The paper reflects on the “IT Procurement” which is defined as a document that provides detail legal binding agreement between a vendor of IT products as well as services (Diamantopoulos 2016). In this assignment, banking industry is selected for illustrating the significant of IT procurement.
The paper analyses the importance of IT procurement, its role in supporting various business strategy, organization structure as well as purchasing procedures of the banking industry. The paper also elaborates the challenges that are associated with IT procurement. Various recommendations are also provided in order to resolve the issues that are associated with IT procurement.
Procurement’s role in supporting business strategy
Effective strategy is achieved by performing various activities or by performing same activities properly. Procurement plays a significant role in both the approaches as it is generally supports differentiated strategy or it can also act as a distinctive competence in executing various strategies better than any other competitors execute (Martin 2014). The procurement professional helps in developing various options, which are helpful for the organization for gaining proper competitive advantage. The actions of procurement must be devised in such a way that they are consistent with the organization’s competitive advantage. The actions of procurement must be designed in such a way that it is helpful in reinforcing the competitive priorities of the organization. The competitive priorities are quite helpful in articulating the competitive strategy of organization.
The material of procurement helps in reflecting the competitive priorities. The procurement decision-makers generally consider the competitive priorities in selecting proper criteria based on which materials are procured (Mahapatra, Levental and Narasimhan 2017). The organizations that mainly competes on cost helps in providing higher priority to procurement costs but the organizations that generally competes on flexibility helps in providing higher priority to lead time. The performances of the buyers are greatly influenced with the help of procurement actions (Decarolis 2014). Cost variance helps in evaluating very much dominant criterion for the performance of procurement decision makers. The emphasis on cost helps in driving procurement for decision makers so that they can take proper actions that help in keeping the material cost low. It is analyzed that costs helps in driving the procurement of decision makers. The reward criteria within the organization help in determining the actual priorities of the organization (Procurement 2015). The reward criteria help in reflecting the performance on various competitive priorities.
Strategic procurement helps in linking the procurement for various actions in the corporate business strategy. Procurement is involved in the formation of various strategies that is dependent on the level of extent to which it can be perceived by the top management of the organization (Rtega, Bouffard and Silva 2013). The strategic significance of procurement in context to value of the product line as well as percentage of total cost is utilized.
The organizational structure of bank comprises of executives, directors, managers as well as staffs. The main structure of the bank is illustrated below:
Executives: Bank executives are quite responsible for various business related areas. The executive for various communities banking helps in focusing on various local branches as well as offices at local level (Blome, Hollos and Paulraj 2014). The manages are also responsible for overseeing consumer lending that will be helpful in providing personal as well as family related loans.
Directors: The executives have a small team of senior directors for managing the various business related functions. The main role of the executive is to assign a leader for managing as well as distributing various products as well as services. They also focus on the development of the business (Morledge and Smith 2013). The lending oversights of the consumers are generally divided between different services, which include credit cards as well as home loans. Commercial lending helps in assigning leaders so that they focus on various small start-ups to various corporate clients.
Managers: The directors of the bank generally help in defining the direction as well as objectives of the business unit. It is the responsibility of the managers to implement as well as define the objectives of the business unit (Dhital et al. 2015). Community banking includes various managers for various areas that include branch operations, teller services as well as new accounts. The consumer lending will be helpful in assigning overseers of the credit card management, direct consumers and home equity loans.
Staffs: The staffs of the banks are on the front line and more often, the client as well as potential employees of the company is quite similar (Prasad and Rao 2014). The banks include various operational employees including customer service representative, human resource, sales staff and many more. A community bank generally helps in offering a broader range of direct consumer services.
The banking industry provides numerous purchasing procedures to its customers. The purchasing procedures that are provided to the customers include:
Mediclaim facility: The bank provides Mediclaim facility to its consumers. Mediclaim is generally an insurance product that mainly reimburses the expenses for incurring in the event of hospitalization (Hackett and Statham 2016). The customers get attracted to the banks in they are capable of providing appropriate police related with the Mediclaim. The policies of Mediclaim varies from person to person depending on various criteria that include geographical area of treatment, age of the proposer, sum insured as well as term f the plan.
Rate of Interest: The bank must provide appropriate rate of interest for the people who invest their money in bank. Appropriate rate of interest is quite advantageous as it helps in attracting more number of customers (Shabihkhani et al. 2014).The rate of interest that is provided to the client must be little bit different from other banks so that more number of customers became interested in saving their amount of money. The bank must provide special as well as exclusive offers like loan offers to the customers.
Accidental insurance: The bank must provide proper facility of accidental insurance to the customers. The customers enjoy various advantages in situations like accidental death, accidental disability, terrorism act, daily payment during hospitalization and accidental dismemberment. It provides various advantages, which include family security, worldwide coverage, and legal as well as funeral expenses (Cherikh et al. 2016).The bank must provide some extra facility in context to accidental insurance so that the customers would attract towards them.
The legal aspects that are necessary for the banking industry include:
Preservation of returns as well as records for paid instruments: Central government under the section of 45Y of the BR act is generally empowered for making various rules regarding preservation of various records. Under this section, a customer is generally return paid instruments under section 45 Z.
