Procurement And Inventory Management Commerce Essay

Procurement And taketaking precaution Commerce EssayA formal procurance impact is a systematic step by step exercise that is most-valuable to hail to ensure no or little mistakes, and to a fault hand age saving, ensure the right solution to meet business selects, to excessively ensure the right bell is paid (not necessarily the lowest pr churl), and ultimately not to miss let go forth on fundamental stairs that big businessman accommodate serious consequences.The come with commons jalapeno (GC) is a private owned eatery chain operating in the UK. It dismissions well-nigh(prenominal) restaurants for takeaway meals and for people that get bulge stop and sit down for luncheon or during any other time of the day. The guild currently devour 53 restaurants whole over the UK in the major cities and towns, collectively they perform on average 16000 eat down in meals everyday and 23000 customers advance for snacks and drinks which ar mostly taken away to eat. Due to the bon tons successful harvest-home the restaurant chain is facing certain seasonality problems of staffing issues and over stocking of items due to the UK egest seasons and the unfavourable variable weather conditions that argon influencing customer preferences. The company have confabulation, information, pricing issues, lumber issues and to a higher(prenominal) place in altogether no unified procural solve in place.After offering consultancy swear emerges to the company regarding its procurance building the next stage is developing a wellspring structured procurance schema for the sourcing of high usage pabulum and non food items that exit meet the needs of the company wide procurement regale.The owner of the company is experienced and has been in the business for a long time, I bequeath be going through the carry taboo of sourcing with him and the rest of the staff.In 1967, the Canadian, American and Israeli securities labor placeing researc hers, Robinson, Faris and Wind, introduced the cloudgrid trap take as a generic conceptual model for buying processes of organisations. They saw industrial buying not as single events, but as organisational finale-making processes where multiple individuals decide on a bargain for. Their framework consists of a matrix of buyclasses and buyphases.The BUYCLASSESBuyclasses argon1. New Tasks2. Modified Rebuy3. without delay Rebuy found on field research, Robinson, Faris and Wind divided the buyer purchase process into eight sequential, distinct but interrelated BUYPHASESAssessment of a companys current spending Fully lowstand the spend category (what is bought, where, at what footings?Assessment of the supply market (who offers what?).Total be analyses (how often does it personify to provide those goods or improvements?).Identification of suitable providers.Development of a sourcing strategy (where to purchase, con fontring demand and supply situations, while minimizing ris k and cost).Negotiation with providers (products, wait on levels, prices, geographical coverage, etc.).Implementation of bracing supply structure.Track results and restart estimation (continuous roulette wheel).Assessment of a companys current spendingUsing spirt chili con carne Company as a matter turn over. Assessment of what is bought by the company in recent time and in comparisons to previous years, from which provider procurement and sourcing were made and lastly at what price were they bought? Fully understand the spend category at the beginning stage, the sourcing aggroup (including the management and some staff) need to ensure it understands everything ab come out of the closet the spend category itself. Identify opportunities, what could be of improvement twain food and noon food item, in extra for meal outturn. The pastime materials atomic number 18 needed necessitately and indirectly by the companyEquipment usual restaurant equipment like cooling syste m, cooking, washing and rinsing, ventilation e.t.cComponents this implys the good leave, style, taste, refinement and run of the company.Raw material These atomic number 18 items used in cooking, tippy meat, rice, beans, vegetables e.t.c.Completely finished goods inventory held for these goods are usu wholey between company and customers. Suppliers supply the goods and function directly with out any form of variety by the company. Goods like treats by restaurants to customers.Service requirement might includeComputer programmers for online ordering, restaurant website creation and principal(prenominal)tenance.Hazardous waste handlers proper disposing of violent waste substances according to guard measures.Transportation carriers restaurant trucks maintenance and kindles. guardianship service provider general maintenance in the restaurant i.e. galvanic appliances, assets, environment, bill boards (branding), cleaning e.t.c.Assessment of the supply marketThe top officials in the sourcing team have re evaluate the providers market for rude(a) potential suppliers. The re evaluation of suppliers is in two areas grapheme and price. A direct comparison is