Question:
Discuss About The Environmental Supplier Selection Process?
Organizations comprise of different departments and purchasing department is accountable for all the activities of purchasing. Purchasing department is one of the important departments in all the businesses because it affects the product cost that might reflects companies profit positively (Moser, 2007). This report explains different aspects of purchasing management of Prime supermarket, which is situated in Singapore. This report will emphasize on supplier selection criteria, cost of purchasing and use of information and communication technology, for purchasing operations and its management. Prime supermarket is among the first to launch the chain of local supermarket (Prime supermarket, 2017). In earlier years, prime supermarket used to have 5 mini complex outlets. In 1991, Prime supermarket occupied more than 10,000 sq. ft. area. It is the largest chain of supermarket in Singapore with 20 outlets expanded in all its island states (Prime supermarket, 2017). Prime supermarket comprises of two trading areas, one focuses on import and provides seafood, meats and vegetables and another trading area focuses on acquiring stock according to the lifestyle of international consumer. Prime supermarket provides 24 hour services to their customers and also focuses on improving customer services. Presently, they are working on renovations of their stores. Mission of prime supermarket is to provide good services to their customers with good quality of product at affordable price (Prime supermarket, 2017).
Purchasing is one of the important element in supermarket business. Purchasing officer is responsible as well as accountable for setting goals and taking related decisions, which helps in improving cost of the company (Weele, 2009). It is a difficult task for purchasing officer of prime supermarket to decide the value of their products, as they want to provide product at lower price by reducing the cost of supplies but they should not keep their prices very low as it will be considered as poor quality goods (Ouelch, & Bonventre, 2017). Cost of the product also increases due to fixed assets. For Example machinery which requires a regular repair, leads to an increase in the cost of the product and it affects the revenue of the business (Ouelch, & Bonventre, 2017). Prime supermarket should consider all these points and after that they should decide the value of their product. Prime supermarket should provide good quality products as poor quality goods increases wastage that results in increasing purchasing cost. Suppliers of prime supermarket should deliver products on time, so that efficiency of the business can be maintained. For this purchasing officer of supermarket should maintain proper communication with their suppliers. Purchasing officer should identify their long term suppliers and should maintain a strong relationship with them which helps in cost reduction (Weele, 2009). Purchasing officer should identify some internal goals to maintain cost of the company, for this different policies are implemented into the company that product can only be purchased by approved suppliers (Ouelch, & Bonventre, 2017).
Prime supermarket should select their suppliers properly, which can help them in reducing purchasing cost. Supplier selection criteria involve different stages listed as follows:-
Identification of possible suppliers- For sustaining in today’s competitive environment, business has to make changes and should do innovations (WONG, 2017). Business should identify new suppliers with maintaining existing suppliers. This stage focuses on searching different suppliers for the business. Prime supermarket should identify those suppliers who can bring better results as compared to existing one (WONG, 2017).
Asking for supplier’s information- After recognizing possible suppliers, another stage is of asking information related to suppliers goods or services and their qualities which make them different from other suppliers. Performance proposal is also issued to show whether the supplier will be able to fulfil the requirements of the business. Quote request is issued to know the specification of product (Kleemann, 2012).
Terms of contract- This stage explains about the contract between buyer and its suppliers as the information which was asked from supplier that gets converted into the form of contract. This contract comprises with all the details, responsibilities and duties of supplier.
Process of negotiation- As we discussed above about the terms of contract that includes duties, responsibilities and payment details, these terms are negotiable. Supplier and buyer both do negotiating in favor of their terms (Altin, 2010).
Evaluation of supplier and award of contract- In this stage buyer checks earlier performance of the supplier to evaluate whether the supplier will be able to perform properly or not (Kleemann, 2012). Suppliers are ranked according to their performance and according to that they get the contract.
Research on supplier selection- This stage focuses on two points, one point is to find out the right criteria and method to evaluate supplier. Second point focuses on negotiation with the supplier, terms of contract and bringing out information that supplier do not want to reveal (Altin, 2010).
