The Procurement Processes and Practices of 7 Eleven and David Jones - Case Study Example

STRATEGIC PROCUREMENT MANAGEMENT 1 Name Institution Professor Course Date Strategic Procurement Management 1 Abstract Business entities and agencies have the tendency of using such stages to evaluate or check their procurement actions in relation to the best practice recommendations. Procurement process tends to be similar or common to the diverse categories of procurement. These stages include analysis of needs, approval of funding, project procurement plan, service provider selection, contract management, and procurement evaluation. The purpose of this research paper is to evaluate or examine the procurement processes and practices of two business organizations operating in Melbourne, Australia. From critical evaluation of the procurement processes of the two business entities, it is appropriate to note that they tend to incorporate the aforementioned essential stages Introduction Procurement refers to the action of an organization, institution, or individual to buy good, services, and works from any external source. From a general perspective, procurement process has the tendency of incorporating six broad stages. Business entities and agencies have the tendency of using such stages to evaluate or check their procurement actions in relation to the best practice recommendations. It is note that procurement process tends to be similar or common to the diverse categories of procurement. Moreover, the relative significance or importance of the diverse stages within the process depends on the type, as well as size of the procurement activity under proposal. These stages include analysis of needs, approval of funding, project procurement plan, service provider selection, contract management, and procurement evaluation. The purpose of this research paper is to evaluate or examine the procurement processes and practices of two business organizations operating in Melbourne, Australia. Comparative Profiles of the Organisations One of the business entities of interest to the development of this research paper is 7 Eleven. The objective of the company is to serve up the classic Slurpie, as well as other confectionery. In addition, the company comes out as a convenience store within Swanston with the ability to offer quality services in relation to daily deals on soft drinks, as well as chocolate bars, donuts, and shakes. Moreover, the company seeks to stock bread and milk to accompany other products such as daily newspapers. The physical location of the business entity is at Shop 1 743-751 Swanston Street, Carlton VIC 3053. Secondly, the research will focus on David Jones, which concentrates on the women’s fashion, shoes, menswear, and accessories, as well as beauty, children’s wear and toys among other products. The business entity is appropriate for the development of this research paper because of the friendliness of the management team to offer quality and detailed information in relation to the procurement services, process, and procedures. The physical location of the business is at 294-312 Bourke Street, Melbourne VIC 3000. Comparative Procurement Processes David Jones Procurement Planning According to the manager of this organisation, it is significant to plan for the procurement or purchasing process in accordance with the demands and expectations, as well as resources of the company. Effective planning is vital in the course of ensuring the effective value for money in alignment with the supply policy (Murray, 2014). The manager notes the tendency of integrating the procurement processes and procedures in accordance with the vision and mission. The development of this research paper will focus on the evaluation of these procedures and processes of the procurement or purchasing practice prior to examination of the best practices. Establishment of the Business Needs According to this manager, the first process is the determination or establish of the need to make purchases or procurement while utilising effective and efficient management in accordance with the policies. During this stage, it is vital to consider and examine diverse purchase options available, as well as the potential sources of supply. Ineffective definition or establishment of the needs, as well as suppliers might lead to incorrect products or service, thus massive increase in time, cost, and effort (McKevitt & Davis, 2013). In the course of identifying the business needs, the institution tends to focus on organisation and execution of internal and external research to identify purchase, as well as potential suppliers. Moreover, the organisation should consider agreeing to the outcome with the intention of determining the most appropriate purchasing option in relation to the risks, costs, and other management issues in accordance with the procurement policy. Integration of the Business Case In this context, the manager notes the influence of business case whenever there is high-risk, high-value, or unique nature of the procurement process. This business case has the tendency of highlighting the scope of the purchase while providing the platform for the development of the implementation strategy, thus the opportunity to ensure the achievement of the objectives by the selected options (Maria, Emilio, & Ordonez, 2014). In the development of the business case, this organisation is essential in incorporating various factors. Some of these factors include feasibility or affordability, identification and appraisal options, procurement strategy, and platform for endorsement from appropriate forum. Procurement Strategy In the course of making procurement or purchase with high-risk or unique products and services, there is need to develop a procurement strategy, which will provide commencing of the contract formation phase. There is need to maintain probity, as well as accountability