made of existing suppliers against at least three potential suppliers using taste panel. As many suppliers as viable are sought which appear to have a product that is similar to that in question or which have the capabilities to produce much(prenominal) a product. Suppliers could be known to any of the sourcing team members or found through slew journals and managing directories. Other sources of potential suppliers include mountain shows and speculative letters. This process is carried out for both food and non food item. The good deal of purchases to be made could be predicted from past procurements with an analytical perspicacity of which goods and service moved fast and which were slacken movers. For fast movers cycle stock inventory purpose or pilot film inventory could be adopted especi onlyy for goods and services relevant for the production of meals like rice, meat, baking hot dredge e.t.c. And for slow movers i.e. ice cream machines and bare-ass materials a seasonal stock could be adopted, since ice cream are more consumed in summer and summer breaks, than winter.Total cost abstractHow much it costs to procure those goods, the food and non food items. In the past, lay out and possible future forecast by experts. These recommendations are then passed on to the procurement section of the restaurant that will use them to decide which suppliers should be progressed to the price dialog stage. The procurement team then indicate for quotations which are b bothpark figures which the team later netizes (direct comparison on price). It is necessary that the judicial admission is complete, and the judge costs including distribution are a part of this. In this way, the procurement team has knowledge of costing and the taste comparison recommendations onw ard negotiations are entered into.Identification of suitable supplierThe company should periodically run assessment for seek alternative suppliers to existing incumbents, a well carried out assessment for both present suppliers and potential suppliers. The company should have an in depth understanding of the supplier marketplace dynamics and current trends (how goods and service are packaged and delivered, alternative products that substitute the present). Prepare a study of the cost components of the product service, and analyze the suppliers market place for risks (hazardous goods, or infections especially for food unprocessed materials) and opportunities establish on a survey to assenting the capacity and capability of the market to meet your requirements compared with your present suppliers. It will modify the company to assess whether the present sourcing process is feasible or the go around. It shows to compile knowledge in the disclose areas likeFeasibility,CapabilityC apacity how much inventory the supplier can provide for the companys restaurant chain in the country. If the supplier is able to meet the demand of Green Chilly company. due datePrices of key rude material and other important variables involved in the procurement process such as labour and transportation essential be priced and calculations done of the suppliers cost elements referred to as should-cost information from the major components of the key products. Take a view on the key suppliers sub ground level marketplace, and analyse for risks as well as opportunities. Should cost digest drives decline in cost and supplier continuous improvement efforts. Although should cost analysis does not work for all item, sometimes traditional strategic sourcing techniques work w ell in cases where should cost doesnt work well.Development of a sourcing strategyUsing a cross functional procumbent team in Green Chilly Copany. Deciding where to buy while minimizing risk and costs is the majo r factor that lays the development of the strategic sourcing strategy. The strategy would depend by and large on the alternatives available to the current suppliers, and similarly how competitive the supplier market is. In addition how open the users are to new suppliers.This process depends on some factors likeHow competitive the supplier marketplace isHow supportive your organisations users are to testing incumbent supplier relationshipsWhat alternatives exist to competitive assessmentIf the supplier have well developed systems for planning material, violence, and capacity needsDoes the supplier track key performance measures, such as throughput time, quality levels, and cost?How easy is it for customers to interact with the suppliers planning and control systems?The next step is to determine the sourcing process the most common method of sourcing is to use a request for proposal process for soliciting bids (RFP, RFQs, eRFQs, ITTs). This will define and affect clear the requi rements to all pr correspondified suppliers. It Includes product or service proper(postnominal)ations, legal transfer and service requirements, pricing breakdown and legal and financial terms and conditions. When all these messages are all been passed out, ensuring all suppliers the competition is on a level played field, a follow up message should also be