Information and communication technology tools are very useful for all the organizations in terms of providing important information quickly that makes work easy and help in sustaining into the competitive environment (Nwokeafor, 2015). ICT enabled communication between different departments of company that made information sharing fast and fulfilled demands of customers on time (Nwokeafor, 2015). Company should install ICT tools, this will provide benefits to them as it results in saving cost, reducing wastage and ultimately business will make high profits (Cline, 2014). Importance of electronic business is increasing day by day, scattering of internet that increases the awareness of information technologies. For achieving organizational goals ICT tools are providing great support to human activities. Hence, process of decision making and transferring of data is faster (Cline, 2014). Tools of information and communication technology are Barcoding, Radio frequency identification, Enterprise resource planning, Material resource planning, etc. Some of them are explained below.
Bar coding- Barcodes are clear demonstration of material through computer. Initially, data stored in barcodes used to be in widths and equivalent lines with spacing, at present barcodes arises in different shapes and designs (Craig, 2008). Different scanners are available for reading barcodes they are known as barcode reader. Flow of products and information of business is faster through barcodes. Barcoding is used to keep all the information of the stock (Craig, 2008).
Radio frequency identification- It comprises with a silicon chip that holds an identification number and an antenna that transfer the number into evaluating device. RFI helps in managing inventory and information of bulk stock can be identified in short period of time (Craig, 2008).
Enterprise resource planning- ERP is a very useful device for every business as it maintain all the information of different departments. It helps manager to known about the problems and points which are lacking in the functioning of different departments (Lawrence, 2012). ERP involves different modules such as marketing, finance, human resource, manufacturing, etc.
Material resource planning- MRP helps in production planning as it arrange all the operations sequence wise. MRP focuses on providing all the information and sequence of production before it is required. Proper track of orders are maintained by MRP at the time of manufacturing (Lawrence, 2012).
ICT tools help in improving the performance of supply chain that is considered to be an important element in all the organizations which deal in the manufacturing and logistics of the products. Business has to understand the importance of installing ERP into its processes as it is very beneficial. Tools of Information and communication technology should be installed into the purchasing department of Prime supermarket to increase the speed of data sharing and there will be reduction in the time taken to deliver the productivity. Innovative and sound models should be developed by the researcher in coming future.
Purchasing of goods and services involve some cost, that need to be analyzed regularly. Different tools are available for analysis of purchasing cost they are-
Cost analysis- While purchasing goods its actual cost is considered that include delivery cost, packing cost and maintenance cost (Blischke, 1993). Business appoint some of the suppliers who demand advanced payments. If supermarket is ordering goods which involve movement of more than one people then they have to make the payment in advance that increases the actual cost which is more than the cost of product (Blischke, 1993). Proper analysis should be done by prime supermarket to know the total purchasing cost.
Inventory analysis- Cost of the product includes different charges like storing cost, maintenance cost as well as cost of unavailability of goods for sale. Inventory analysis is important to know detail about the stock that is available. It can help in forecasting about future stock to be ordered (Sherbrooke, 2006).
Suppliers analysis- Prime supermarket has a number of suppliers, this shows that they should not get depend on one supplier as it can be harmful for the business. Purchasing officer of prime supermarket should maintain good relations with their suppliers as they can provide stock at discounted price. Besides this officer should regularly check the stock supplied by different suppliers.
Maverick spending- Price of goods may vary from supplier to supplier, for this prime super market should analyze price properly before placing the order as small amount also matters a lot for the business.
Delivery time analysis- Supplier should provide stock in time as it affects the image of business. Perishable goods should be handled properly as they get spoiled easily.
Prime supermarket is one of the leading supermarket chain in Singapore. Supermarket is using multiple sourcing of supply as it provides different categories of goods that need different suppliers for the business. Prime supermarket provide good quality of products at reasonable price because their main focus is to deliver good services to their customers. Prime supermarket regularly analyze their suppliers that helps in reduction in the cost of purchase.
Cost ratio is a method used in retail for valuation of inventory at the end of particular time period. It is calculated by dividing available goods cost with available goods retail value (Robinson, et al 2015).
