Discuss about the Project Risk and Procurement.
Calfee et al. (2014) stated that procurement is the acquisition of the goods, services, suppliers concerned with the company or any project to be operated in a successful manner. Procurement strategies are one of the most important competitive advantages of any organization. Procurement strategies are concerned with the strategic planning for reducing the wastage of the materials, good and services or in details prevent the misuses of the products and services. (Mills 2014). Contributions of the procurement strategies are enormous in case of risk assessment and management of any organization.
In this report, the importance of procurement strategies are evaluated by considering the organization considered with the health care products of South Africa Adcock Ingram (Adcock.co.za. 2016). The company has their proud heritage of 120 years old. They started their business from a small Krugersdorp pharmacy. This academic elaborates the relationship between the value chain of the organization and improvisations with the procurement strategies in the present scenario.
Adcock Ingram follows the strategically planned approach of purchase of the required raw materials and effectively important services required for the managing the relevant goals of the company (Hawkins et al. 2015). The company has consideration about the few factors which enrich their procurement strategies according for meeting their goals. The strategic objectives of Adcock Ingram are to procure cost effective drugs in the right quantities, ensure for timely delivery of the products, and achieve lowest possible total cost and selection of reliable suppliers for high quality of products.
The development of the procurement strategies are firstly concerned with the steps involved in the building the strategies (Teichgraber and de Bucourt 2012). Procurement operations concerned with Adcock Ingram are analyzing the relevant raw materials required for the manufacturing the health care products (Allegranzi et al. 2013). The operations regarding procurement concerned with the Adcock Ingram is concerned with few aspects: reducing the cost involved in purchasing the materials for the manufacturing the health care products, improvement of the service levels within the organization, and the most important Adcock Ingram focuses on the maximization of the compliances and ensures the bottom line savings (Calfee et al. 2014). The core target market and target customer of the Adcock Ingram are the adults. In addition to this, health care products are also essential for the newborn babies. The following are the procurement strategies of the company:
Collaboration contract: With collaboration with new multinational companies, Adcock Ingram makes a turnover in their prescription business and increases their sales by 22 percent. The multinational partner of the company continues to deliver value with supply chain collaboration. It will extend their multinational partnerships into the sub-Saharan Africa, and the company can able to increase their demand (Mills 2014). Adcock Ingram follows the One size does not fit all aspect among the different procurement strategies. This aspect introduces that, there must be various solutions for the each and individual problem rose within the organization.
Procure cost effective drugs in right quantities: Adcock Ingram develops an essential drugs list in order to make sure that the customers can only purchase the cost effective drugs (Meyr et al. 2015). Procedures are also followed that estimate procurement quantities to ensure that continuous access to the products are selected without accumulating excess of stock.
Technology collaboration: The procurement and distribution system of Adcock Ingram ensures for timely delivery of products to central stores as well as distribution of health facilities to the customers at the right time (Su 2013). It achieves lowest possible cost for the products.
Component standardization: With the standardization of the components, Adcock Ingram will provide consistent and effective products backed by chemical analysis in order to confirm their quality.
Figure 1: Procurement Strategy for Adcock Ingram
(Source: Meyr et al. 2015, pp- 101)
The evaluation of the cost involved with in the organization producing the pharmaceutical products and medicine for the patients are around 25% to 30 % of the total cost involved in manufacturing the products (Meyr et al. 2015). Adcock Ingram mainly focuses on both the service and cost objectives of the organization. Adcock Ingram faces some of the supply chain challenges in their organization such as lack of coordination, absent of demand information, issues of order management and warehouse management and shortage avoidance.
Using the just-in-time (JIT) supply chain model the supply chain department of Adcock Ingram mitigates the issues. Adcock Ingram optimizes their supply chain, offshore for cost purposes and then keeps their inventories low for JIT efficiency. It is benefited for the organization as it eliminates the shortage of parts, which inhibits efficient movement from the line of production (Tsoku 2014). Reduction in the shortage of parts at the line of production, the manufacturers can able to increase the production speed and produce more products with same number of resources and lowers the entire production cost. Eltantawyet al. (2014) opined that the Adcock Ingram utilizes the JIT in their units of production across the supply chain. It reaches to a position to adopt the technology to give value to the customers. Eltantawy and Giunipero (2013) argued that the rise in the sustainable in the pharmaceutical supply chain is the globalization of sourcing and supply.
Figure 2: Just-in-time Supply Chain Model
(Source: Eltantawy and Giunipero 2013, pp-219)
The procurement processes involved in case of Adcock Ingram are described as follows:
Procurement process is concerned with the developmental aspect of the organizational goals (Meyr et al. 2015). The needs of the Adcock Ingram are development of the standards of the pharmaceutical products which make the positioning of the organization better than their competitors.
In case of the Adcock Ingram, the procurement strategy is to analyze their target market. Their positioning in the market depends on the addition of values to the product they manufacture.
Selection and evaluation of the suppliers are crucial for developing the procurement strategies (Mills 2014). The most valuable supplier of the Adcock Ingram are: Baxter, which supplies the raw materials to them.