sent out to foster a greater response.Negotiation with suppliersIn this stage the selection and negotiation with suppliers is carried out base on the products, service levels, prices, quality, delivery, geographical coverage and redundant benefits. In respect to products been bided for, suppliers m hoariness meet delivery, price, quality and purposes of inventory core the quantity required by Green Chilly Company. The supplier must(prenominal) be able to meet the demands of the company based on the volume forecasting of the company which In the case of Green Chill Company, all the bids should be related to food and non food items (i.e. food stuffs like meat, rice, vegetables, nutrition e.t.c. non food like cooking, cleaning, dinning equipments) the process of procurement is different for each item. Could be buffer or safety stock for rice, cycle stock for vegetables and meat, in transit inventory for items like chop stick, seasonal stuck for goods like ice cream, during summer or heaters during winter e.t.c.The price and quality of goods, both food and non food items most be regulated crossways all Green Chill chain of restaurants in the country. Geographical coverage is of high philia to Green Chill Company because of the companys chain of restaurants. The procurement team should apply its evaluation criteria to supplier responses. From this process the GC procurement team will be able to then narrow down to a someer finalists. The few finalists should be compared together with the senior executives involved to give their final approval and a final supplier should be selected. The senior executi ves should be make outly briefed so as to prepare them for calls from disap head worded suppliers.Implementation of new supply structureAfter a proper new structure as been formulated, the winning or successful suppliers should be notified and they should be invited to recruit in implementing process and recommendations. Green Chilly Companys new structural process should also be communicated to all staff and users to bridge the communication gaps and problems in the company. Implementation plans vary depending on the degree of changes. The communication plan in the strategic sourcing strategy will majorly comprise of any improvement to specifications or process, changes in delivery ( leave alone time) service requirements (inventory management) or pricing (major changes in the prices of goods both non food and food item) should be communicated in the process of implementing the new process.For old suppliers coming back to be winners there will be communication changes in specifi cations, improvements in delivery, and service or pricing models based on what they do before compared with the new structure. In the case of new suppliers a communication plan has to be developed that will supervise the handing over from old to new at every point in the process that is touched by the structural change. i.e department of finance and customer services affected by this change, and the risk supervision will be curiously sensitive during this period, due to their vulnerability to mistakes. It is necessary to measure closely the new suppliers performance during the first workweeks of performance.It is also important to capture the intellectual upper-case letter GC sourcing team has developed during the seven-step process so it can be used the next time that category is sourced.Track results and restart assessment (continuous cycle)This is a major aspect of the whole sourcing management process carried out by the Green Chilly Company. It is the start of a continuous c ycle, startle with benchmarking the current status of the commodity or category, monitoring the results and ensuring that full hold dear is being achieved.ConclusionAfter spending time planning all the processes of procurement, the roles and responsibilities of each member of the procurement team must be well established. The procurement process is reviewed and communicated to all parties involved including staff of GC.Given the market Green Chilly chain of restaurants is which is in the United Kingdom. A rally distribution system would be of an advantage and feasible. With a central distribution goods and services could be distributed in 4 to 5hours drive to all corners of the UK. With the procurement process listed above putting in mind central mending (Birmingham) criteria for suppliers bidding for contracts. Inventories are mostly head in goods in transit, stark naked material and finished goods in a restaurant. It is safer to run a safety stock for some products in the res taurant and a seasonal stock for some other stock like ice cream ingredients. The main goal is to have a reliable supplier with low price considerations and Just in time deliveries (JIT).Section 1 (2299 words)Reference marketing Management Guide. MMG Buy grid model Online. addressable from http//marketing-management-business.blogspot.co.uk/2009/11/buy-grid-model.html Accessed seventeenth November, 2012.Leung and Bockstedt Structural Analysis of a Business Enterprise.Service Science 1(3), pp. 169-188, 2009 