in the development of the procurement strategy. There is also need to review the previous purchases or procurement plan and techniques (McKevitt & Davis, 2013). The procurement plan will provide a comprehensive document that outlines the stages in the project, as well as the management. The plan will be essential in the course of incorporating request and specification. This is vital to ensure clarity and precise of each component. The strategy contributes to the determination of the exact requirement, quantity, and quality, and timeframes. Furthermore, the plan is critical in the identification of the user needs and evaluation of criteria to reflect the importance in relation to the specification. This will incorporate the cost of tender processes in concise and accurate. There is need to consider sustainability issues as part of the decision-making process. Sustainability is one of the essential parts or elements of the decision-making for the business entity in its operations in the context of Melbourne. These types of specifications include functional, performance-oriented, and technical specifications such as size, capacity, and materials (McKevitt & Davis, 2013). Competitive Purchasing/Procurement Effective management of procurement is vital for the realisation of best value for money, thus the perfect platform for the decision-making. During this stage, the obligation of the organisation is to receive and record offers. This is the obligation of the sales and purchasing manager. In most cases, the suppliers have the obligation of sending or quoting their appropriate offers, which are sent to the organisation through its email address. The procedures for the receipt, opening, and registration of the offers tend to adhere towards their security and confidentiality (Murray, 2014). The stage is also vital in the course of evaluating offers. During this process, the organisation focuses on convening the evaluation panel of three practitioners with the objective of reviewing the relevant offers. This provides the platform for the due diligence, which is a formal stage within the course of the contract negotiations and management. Parties will have the opportunity to test their expectations, as well as understanding of the contract. The phase is ideal in the identification of the false assumptions, thus the need to integrate negotiations with the intention of resolving any misunderstandings (Maria, Emilio, & Ordonez, 2014). The organisation seeks to evaluate and execute this process through verification of the accounting records, assets, and sites in accordance with the demands and expectations of the consumers, as well as business entity within the case of Melbourne. Awarding and Implementation of the Contract Completion of the competitive procurement phase provides the platform or opportunity for awarding of the contract. The first step of this phase relates to obtaining the approval from the management to award the contract to the competitive suppliers in accordance with the criteria. In addition, it is critical to notify unsuccessful suppliers on their performance, as well as participation in the course of the competitive phase (McKevitt & Davis, 2013). This will encourage their participation in the future encounters, thus enhancing the image and reputation of the firm within the industry of operation. Management of the Contract Contract management comes out as an essential element of the procurement cycle with reference to the mission and vision of this company. This is because of the potentiality of the phase to incorporate aspects or facets relating to risk, value, and complexity of the procurement procedures and processes. The phase contributes through identification of the plans for the contract administration, thus the need to incorporate aspects such as delegations, relationships, and reporting requirements, as well as the eventual responsibilities between the suppliers and the business entity (Maria, Emilio, & Ordonez, 2014). Careful, as well as timely planning is critical towards realisation of continuity in the provision of the services or products, which are crucial to the operations and transactions of the organisation. Closure & Review At the completion of the procurement process, there is need to review the procedures, best practices, and limitations prior to embarking on a similar or new contract process, which is ideal in the procurement process. The outcome of the review process is valuable in the establishment of the clear and precise understanding of the future requirements, thus the opportunity for the organisation to adopt quality information in relation to the best action in procurement (Maria, Emilio, & Ordonez, 2014). These attributes are essential in the provision of effective and efficient closure of the procurement or purchasing process within the organisation in accordance with the demands and expectations of the consumers. 7 Eleven Procurement Planning Analysis of Needs/Requirements In the case of this organisation, the first step towards realisation of effectiveness and efficiency in the procurement management is the analysis of the needs to purchase. During this stage, the organization has the tendency to organise and execute an internal consultation under the influence of inclusivity with the intention or objective of identifying the needs. In addition, the engagement should provide the platform for the agreement on the business needs, as well as mechanisms to address the objectives of the purchasing or procurement process (Meyr, Wagner, & Rohde, 2015). Moreover, the company tends to consider integration and exploitation of the management plan while analysing the needs. It is also vital to organise and execute external consultation in diverse circumstances with the objective of addressing effectiveness and efficiency concerning the desired state of the company (Maria, Emilio, & Ordonez, 