project management and change management of international projects. It is worth noting that project management involves coordinating various aspects of a project with an aim of getting positive results. These challenges can be inform of equity, cost and schedule. And since it is an international project geographical dispersed projects teams, using the wrong tools, mismanaged resources, wasting time looking for project documents and assets and spending too much time in status meetings is a very big challenge to such projects (Palmer, 2000). In any given project, teams have multiple team members. I.e. team members can comprise of employees, clients and other third parties. The project team belongs to the same organization, yet they often work from different offices for instance in World Editions headquarters in Germany. This calls for a centralized project management solution so as to manage the project. When this is the case, the governance structure is of great importance when it comes to decisions making. The structure can be either centralized or decentralized which are very important concepts in any organization (Palmer, 2000). Centralized concept involves the concentration of formal authority at the top levels of an organization. The main aim of centralization is to have a centralized performance. In this case, the lover levels of an organizational hierarchy look upwards for direction, advice, interpretation and clarification. In other words, this is delegating or withholding authority and the authority dispersal or concentration in decision making. It is worth noting that centralization is all about decreasing the importance of subordinate roles in decision making (Rozemeijer, 2003). For example making all the decision come from the headquarters will mean that all the other units will look to the headquarters for decisions. On the other hand, in the units, the decisions can be the obligation of the senior management, whereby the lower levels can not make any decision but have to wait on the senior management. Decentralization is a democratic method of devolution of any authority. Assigning responsibilities to the subordinates is very important in decentralized model for the lower levels are allowed to decide many matters while a few cases involving the major policies are referred to the top management (Rozemeijer, 2003). Whether the organization uses centralization or decentralization, there is always a continuum of authority in that organization. They are viewed as complementary to each other for when fairly combined they result to accountability, efficiency and effectiveness. Decentralization is viewed as an administrative device for locating the authority of decision making in a dispersed manner while centralization is viewed as a concentration of authority in the top management (Rozemeijer, 2003). It is worth noting that they are both important in decision making and most importantly in project management. When subordinates are given chances to make decisions, they feel part of the project and these acts as a motivational factor. However, there are some decisions that need to be made by the senior management for the projects to be successful. As noted earlier when people are delegated certain tasks, efficiency and effectiveness is expected, for one is held accountable of the assignment delegated to him/her (Rozemeijer, 2003). In this case, delegation is given to those involved in the project to make decision towards the success of the project. This will ensure that all people are involved in the entire project and their skills utilized ,maximamly. Decision making need to be an economy of scale where by there are central units for handling certain decisions expertly for it will turn out to be expensive to distribute experts throughout the organization. This means that centralization is better positioned in cost reduction in the organization. Even when decentralization is aimed at improving effectiveness, the cost consideration tends to focus towards the center (Rozemeijer, 2003). Having set a responsible purchasing policy in World Editions group, the other important aspect is maintaining and developing long term relationship with suppliers for sustainable competitive advantage. For there to be a long term relationship with the suppliers, the buyers need to change from being an adversary to being allies (McDonough & Barczak, 2003). This can be affected by realizing that, the suppliers have technical expertise that is of great importance to them if utilized and cultivated. Communication has to be very paramount for this is the only way of sharing information. There is also a need to measure the supplier’s performance so as to know their compliancy (McDonough & Barczak, 2003). For instance in a supply of 120 pieces of books where 20 are faulty, should be collected and reported and should not be thrown away. This results to waste. Communication of the specifications needs to be adhered to so as to avoid collisions with the suppliers. When there are new ideas which need to be share with the suppliers, it should be done in ways that encourage them to continue in their good work. This is due to the fact that, both the suppliers and the buyers are out to benefit from their businesses. Feed back is vey important to the suppliers so that they can be able to benefit and adjust (Palmer, 2000). This means that World Editors Group units should communicate to their supplier’s shifts in demand of certain types of Book models, to allow them to quick adapt to customer demand. This will be an aspect of working closely with them to achieve the desired goals and being of paramount support to each other. Conclusively, for any project to be successful, the manpower required need to have the necessary skills and experience. A big challenge in any project is the manpower used to enact the project (Zielinski, 2005). This is due to the fact that, people experiences are very important for they will determine how the whole project will be developed. This is due to the fact that, project management comprises of a set of skills, tools and process (Gillard, 2005). Skills are specialist knowledge; skills and experience that are very important for the help reduce the level of risk within a project and thereby bring about its success. Tools are used in the project to improve the chances of success and processes are management techniques that are required to monitor and control time, cost and quality throughout the project development. If the people used have experience that is matched with all the requirements of the project to be enacted, then the entire project is going to be a success and it is going to be achieves in a cost effective manner (Pant & Baroudi, 2008). However, when the expertise cannot be relied on, then there is a need to hire more experienced and skilled personnel so as to have a successful project to the competitive advantage of the organization. References Chan, C.F.,Holbert, N.B., 2001, “Marketing Home and Away. Perceptions of Managers in Headquarters and Subsidiaries”, Journal of World Business, 36 (2), 205-221 Gillard, S. 2005. The competencies of effective project managers: A conceptual analysis. International Journal of Management, 22(1), 48-53. Lo, V.H.Y. and Yueng, A.H.W. 2004. Practical framework for strategic alliance in Pearl River Delta manufacturing supply chain: a total quality approach. International Journal of Production Economics 87, 231-240. McDonough E., 2000, “Investigation of Factors Contributing to the Success of Cross-Functional Teams”, Journal of Product Innovation Management, Vol. 17, p. 221-235. McDonough, E., Barczak, G. 2003, “Leading Global Product Development Teams”, Managers at Work, November-December, 2003, p. 14-18. O’Donnel, S.W. 2000. “Managing Foreign Subsidiaries: Agents of Headquarters, or an Interdependent Network?” Strategic Management Journal, Vol. 21, May 2000, p. 525 548; Pant, I., Baroudi, B. 2008. Project management education: The human skills imperative. International Journal of Project Management, 26(2), 124. Palmer, A.J. 2000, ‘Co-operation and Competition; a Darwinian synthesis of Relationship Marketing’, European Journal of Marketing, vol.34, issue 5/6, pp.687-704. Roth, T. and Pullman, G. 2008. Unraveling the Food Supply Chain: Strategic Insights from China and the 2007 Pet Food Recalls. Journal of Supply Chain Management 44(1), 22-39. Rozemeijer, F. 2003. How to manage corporate purchasing synergy in a decentralized company? Towards design rules for managing and organizing purchasing synergy in decentralized companies. European Journal of Purchasing and Supply Management 6 (1), 5-12. Sanchez-Rodriguez, C. Martinez-Lorente, A. R. and Clavel, J. G. 2003. Benchmarking in the Purchasing Function and its Impact on Purchasing and Business Performance. Benchmarking: An International Journal 10 (5), 457-471. Trent, R. J. and Monczka, R. M. 2002. Pursuing competitive advantage through integrated global sourcing. Academy of Management Executive 16 (2), 66-80 Zielinski, D. 2005. Soft skills, hard truths. Training, 42(7), 18-22. Read More