SSG. Online. getable from http//www.sersci.com/ServiceScience/ transfer/12556582800.pdf Accessed 8th celestial latitude 2012.Purchasing Insight. The Procurement Process. Online. Available from http//purchasinginsight.com/resources/the-procurement-process/ Accessed 11th December 2012.Article citation Elizabeth Mawson, Andrew Fearne, (1996) Purchasing strategies and decision-making processes in the food service industry a case study of UK restaurant chains, bring out Chain Mana gement An International Journal, Vol. 1 Iss 3, pp.34 41. Online. Available from http//0-dx.doi.org.pugwash.lib.warwick.ac.uk/10.1108/13598549610155305 Accessed 15th November 2012.Robinson, Patrick, Wind, Yoram and Faris, C.W. Buy-grid framework. Marketing Selling. Online. Available from http//www.provenmodels.com/549 Accessed twentieth November 2012.eHow. List of equipment needed to start a restaurant by Kristen Bennett, eHow contributor. Online. Available from http//www.ehow.com/list_6720275_list-equipment-needed-start-restaurant.htmlpage=0 Accessed 27th November 2012.Purchasing Procurement Center. Source 2001 A.T. Kearney. Online. Available from http//www.purchasing-procurement-center.com/strategic-sourcing-process.html Accessed 28th November 2012. add Management. The seven stages of a sourcing strategy. Online. Available from http//www.supplymanagement.com/resources/how-to/guide-to-strategic-sourcing/the-seven-stages-of-a-sourcing-strategy/ Accessed 2nd November 2012.The Suppl y Chain Resource Cooperative. The SCRC Article library, Procurement process-creating a sourcing plan,by Robert Handfield, PhD. Published on Jan 26,2011. Online. Available from http//scm.ncsu.edu/scm-articles/article/the-procurement-process-creating-a-sourcing-plan-procurement-a-tutorial5 Accessed 2nd December 2012).Chapter 3, Sourcing Strategies to Manage Supply Distributions, by Amanda J. Schmitt and Brain Tomlin.Pages 51 to 60. Online. Available from http//0-link.springer.com.pugwash.lib.warwick.ac.uk/ gist/pdf/10.1007%2F978-0-85729-778-5_3 Accessed 6th December 2012.http//0-link.springer.com.pugwash.lib.warwick.ac.uk/content/pdf/10.1007%2F0-387-25183-9_1 Accessed 4th December 2012INSTITUT NATIONAL DE RECHERCHE EN INFORMATIQUE ET EN AUTOMATIQUE.INRIA, by Lys Benyoucef,Hongwei Ding, Xiaolan Xie. Online. Available from http//hal.archives-ouvertes.fr/docs/00/07/18/60/PDF/RR-4726.pdf Accessed 4th December 2012.provider SELECTIONContentsSUPPLIER SELECTIONQuestion 2 entranceNowadays the costs and effect of purchasing raw materials, goods and services from suppliers are very important. Majority of the costs incurred by a company are usually procurements of components and materials for production. This shows how important decision of purchasing activity is. The procurement process usually determines the final cost of a product. Among the decisions related to this activity, supplier selection is most capital decision (Nydick and Hill, 1992) and (Mobolurin, 1995). Supplier selection is the most important decision in the procurement process.Given the market Green Chilly Company is in, the decision making process should be well defined and laid out. establish on the Decision making process (selection of supplier) raw material inventory (food stuffs like meat, vegetables, perishables e.t.c) seasonal stock, safety stock, speculative stock, cycle stock. Monetary influence and non financial influence criteria modify the quality of supplier. to a fault the risks both in fluences and external factors should be well examined. There are so many factors to go through in deciding who to buy from, what to buy and what quantity, how to carry out the procurement process, where and for what purpose for inventory.Supplier selection for bake FlourBaking flour is an essential product in the purport operation of a restaurant all round the business year. employ in the production of meals.Using structural role analysisIn respect of the simplistic of the BUYGRID framework, structural role analysis can also be used in reaching a structural frame work for the sourcing and procurement process for the company. This technique allows each task in the buying procedure to be related to the individual (procurement team) responsible for decision making and is more flexible in the description of the buying procedures in the company for baking flour. In this way, it is easier and possible to include explicitly factors change the decision making process in selecting a supp lier, these factors includesSocial and ethnic factors the cultural differences or social influences on the level of purchases made on some products have to be monitored for the sake of improvement and how to do bump on such goods. Since the restaurant chain is different area of UK, with different social and cultural differences. This should be put into consideration and monitored.Political and frugal factors factors like political instabilities, strikes (restaurant union), lock outs, Quotas/ import quotas, Exchange rate mutant for goods and services imported, regulations ad restrictions concerning products and designs, application and usage. Laws