The Air Force Project - Research Paper Example

The Air Force Project Purchasing and supplies management can be defined as a strategic enterprise wide method to selecting the suppliers of an organization’s goods and services, managing them and the whole value network form the raw materials to the final customer use and disposal. Purchasing and supplies management is a kind of management that seeks to continuously reduce the total ownership costs, manage the risks involved and improve quality, responsiveness, reliability and flexibility. Therefore purchasing and supplies management professionals normally manage procurement raw materials, supplies and other services. They must develop negotiation skills in order to get contracts that will support a company’s production unit (Fraser, et al., 2010). The importance of purchasing and supplies management to the world can be looked at in various dimensions beginning with the process of purchasing to managing the supply chain. The purchasing and supplies professionals are important in the day to day functioning of the organization and without their services it would be difficult for the production department to work. The profession does not only affect the production department but the entire organization as most contracts must go through this department before they are approved to proceed (Fraser, et al., 2010). Purchasing and supplies is important as it helps organizations in save on costs. It is important to note that effective management of the supply chain depends on availability of materials, the purchase volumes, the product cost and types of materials. These factors present a lot of problems to procurement professionals especially the products and materials that have unstable prices. Procurement officers know that a small change or reduction in the material costs can have a great impact in the organization by increasing the profit margin. Therefore these professionals ensure that they negotiate effectively in order to come up with materials that are of high quality at the lowest price so as to save on costs and to maximize profits (Fraser, et al., 2010). The second importance of this profession is that it is used in the effective management of contracts. The procurement officers buy goods and services that are either resold or are consumed within the organization or are used in the production of other goods and services. They deal with the suppliers of goods and services during both direct and indirect buying. This way they establish a long term relationship with the suppliers, which is important for any organization. The procurement officers ensure the long term success of any organization through the definition of requirements for materials, analyzing the value and arrangement of the logistics and distribution of products and services. The third importance has to do with negotiating and administering the best contracts for the organization. In the business world there are so many buyers and sellers of goods and services. These professionals ensure that they negotiate the best deals; they must understand what it is they are buying in terms of quality, cost and delivery, and how what they are buying will be used in the organization. In doing so the officers are able to secure the best contracts that are of mutual benefit to both companies. This way they reduce operational costs, maximize on profits and improve on the working relations of both companies. This in the long run will contribute to a long term, productive relationship between the two companies. There are five basic steps involved in creating a supply chain. The first step is called planning where a company needs to develop strategies for managing all the resources that are used in meeting customer demand for their product or service. A big percentage of supply chain planning involves developing a set of metrics that are used to monitor the supply chain so that it is seen as efficient, has minimal operational costs, delivers high quality and provides added value to its customers (Checklist, 2002). The second step is called sourcing and this involves choosing suppliers to deliver goods and services that are used in the creation of their products. The supply chain professionals are involved in developing a set of pricing, delivery and payment procedures with their suppliers and in the creation of benchmarks that are used in improving the relationship between the two. After this the supply managers then come up with mechanisms for managing their goods and services inventory which include receiving and verifying shipment, transfer to manufacturing facilities and authorizing payment of the suppliers (Fraser, et al., 2010). The third step is the manufacturing step where the supply chain managers are involved in setting up the processes and activities that are necessary for production, testing, packaging and preparation of products for their delivery. This section requires so many factors to be measured and the company is able to measure quality levels, the production output and the productiveness of the workers. The fourth step is called delivery or logistics and is the most important step in the supply chain.it is important because all companies require that their products be delivered to their customers so that they can make a profit from them. In this step companies will invest heavily in systems that will be used to coordinate the receipts of orders from customers. They will have a record of who wants what at what time, what quantity and specifications and where are the goods to be delivered. They will have a network of warehouses to store the goods, have pick carriers that will be used in delivery of products to customers and lastly they will develop an invoicing system for receiving payments (Checklist, 2002). The last step is called return where the company will also create a responsive and flexible network that will be used to receive all the defective products from their customers and lastly will develop mechanisms for ensuring customer support with logistic problems. The process of selecting a qualified supplier can be tedious and demanding, on the other hand it can pay off if a few steps are followed to the latter. This process is not same for all organizations as different organizations have different requirements and needs. However the following information can be used as a checklist to ensure all parts of the process are looked into so that they do not cause problems in the future. The first issue to look at is the supplier’s status. Here a variety of factors are considered such as the employees, the geographical location of the supplier as in where are they located and how easy can they be located. Another factor to consider is the credibility of the supplier and this can be got from information about the supplier’s reputation in the market. You could check white papers, the supplier’s involvement in industry bodies, the supplier’s competitors etc. Still on suppliers credibility you could talk to reference clients whom they have worked with before, the relationship with partners, the strategic direction of the company and the existing relationship between you and the supplier. There could be existing relationship based on previous business and this could be a stepping stone to aid you in the process (Fan, et al., 2010). The second factor to be considered is the delivery capability of the supplier. This can be looked at in terms of the services they offer. Are they able to offer a wide range of services for the company including technical, support and delivery? Another issue to look at is the quality of deliverable: are they able to produce evidence of quality products and do these products meet their standards? The third issue to look at is resources. Examine if the supplier has enough resources to sustain the