2014). Similarly, the manager of the organisation notes the influence of the previous, as well as existing arrangements under the influence of the supplier performance and the eventual contract management issues. This initial stage enables the organisation to practice its best practices and processes, as well as procedures while aligning the needs with the vision and mission statements for sustainability in handling the demands and expectation of the consumers. Approval of Funding Stage Following the analysis of the needs, the institution focuses on adhering to the procurement policy while liaising with the financial practitioner on the need to procure. During this stage, there is need for the organisation to consider defining the scope, as well as objectives in accordance with the outcomes of the needs analysis. In addition, the procurement (purchasing and sales department) focuses on the development or construction of preliminary procurement strategy. This will work effectively and efficiently under the influence of the preliminary risk and shareholder plans, which are appropriate in the course of managing change in accordance with the demands and expectations of the company. These practices are critical towards realisation of effective and efficient business case, which paves way for the request of financial resources from the finance department while adhering to the mission and vision of the company (Yund, Ryan, & Jin, 2012). The final practice during this stage of procurement is the approval of the funding practice in accordance with the demands and expectations of the consumers, as well as business entity in the market and industry of practice. Development of the Procurement Plan The third stage is one of the essential aspects of the procurement management with reference to the case of this organisation for effectiveness and efficiency in addressing the mission, vision, goals, and objectives of the business entity. The purpose of this stage is to enable the organisation to determine or establish appropriate strategy towards approaching the market with the objective of ensuring the achievement of the strategy objectives. From this perspective, the organisation uses the stage to prepare for the market invasion in accordance with the needs analysis in the first stage of the procurement management. During this stage, the company concentrates on identification, as well as implementation of the requirements of the change management plan while facilitating the generation of the procurement strategy. The practice is vital in gaining the authority to make the procurement action (Meyr, Wagner, & Rohde, 2015). Another essential practice of procurement management in this stage is the establishment of the special requirements for the type of procurement in consideration. These practices must relate to the policies, mission, and vision of the company while considering specific categories of the services and products. Effectiveness and efficiency in the execution of this stage are vital for the approval of the procurement plan in accordance with the demands and expectations of the target audiences and the business entity. Selection of the Service Provider According to the manager of this institution, selection of the service provider tends to incorporate three critical practices: evaluation of the relevant responses, negotiations, and integration of the contract. During the evaluation process, it is the obligation of the sales and purchasing department to consider ranking of the relevant suppliers in accordance with the criteria in the procurement plan. In addition, the organisation has the obligation of inviting suppliers to execute presentations whenever appropriate. This is mostly applicable whenever the organisation seeks to add more suppliers to its network while addressing the demands and preferences of the consumers in the wholesale industry within the case of Melbourne, Australia. This stage is valuable towards enabling the organisation to make valuable assessments and checks in relation to the new suppliers and potential risks (Meyr, Wagner, & Rohde, 2015). The outcome of the evaluation process will lead to the generation of the shortlist of suppliers to participate in the negotiation and awarding of the contract. In accordance with the size of the organisation, the manager notes that negotiation and awarding of the contract does not incorporate many stages or steps for effectiveness and efficiency towards the achievement of the procurement objectives (Nemec, Mikušová, & Grega, 2014). The objective of this stage is to prepare, as well as approve relevant recommendations in relation to the presentations by the suppliers. This provides the platform for the execution of the negotiation with the chosen suppliers. The eventual practice in this stage is the awarding of the contract to the ideal and appropriate supplier (Murray, 2014). In large procurement instances, the company has the tendency of generating implementation plan with the highly ranked supplier with the intention or objective of limiting disruptions. The implementation plan adheres to the mission, vision, values, and goals, as well as objectives of the company within the wholesale industry. Management of the Contract The fifth stage of the procurement management is essential in facilitating transition between the awarded contracts and the performance of the management of the company aligned with the demands and expectations of the stakeholders and shareholders. One of the major practices in this stage is the disclosure of the information relating to the awarded contract. In addition, it is the obligation of the management and the supplier to ensure the delivery of the services, as well as the products while adhering to the contractual responsibilities. The organisation plays a critical role in facilitating the management of the performance of the supplier to enhance