governing goods and services used in restaurants and also the restaurants in the country. For the supplier of baking flour, some types of flour might be banned in the UK, or importation restricted.Technological factors engine room advances in the restaurant market, provides new opportunities for storage and distribution of goods and s ervices. Suppliers have to upgrade to meet up with present trends in the market.Industrial factors there are mandatory compliance under a variety of industrial acts, affecting suppliers and restaurants concerning some issues like environmental protection, health, safety, and consumer protection laws e.t.c affecting the selection of suppliers. organizational this is from both the buyer and the supplier. Organizational set up of the two parties must be examined.Environmental/ External factors there are environment laws guide the type of pollution and amount acceptable in a particular area. Disposing of hazardous components is essential.Risks the potential risk of a supplier defaulting. Adequate misadventure plans should be put in place. In the case the supplier contaminates the goods, because restaurants raw material is very sensitive.Monetary and non monetary factors the price of goods and services supplied confirming distribution is the main factor considered by the buyers. Price drives the purpose for seeking for new suppliers. There are non monetary factors like the good will of the supplier or the supplier is the sole supplier of such product. The go out time on some goods is also crucial to the delivery of such goods and services.The above factors throw light on the cause and effect of specific actions during the decision making process.Structural role analysis links personnel structures with the roles and tasks that are carried out. In this way the constructed model gives a clear indicator concerning who is responsible for which tasks. This is well adornd by structural role analysis since the personal effects on the buying behaviour in terms of the individuals that carry out specific tasks and the order in which they are carried out are exact. These individuals are all part of the procurement team (includes managers, commercial director, operations director and marketing director, site catering managers). Structural role analysis requires the rec ognition of key decision makers and the intentions between individuals in the decision making unit.To illustrate the use of structural role theory, we should consider the case study of Green chilly company. We should start by displaying the roles of the buying centre (procurement team) of the companys restaurant chain, for precedent a uninterrupted rebuy. A straight rebuy is a routine buy that may have been made many times before. In this case study on Green Chilly Company, lets pick a straight rebuy for baking flour. A policy of central procurement is followed. Distribution is carried out from the central depot through a specialist distribution company. The distribution company delivers to all restaurants in three to four days per week all over the UK branches.Each member of the procurement team is briefed and assign a role (buyer and assistant buyer). In this case of repurchasing baking pulverisation on a straight rebuy process re-evaluation is undertaken before reordering wi th the akin supplier. The re-evaluation of suppliers is going to be carried out in four areasQuality the quality of products supplied is very essential to the services and goods rendered by the company. Better quality supplies lead to better goods and services produced.Price the price of goods and service supplied directly affects the selling price. This includes the distribution costs as well.Service the packaging and technology advances of the supplier is very paramount to the procurement processDelivery just in time delivery (JIT) is very important, especially in a restaurant running all through the week. For a product like baking flour cycle stock or buffer stocking should b employ to prevent shortages.A direct comparison is made of existing supplier and against at least three potential suppliers based on the areas above using a taste panel. As many suppliers as possible are sought which appear to specialize in baking flour products with capabilities to produce such a product .The following steps are carried outSeeking of potential suppliers head up comparison on qualityDirect comparison on priceDirect comparison on serviceDirect comparison on delivery timeDecision/ weft of selected supplierSeeking of potential suppliersPotential suppliers are either already known to the procurement team of the company, or found through trade journals and directories. Other sources of potential suppliers include trade shows and speculative letters. Therefore, there is a pool of suppliers for baking flour from whom to choose as well as active search for new suppliers. The information needs to be right away available to all potential suppliers with a tight specification on the product and with a rough price built into the brief. All suppliers of baking flour need to match the product to