PURCHASING PERFORMANCE MEASUREMENT AT IBM
6.1 Purchasing Performance Measurement
Purchasing is defined as the management of a company’s external resources in such a way that the supply of all goods, services, capabilities and knowledge which are necessary for running, maintaining and managing the company’s primary and support activities are secured under the most favourable conditions. (Van Weele, 2014).
Purchasing is vital to primary and support activities in business, where direct purchasing refers to spend targeted at acquiring materials and services to manufacture end products and support purchasing to cover the running of the back office (Van Weele, 2014). Purchasing is an integral part of day to day operations. Based on this observation, spending on materials and services represents a major chunk of a firm’s overall cost. It becomes imperative to view purchasing as a key strategy for improving bottom line and increasing profits.
Global competition, leading to pressure to reduce cost and increase outsourcing contributes to the growing strategic importance of purchasing (Carter, 2005).
Purchasing performance will be judged based on the responsibilities and expectation of the purchasing department at each unique organization. In other words there is no one size fits all criteria or set of indicators to measure purchasing performance across board.
The way an organization views purchasing will determine the criteria it uses to measure its performance. Using the Van Weele
The reason of the creating competitive pressure to firms is that which from the enhancing the quality but decreasing the price synchronously. The key of success is that the firms and organizations which treat “Global Sourcing” as a weapon fighting with its competitors.
Procurement is a collaborative work between the supplier and the client of the products or services being supplied. This report will take some critical anlysis of article findings such as Razavi et al. (2016) argued that supply chain relationship is built on trust, communication, interdependence, and cooperation between the involved parties. The authors have used a model of Structural Equation Modelling to explain the relationship between the supplier and the customer. Amemba et al. (2013) sought to explore how public institutions and especially the government can be affected by the challenges inherent in their procurement practices. Among the challenges identified by the researchers include ICT adoption, complex procurement process, and ethics and supply relationship
Throughout time, many things evolve based on current trends. The business world is no exception to evolution. In the world of business, the bottom line is key and wealthy figure heads are paid large sums to bring up profit margins and cut production costs. During the twentieth century, production costs have been cut by the means of outsourcing. Although outsourcing is financially beneficial to large businesses, it has detrimentally impacted the American economy through raises in the unemployment rate, lost countless tax dollars and compromised the integrity of products received.
4. When domestic and global sources in existing trading alliances come under pressure toinnovate, reduce prices and increase services:
However, this approach is limited. Due to globalization, lowering cost of production and availability of information, the competition is more fierce some than ever in most industries, putting more pressure on companies and shrinking their profit margins. In this competition race, products and services
W.C. Benton, J. (2010). Purchasing and Supply Chain Management (2nd ed.). New York: McGraw-Hill Irwin.
Session 1 Date September-4 Topic Introduction, overview, group assignment, product costing systems (concepts and design) Process costing systems Managing and allocating support service costs Inventory decisions Strategic issues in investment decision Managing quality and time to create value Midterm Exam Cost management and strategy The nature of management control systems Understanding strategy Strategy, balanced score card, incentive systems Organizational design & responsibility accounting Case presentation Case presentation Case presentation Case written report is due at the beginning of session 13 Final exam Chapter 1 (H) Chapter 1 (A) Chapter 2 (A) Chapter 20 (H) Chapter 18 (H) Reading Chapter 2 (H)
to have good strategic development. Since these purchases are the main source of their business products, risk will need to be minimal.
Appropriate performance measures: provides information regarding the results of the system efforts to supply chain
The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.
1.Does Scott divide the final goals of his five year plan into relatively shorter term objectives?(such as setting annual objectives for each year)
As companies increase their global presence through the outsourcing of manufacturing activities, the question of Who is responsible for ensuring the supply
Twenty-five years ago, firms conducted global trade; however, it was not as complex or as interrelated in comparison to today because there was less outside influence and the world was less connected. Firms then were able to use known rule sets, or past business knowledge, to adjust operations to respond to change (Vecchiato, 2015). As time passed and organizations grew more complex and diverse, so did market conditions and external influences on an organization. With a growing reliance on global competition, cross border outsourcing, and an interconnected world, there are many external influences and forces in today’s market environment. Although international trade enabled firms to lower prices to gain competitiveness, it also increased environmental uncertainty. Furthermore, a reliance on external sourcing, or outsourcing, allows today’s firms to cut costs but also increases external influences on an organization. In today’s interrelated markets, a crisis in one country that produces outsourced goods will influence a prime organization in another country. As an example of growing external influence, the explosion of technology and use of social media has created an overabundance of
When it comes to supplier management they should definitely use a performance measure to test our efficiency of their suppliers. By evaluating supplier performance, Peanutty can hope to identify suppliers with exceptional performance or developmental needs, improve supplier communication, reduce risk and manage the partnership based on an analysis of reported data. They could use total cost of ownership (TCO) as a measuring tool. It the combination of the purchase or acquisition price of a good or service and additional cost incurred before or after product or service delivery. This would be a great way to better understand cost and opportunity.
So, those non-production purchases are items that are difficult to manage for companies as they are really diversified and need to be well analyzed. As a consequence they are very costly as they need competent people to deal with them and quite a lot of people due to their diversification. That is why Thomson has recourse to e-procurement with EasySource for such purchases