effectiveness and efficiency in the delivery of the services and products (Meyr, Wagner, & Rohde, 2015). It is also the obligation of the company to facilitate the management of the contract administration with reference to the variations concerning the price, services, and products. These attributes are critical in aiding the management of transition and the eventual exit. Evaluation of the Procurement Following the monitoring and execution of the procurement plan, it is ideal for any business entity to consider the assessment of the performance of the supplier or the service provider with reference to the value for monetary resources (Moe & Päivärinta, 2013). The objective of this stage of the procurement management focuses on the determination of the ability of the plan to address the needs, targets, and goals of the company in accordance with the mission and vision of the company. Similarly, the organisation should consider utilisation of this stage towards determination of the need to use the same suppliers in the future. Stress Testing of Organisational Procurement Process In this context, the research paper will focus on four critical risk factors with reference to disruptions, delays, procurement, and forecast (Chopra & Sodhi, 2012). Disruptions In most cases, disruptions to the procurement process tend to be unpredictable and rare, but quite damaging. Some of the common aspects of disruption relate to labour strikes, fires, natural disasters, and terrorism with the tendency to halt the flow of materials. According to the two business entities, one of the major causes of disruptions is labour strikes, which require the companies to halt their transactions in relation to addressing the demands of the consumers within the industry of transaction (Chopra & Sodhi, 2012). Disruptions tend to have significant implications in relation to the operations of the business entities, thus the need to incorporate substantive mitigation strategies such as generation of redundant suppliers. Delays In this context, the companies note the tendency of facing delays whenever materials flows fail to arrive in time (Chopra & Sodhi, 2012). This might be because of inflexibility of the supplier to respond to substantive changes to demand. In the case of 7 Eleven, one of the major causes of this risk include poor quality output at supplier plants. On the other hand, Dave Jones cites diverse issues such as quality inspection and changes to mode of transportation. Delays lead to massive decrease in the profitability of the organisation, thus the need to adopt diverse mitigation strategies such as reduction in the capacity, responsiveness, and level of inventory. Procurement Procurement risk relates to the unanticipated increases in relation to acquisition costs from fluctuating exchange rates or supplier price hikes. The risk tends to affect the operations of the organisation through determination of the volume to procure within the market and industry of operation (Chopra & Sodhi, 2012). Forecast Forecast risk relates to substantive mismatch between the projections of the business entity and the actual demand. For instance, too low forecasts lead to lack of products to sell in accordance with the demands of the consumers in the market (Chopra & Sodhi, 2012). On the other hand, too high forecasts lead to excess inventories, thus the eventual price markdowns. Supplier-Related Internal Customer-Related Disruptions A critical supplier decides to shut up plant for two months Decrease in the capacity of the supplier Decrease in the capacity of the organisation overnight Termination of a product line unexpectedly Unexpected increase in the demand by consumers Unexpected decrease in the consumer demand Delays Delay in the purchase orders by three weeks Delay in the production orders by a month Delay in the customer orders by two weeks Procurement Delays by the supplier in processing returns Increase in the cost of transportation by 30 percent Unexpected cash squeeze demanding three weeks delay in paying vital suppliers Forecast Low forecasts by 30 percent High forecasts by 20 percent Low demand forecasts by 30 percent High demand forecasts by 20 percent Conclusion Conclusively, business entities and agencies have the tendency of using procurement processes and stages to evaluate or check their procurement actions in relation to the best practice recommendations. From critical evaluation of the procurement processes of the two business entities, it is appropriate to note that they tend to incorporate these essential stages: analysis of needs, approval of funding, project procurement plan, service provider selection, contract management, and procurement evaluation. List of References Chopra, S., & Sodhi, M. S. 2012. Managing risk to avoid supply-chain breakdown. MIT Sloan Management Review (Fall 2004). McKevitt, D., & Davis, P. 2013. Microenterprises: how they interact with public procurement processes. International Journal of Public Sector Management, 26(6), 469-480. Maria Alvarez-Rodriguez, J., Emilio Labra-Gayo, J., & Ordonez de Pablos, P. 2014. New trends on e-Procurement applying semantic technologies. Meyr, H., Wagner, M., & Rohde, J. 2015. Structure of advanced planning systems. In Supply chain management and advanced planning (pp. 99-106). Springer Berlin Heidelberg. Yund, W., Ryan, J. K., & Jin, Y. 2012. Design of Two-Stage Procurement Processes with Imperfect Information on Supplier Capabilities. In IIE Annual Conference. Proceedings (p. 1). Institute of Industrial Engineers-Publisher. Murray, J. G. 2014. Procurement Fraud Vulnerability: A Case Study. EDPACS, 49(5), 7-17. Moe, C. E., & Päivärinta, T. 2013. Challenges in information systems procurement in the public sector. Electronic Journal of e-Government, 11(1). Nemec, J., Mikušová Meričková, B., & Grega, M. 2014. Procurement Management and its Impact on the Results of Externalisation. Read More