these specifications, including quality, delivery time, price and services rendered. The procurement team acts as a forum for discussion and also to make decisions on what quotas to give in terms of quality, price, delivery time and services.Direct comparison on qualityIn this process all products from all suppliers are all tasted blind and this side by side comparison is the key evaluation on the quality aspect. The procurement team makes the decision in terms of taste, texture and colour, and then makes recommendations about which products should be considered further, based on the result of the tasting and recipe compilation. This information is now passed to the leader of the procurement team leader and member who now resolute which suppliers should be progressed to the price negotiation stage.Direct comparison on priceThese are ballpark figures which the team later finalizes. It is necessary that the specification is complete, and the expected costs including distribution of baking flour are well detailed. In this way the procurement team has knowledge of all price quotations of all suppliers and taste comparison recommendation.Direct comparison on serviceA detailed heavy point method is used to categories each suppliers based on their pat performances in rendering their services with GC or with other companies.Direct comparison on delivery timeBased on past jobs for GC or other companies, the supplier with the best just in time (JIT) delivery stands better chance of acquire contracts from the company.Non-monetary criteriaNon monetary criteria includes lead time of some goods and services, good will enjoyed by some suppliers from their clients. There are ways to make decisions just based on abilities not just on monetary basis. A weighted point method is a good example to illustrate this pointWeighted point methodThis method is based on a non monetary criteria evaluation. Not all criteria and decision can be mensural in monetary terms, as no market value exists for some criteria. In this method Green Chilly Company we consider the non monetary costs and benefits associated with each of the set factors.Based on the factors for con siderations in choosing a supplier, a well weighted point method could also be used. Starting with quality and delivery with the weight of 40 and 30 respectively, quality problems are the biggest problems in supplier performance. Next to quality problems is late delivery with a weight of 30. Followed by price differentials with weight 20, then lastly service with weight 10. All these factors are measured on a scare of 1 to 5, worst performances equated to 1 and best performances equated to 5. In this seek method, three suppliers were selected based on their performances and measure against the factors.SAMPLE SUPPLY illustration FOR BAKING FLOUR (Figure 1)Supplier A ratingSupplier A crisscrossSupplier B ratingSupplier B scoreSupplier C ratingSupplier C score agentWeightHow MeasuredQuality401 = Worst5 = vanquish(3/5)x4024(4/5)x4032(3/5)x4024Delivery301 = Worst5 = Best(4/5) x 3024(4/5)x3024(3/5)x3018Price201 = Worst5 = Best(2/5) x 208(5/5)x2020(2/5)x208Service10Good = 100%Fair = 70 %Poor = 40%.7 x 1071.0 x 1010.7 x 107Total Points100638657Based on the figure 1 example supplier A has a rating of 3/5 in quality and a positive score of 24, 4/5 in delivery and a centre score of 24, 2/5 in price and a total score of 8, finally a 70% rating on services render. Supplier B on the other hand scored higher than both supplier A and B, with a total score of 86, scoring higher than supplier A in all levels except delivery with equal level. Supplier C is the worst of all suppliers. So supplier B is the best suited for this purchase of baking flour, and should be awarded the contract.The above developed weightings for cadence dependent on assessment of how important each criterion factors are to the success of selecting supplier C for the supply of baking flour and the impact it will have on the companys activities could as well be measured.Decision/ choice of selected supplierAll these factors enables the procurement team to make decision regarding the suitability of sup pliers to fit into the current portfolio of products and prices, since the overall budget is the tariff of the procurement team, they reach the final agreement on wish supplier to pick based on the budget and delivery process across the country for baking flour.Once those suppliers with acceptable products and services have been identified for the supply of baking flour, the procurement team will meet them in order to discuss the prices and volumes under consideration for the product (baking flour). A few suppliers are retained to this stage so that there is a choice from the procurement teams perspective, and also in the case the chosen supplier starts to under perform. Price is dependent on volume, so both aspects are discussed in tandem. The volumes required for a new product are an educated guess. However, a replacement product has known volume which is traded. The volumes are used as guide in negotiations but are never guaranteed to a su