Negotiation are must to be understood by the owner when they are hiring some supplier for getting raw materials, otherwise the owners may face so many problems during the business deals.
There will be no supply of goods if the contract is not properly signed. There must be legal contract before dealing with some aspects of business. Adcock is also follows this process of dealing with their suppliers (Hawkins et al. 2015). The demands of the suppliers and relevant trends must be followed by the owner of the organization.
Strategic sourcing defined as the systematic and evidence based approach for the optimization of the value base of the organization, which will measure the overall value of the product and services delivered (Eltantawyet al. 2014). In case of the Adcock Ingram, strategic sourcing is helpful for the understanding of the demands growing in the present market accordingly the evolving trends in the market. With the outsourcing of R&D, the company can reduce the cost of their products. It ranges from their lab services, process of validation, downstream production as well as regulatory advices. Outsourcing of Adcock Ingram results into significant benefits such as growth in revenue, lower cost for companies and patients and greater access to life saving products (Gurnani et al.2013). In general perspective, strategic sourcing have some crucial objectives for the betterment of the organizational goals:
Improvement of the value to the price relationship: The organization must maintain their policies while considering the cost reduction techniques of their products but besides this the quality of the product should be maintained (Eltantawy and Giunipero 2013).
Examination of the supplier relationship: The suppliers are the most crucial part of the organization. Adcock Ingram also considers their suppliers to be in the top most priority. Before the legal agreement of the deals, they always consider the bargaining of their suppliers.
Understanding the buyer category: This aspect helps the Adcock Ingram to evaluate the ongoing trends in the market (Nudurupati et al. 2015). The organization follows surveys for understanding their customer responses.
Development of the yearly contracts: This is the main competitive advantage of the Adcock Ingram (Su 2013). The yearly contracts are maintained and renewed by the organization properly in the regular manner.
Leverage to organizational needs and sharing of best practices: Freedom and sharing are two crucial aspects of any organization for maintaining the good relationship with in the organization. Adcock Ingram always do regular meetings and survey within the organization for understanding the issues of their employees.
E- Procurement is known as the electronic procurement techniques considering the business to business and business to consumer purchase and sales. This aspect is also known as the supplier exchange. E- Procurement deals with the value chain of any organization, which deals with the quality of work and reduction of wastage of the products and services (Gurnani et al.2013). Adcock Ingram also obeys the policies involved in the E- Procurement procedure concerned with the organizational goals.
The total process involves the details about the supplier dealings, which specifies the ship notice, order status enlisted for the concerned supplier, order details etc. Adcock Ingram records all the details of their suppliers. They use a specific electronic server for requesting the information regarding their supplier to be generated according to the needs of their business deals (Eltantawy and Giunipero 2013). This system is totally fruitful to the handling of the supplier details. The crucial elements for Procurement are: request for information, request for quotations, request for proposal etc. In this procurement system the vendors are given the higher priority.
There are mainly two types of vendors available in an organization: ERP providers and the most affordable service providers. This electronic procurement service helped the Adcock Ingram to establish the new technological options for the development of the organization and opened up new fields for the concerned factors (Hsin Chang et al. 2013). This offers the company high positioning capabilities, which make the company more popular in the target, market.
Figure 3: E-Procurement of Adcock Ingram
(Source: Gurnani et al.2013, pp-67 )
Every aspect of any organization tends to be sustainable for the development of the organization. Sustainability is the core aspect behind the each and every organizational goal (Eltantawy et al. 2014).Adcock Ingram is concerned with the social, environmental and economic factors involved into the procurement process are:
Protection of human health: Adcock Ingram is concerned with the health care services and products, so it is very important to them to understand the needs of their target customer with providing good quality of products to them.
Providence of fair work conditions: Adcock Ingram is always giving priority to their customers as well as the employees. Improvement in the case of the pay system which is the vital part of the employee interest (Calfee et al. 2014). They provide total freedom to their employee for adjusting their working hours according their convenience.
Reduction of waste of materials: The procurement strategy is always considered for the reduction of the waste in case of the materials and misuse of the services provided by any organization.
Figure 4: Sustainability Procurement
(Source: Calfee et al. 2014, pp-128)
The value chain analysis considers the supply chain risk assessment process, which involves the different types of risk handling techniques and their solutions important in case of the value chain analysis of any organization (Kern et al. 2012). There are several factors involved into the risk assessment within the organization.
Adcock Ingram is concerned about the quality measurement of the health care products and services, so the key risk factors involved in this perspective are:
Outsourcing risk: Across their entire supply chain, Adcock Ingram needs to maintain strict quality of their products. With outsourcing of their manufacturing, the company should concern over the supply chain (Calfee et al. 2014). The outsourcing risks are dependence on the outsourcing partner, negligence to ensure the regulatory compliance.
Fraudulent claims risk: Sometimes the organization faces some fraudulent cases, where they are penalized for wrong doings of their customers (Gurnani et al. 2013).In case of the Adcock Ingram; they have the specific management system for handling this kind of disruptions.