production of the goods that the company requires. The third factor to consider is the supplier’s culture. Several issues can be looked at here and these include professionalism, openness/ friendliness in as in how honest they are when faced with a problem, how discreet are they about clients and how do they communicate with clients. Another issue is integrity as in do they stand by what they supply? Are they consistent and are they happy to be audited? They could also be looked at how proactive they are as in if they offer solutions to problems, and lastly do they understand your company’s needs and the business environment in which the company operates in? (Fraser, et al., 2010) The fourth factor is the financial/commercial status of the organization. There are various items that can be examined here. Look at the sustainability of the supplier such that are they able to continue existing for a considerable length of time? You could also look at the ownership structure of the supplier and define who they are and who owns them. Analyze the company’s cash flow and find out if they are able to sustain the contract or they will go broke, also check whether they can receive payments after they have supplied the company with products for a given period instead of the direct payment. Look at issues to do with competitive pricing and check whether they are selling at a high or low price as compared to other players in the market (Fan, et al., 2010). The last factor to consider is support or after sale services. Look at what products they offer and what your company is looking for and if the goods or services may require after sale services such as maintenance. Look at the costs involved if any in offering such services and if they are within your company’s reach. Are they available any time to render these services? Some suppliers may be located far off that they may not be in a position to offer support services to their client. They may take long and in the process the company will end up making losses as a result of the problem (Rand Project Air Force, 2011). There are various strategies for negotiating prices with the suppliers of goods and services. The first strategy is to let the supplier mention their price before you can mention yours. Here you could gauge if the supplier is charging low or high price compared to others. If it is low, do not fall for it; ensure you counter check with the quality of products being offered. You may get low price but the goods are of poor quality. The second strategy is to use the bargaining approach where you do not accept the first offer given. Whether the price is low or high, provide your price. The supplier is bound to review his pricing and come up with another figure. Do not accept the figure before you ask him what other costs are covered within the new price. They may present a new price but they come at a cost where you will have to cover other expenses (Fraser, et al., 2010). The third strategy to use could be asking for discounts on purchases you make. If you are a big customer that is capable of purchasing bulk goods, ask them to offer discounts on a given purchase. This could save the company a lot of money because they may decide to give you a discount as you are the biggest customer they have. It is important to work on the discounts so that both parties benefit and not your organization alone. This will help in strengthening the relationship so that it will be difficult for other clients to take your position. Outsourcing refers to obtaining services and expertise from external vendors rather than from the internal units within the organization. There are many advantages to this the first being that the company is able to concentrate on core business areas. In periods of growth the back office operations expand and start consuming resources. Outsourcing back office operations will make the company concentrate on more important issues that contribute to its success. The second advantage of outsourcing is that it saves on costs and efficiency. The back office functions may be complicated and the size of the company may not allow you to perform them. Therefore the only alternative is to outsource that will make the company get the services at an affordable cost. The third advantage has to do with staffing flexibility. There are times when the company as high and low seasons. Outsourcing will help the company to bring on board additional resources in terms of staff to help during the peak period and when the low season is back they can be easily released. The fourth advantage is that it can be used to beat competitors. In today’s business world companies are competing and it is those that can provide high quality goods at an affordable price that remain relevant in the market. Outsourcing can help a company maintain high quality of goods and at the same time provide low rates as compared to their competitors. This gives them a better position in the market. There are various costs associated with outsourcing, these include loss of managerial control as it is difficult to control and manage outside service providers. Second is that there are hidden costs that are usually difficult to calculate or prepare such as legal costs of drafting contracts between two companies. The third issue has to do with security and confidentiality, if a company outsources payroll services or other confidential information, it may lead to a security breach. The fourth problem has to do with the loss of flexibility in reacting to changing business environment (Fraser, et al., 2010). The growth pattern for outsourcing could be difficult to describe. There are a few ideas that could help bring it out such that for most companies outsourcing will begin when the company has grown or matured. Others will start outsourcing immediately they are launched and this will be mainly for services such as IT or advertising. For big companies they outsource when they have peak periods such that the available staff cannot be able to handle the work. Basically the growth pattern is based on the stage of the company in its life cycle, the size of the company, the season and the services required (Fan, et al., 2010). There are various companies that are benchmarks in purchasing and supplies; one of such companies is CEVA logistics that has curved a niche for itself. This company deals in automotive, consumer and retail, energy, industrial and technological logistics. Some of their best practices are to create customer relationships, timely delivery of goods and services, accessibility and support to its customers (Ceva, n.d). Another company is the EA Hunter Transportation. This company specializes in offering transportation services, processes and consulting. They work in the US and abroad. Some of the best practices in the industry employed by this company include strategies to retaining customers, creating and maintaining relationships between the company and clients, adhering to procurement ethics during work and timely delivery of goods and services to clients both in the US and abroad. References Ceva (n.d) Making Business Flow, Retrieved on 09 11 2011, from http://www.cevalogistics.com/en-US/Pages/default.aspx Checklist (2002) Supplier Selection, Retrieved on 09 11 2011, from http://www.projectsmart.co.uk/docs/supplier-selection-checklist.pdf Fan L. Liang, Ramachandran Srihari, Ying Hsiang Wu & Yue Zhang Ning (2010), Outsourcing in Businesses Retrieved on 09 11 2011, from http://teaching.fec.anu.edu.au/BUSN7040/Groups/Group%2013%20Report%20IT%20Outsourcing.pdf Fraser P. Johnson, Leenders Michael R. & Flynn Anna E. (2010) Purchasing and Supply Management. McGraw-Hill, New York. USA Rand Project Air Force (2011), Making a Difference with the Air Force Project (http://www.rand.org/pubs/monographs/2004/RAND_MG116.pdf Read More