Linear averaging method include linearly weighted moving average that allocate a higher weighted to current value. It can be calculated by multiplying closing prices with its definite place in the data series (Burd, 2007).
Activity based costing is a method that allocates indirect cost to products by recognizing all the activities that takes place in the business (Goektuerk, 2007). Connection among the products, costs and activities is reflected through this method. Sometimes it is difficult to assign indirect cost through this method (Goektuerk, 2007).
Conclusion
Report is explaining purchasing management of Prime supermarket that is one of the leading supermarket chain in Singapore. According to the above discussion it can be concluded that purchasing management is very important for Prime supermarket. Purchasing manager is the one who handles all the activities of purchasing department. They should identify elements that are disturbing the cost of products and should take corrective actions to eliminate them. Suppliers of prime supermarket should provide good quality of products in time.
Criteria that should be considered for supplier’s selection are Identification of possible suppliers, asking for supplier’s information, Terms of contract, Process of negotiation, Evaluation of supplier and award of contract and Research on supplier selection. Prime supermarket use multiple sources of purchasing for that they have to appoint different suppliers. For this they should identify suppliers who will provide them good quality of product on time and should reveal past performance of their business. Information and communication technology is also discussed in above report. ICT is important for business for keeping records of available stock that helps in forecasting about the future stock to be ordered.
Tools available for Information and communication technology are Barcoding, Radio frequency identification, Enterprise resource planning and Material resource planning. ICT tools are considered to be important for business as it helps in improving performance of supply chain. Prime supermarket should adopt information and communication tools in their business that can make work faster and products can be delivered on time. It will also help in saving the cost of the product. Tools for analyzing purchasing cost are Cost analysis, Inventory analysis, Suppliers analysis, maverick spending, Delivery time analysis. Prime supermarket should consider all the purchasing cost analysis tools as it will lead to increase in the profits of the business. Report also explains cost ratio and activity based costing that is important for business.
References
Altin, G. (2010). Global Purchasing and Supply: Case Study in Purchasing. GRIN Verlag.
Blischke, W. (1993). Warranty Cost Analysis. CRC Press.
Burd, V. (2007). Method of Averaging for Differential Equations on an Infinite Interval: Theory and Applications. CRC Press.
Cline, H. F. (2014). Information Communication Technology and Social Transformation: A Social and Historical Perspective. Routledge.
Craig, V. S. (2008). Information Communication Technologies: Concepts, Methodologies, Tools, and Applications: Concepts, Methodologies, Tools, and Applications. IGI Global.
Goektuerk, H. (2007). Activity-Based Costing (ABC) – Advantages and Disadvantages. GRIN Verlag.
Kleemann, F. C. (2012). An Evaluation of Supplier Selection Methods in Strategic Procurement. GRIN Verlag.
Lawrence, T. A. (2012). Learning Tools and Teaching Approaches through ICT Advancements. IGI Global.
Moser, R. (2007). Strategic Purchasing and Supply Management: A Strategy-Based Selection of Suppliers. Springer Science & Business Media.
Nwokeafor, C. U. (2015). Information Communication Technology (ICT) Integration to Educational Curricula: A New Direction for Africa. University Press of America.
Ouelch, J & Bonventre, K. C. (2017). Better marketing at the point of purchase. Retrieved from https://hbr.org/1983/11/better-marketing-at-the-point-of-purchase
Prime supermarket, (2017). About us. Retrieved from https://www.primesupermarket.com/about-us/
Robinson, T. R., Henry, E., Pirie, W. L. P., Broihahn, M. A. (2015). International Financial Statement Analysis Workbook. John Wiley & Sons.
Sherbrooke, C. C. (2006). Optimal Inventory Modeling of Systems: Multi-Echelon Techniques. Springer Science & Business Media.
Weele, A. J. V. (2009). Purchasing and Supply Chain Management: Analysis, Strategy, Planning and Practice. Cengage Learning EMEA.
WONG, Y. K. (2017). Integrating Environmental Criteria into the Supplier Selection Process. Open Dissertation Pres
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