Documentation risk factors: There are certain risk factors involved into the data entry process. This aspect may create many problems within the organization. Adcock Ingram is concerned with the health care products and services, which needs to be handled with care, otherwise the entire brand image will face will be diminished(Allegranzi et al. 2013). Adcock Ingram follows specific section for this purpose, which is known as RAC auditors, who totally take care of these factors which may affect the brand image of the organization in direct and indirect manner.
IT risks: As the technology is developed in past few decades, there are so many risks involved behind the benefits of using information technology as a key tool. The risks are: malicious attacks, security breaches, internal IT fraud, continuity of business etc. Adcock Ingram maintains their IT department such a way that these kind of risk can avoided easily.
Regulatory risk: Health care industry is one of the most regulated industries among others. Adcock follows the following regulatory act for supporting this aspect: HIPA/HITECH, PSQIA, DSS, FCPA and SOX (Calfee et al. 2014). These acts help them to maintain the regulations within the organization, which indirectly enrich their organizational goals and objectives.
Conclusion
The report conveys a detailed study of importance of the procurement strategies in an organization. Procurement process is comprised of the indulgence of the matter concerned about the reduction of wastages within an organization. In this report the different perspectives of procurement strategies are explained by considering the Adcock Ingram on the base. The total scenario explained that procurement strategy not only affects the developmental perspective of the organization but also it is relevant to the improvement of the supply chain management of the Adcock Ingram. It can be concluded that, procurement strategy helps to develop the brand image of the company and supports its objectives and goals.
References
Adcock.co.za. (2016). Adcock Ingram. [online] Available at: https://www.adcock.co.za/ [Accessed 8 Jul. 2016].
Allegranzi, B., Gayet-Ageron, A., Damani, N., Bengaly, L., McLaws, M.L., Moro, M.L., Memish, Z., Urroz, O., Richet, H., Storr, J. and Donaldson, L., 2013. Global implementation of WHO’s multimodal strategy for improvement of hand hygiene: a quasi-experimental study. The Lancet Infectious Diseases, 13(10), pp.843-851.
Calfee, D.P., Salgado, C.D., Milstone, A.M., Harris, A.D., Kuhar, D.T., Moody, J., Aureden, K., Huang, S.S., Maragakis, L.L. and Yokoe, D.S., 2014. Strategies to prevent methicillin-resistant Staphylococcus aureus transmission and infection in acute care hospitals: 2014 update. Infection Control & Hospital Epidemiology, 35(S2), pp.S108-S132.
Eltantawy, R., Giunipero, L. and Handfield, R., 2014. Strategic sourcing management’s mindset: strategic sourcing orientation and its implications.International Journal of PhysicalDistribution & Logistics Management,44(10), pp.768-795.
Eltantawy, R.A. and Giunipero, L., 2013. An empirical examination of strategic sourcing dominant logic: Strategic sourcing centricity. Journal of Purchasing and Supply Management, 19(4), pp.215-226.
Gurnani, H., Ramachandran, K., Ray, S. and Xia, Y., 2013. Ordering behavior under supply risk: an experimental investigation. Manufacturing & Service Operations Management, 16(1), pp.61-75.
Hawkins, T.G., Gravier, M.J., Berkowitz, D. and Muir, W.A., 2015. Improving services supply management in the defense sector: How the procurement process affects B2B service quality. Journal of Purchasing and Supply Management, 21(2), pp.81-94.
Hsin Chang, H., Tsai, Y.C. and Hsu, C.H., 2013. E-procurement and supply chain performance. Supply Chain Management: An International Journal,18(1), pp.34-51.
Kern, D., Moser, R., Hartmann, E. and Moder, M., 2012. Supply risk management: model development and empirical analysis. International Journal of Physical Distribution & Logistics Management, 42(1), pp.60-82.
Meyr, H., Wagner, M. and Rohde, J., 2015.Structure of advanced planning systems. In Supply chain management and advanced planning (pp. 99-106). Springer Berlin Heidelberg.
Mills, A.D., 2014, April. An evaluation of solar valuation methods used in utility planning and procurement processes. In American Solar Energy Society (ASES) Annual Meeting, Baltimore, MD, April 16-20, 2013.
Nudurupati, S.S., Bhattacharya, A., Lascelles, D. and Caton, N., 2015. Strategic sourcing with multi-stakeholders through value co-creation: An evidence from global health care company. International Journal of Production Economics, 166, pp.248-257.
Su, J., 2013. Strategic sourcing in the textile and apparel industry. Industrial Management & Data Systems, 113(1), pp.23-38.
Teichgräber, U.K. and de Bucourt, M., 2012.Applying value stream mapping techniques to eliminate non-value-added waste for the procurement of endovascular stents. European journal of radiology, 81(1), pp.e47-e52.
Tsoku, M.E., 2014. Determining supply chain management trends in the pharmaceutical industry (Doctoral dissertation).
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