Board of financial instruments: This legal aspect is established in the year 1988. The members of the board comprises of governor of the bank and deputy governors. The deputy governors are generally nominated by the governor as the vice chairperson (Cicala 2014). The directors of the bank are nominated by the governors as members.
Functions and powers: The board helps in performing the functions and also assists in exercising the power of supervision in respect to various banking companies. The board is assisted under the act by the various department of supervision. The board meets on a monthly basis for arranging meetings in a month. The board has some powers that constitute various executive committees.
Amalgamation and winding up: A banking industry must be amalgamated with other banking company as per the act of Br. The banking industries must prepare a new scheme for amalgamation that generally covers all the terms as well as conditions that is required to be placed separately by the different companies of the shareholders (Edler and Yeow 2016). The scheme of amalgamation must be approved with the help of the resolution that is passed by majority of the members that helps in representing two-thirds of the value of the shareholders.
There are number of challenges that are associated with the IT procurement. The challenges include:
The rise of risk: It is analyzed that both the supply chains as well as markets are quite complex as well as globalized. The risk management is considered as afterthought for many of the organizations. In some of the cases, compliance is quite enough for covering risk management. In very much complex supply chain, it can be a big mistake (Kim and Netessine 2013). An approach towards risk management is one off the thing that helps in holding the procurement back from various strategic roles. The challenges for building a hostile risk management include financial risk, supply chain risk, sustainability as well as ethics violation.
The need of agility: The selling value above savings to management: The meaning of cost is dynamically changing. Cost is not just a purchase price but it is about the value from the correct sourcing direction. For example, Tesco have squeezed suppliers which are known for aggressive pursuit of savings (Cicala 2014). The consequences of this incident include supplier backlash as well as building up poor quality. Positioning of procurement does not only depend on improving the reputation of the function but also it is about rescuing the saving from C-suite myopia which cost much more.
New product innovations: The organizations require beating the competition of the market by accelerating pace of technological advances (Morledge and Smith 2013). Many of the market are generally get disrupted due to the new entrants. Therefore complacency helps in keeping the older player at risk. For example, the automotive market is going through various self-driving cars, rental economy and electrical vehicles.
Develop the right talent with the help of procurement challenges: One of the most important challenges of procurement is recruiting the next generation. It will need to share an exciting vision for the future of the young talent (Prasad and Rao 2014). Various types of online communities are quite helpful as they are helpful in bringing fresh energy that is required for attracting the young professional’s The young people of our generation have two things which includes high tuned full detector as well as dynamism. Therefore procurement generally sells passion for different profession with respect as well as honesty.
Conclusion
It can be concluded that IT procurement is very much advantageous in supporting business strategy of an organization. It is analyzed that it helps in developing various options, which are helpful for the organization to gain proper competitive advantage. The actions of procurement must be devised in such a way that they are consistent with the organization’s competitive advantage. The purchasing procedures as well as legal aspects specific to the banking industry have been illustrated. The paper also illustrates the organizational structure of banking industry which includes executives, directors, managers as well as staffs. It is identified that IT procurement faces numerous challenges and it is very much important to resolve those challenges. The paper helps in providing a number of solutions that are helpful in resolving the issues of IT procurement.
It is analyzed that IT procurement faces numerous challenges and those challenges must be resolved properly. There are some methods that helps in resolving the challenges that are related with IT procurement and the methods are:
By making proper internal engagement: It is very much important to enhance proper internal engagement in order to minimize the issues that are associated with IT procurement
By reducing capacity related issues: It is analyzed that 80percent of the procurement decision makers identify procurement team time as a challenge and therefore it very much important to reduce the challenge
Reduce the gap: The gap of skills which is mainly present in relationship management is identified as the greatest problem and therefore this type of problem must be reduced in order to minimize the problems that are associated with IT procurement
References
Blome, C., Hollos, D. and Paulraj, A., 2014. Green procurement and green supplier development: antecedents and effects on supplier performance. International Journal of Production Research, 52(1), pp.32-49.
Cherikh, W., Harper, A., Luskin, R., Wholley, C. and McDiarmid, S., 2016. 2549: Results of a survey of organ procurement organizations to identify barriers to VCA authorization and recovery in the US. Vascularized Composite Allotransplantation, 3(1-2), pp.5-5.
Cicala, S., 2014. When does regulation distort costs? lessons from fuel procurement in us electricity generation. The American Economic Review, 105(1), pp.411-444.
Decarolis, F., 2014. Awarding price, contract performance, and bids screening: Evidence from procurement auctions. American Economic Journal: Applied Economics, 6(1), pp.108-132.
Dhital, K.K., Iyer, A., Connellan, M., Chew, H.C., Gao, L., Doyle, A., Hicks, M., Kumarasinghe, G., Soto, C., Dinale, A. and Cartwright, B., 2015. Adult heart transplantation with distant procurement and ex-vivo preservation of donor hearts after circulatory death: a case series. The Lancet, 385(9987), pp.2585-2591.
Diamantopoulos, A., 2016. THE ROLE OF INFORMATION TECHNOLOGY IN THE INNOVATION ROADMAPS OF HIGH-TECH ORGANIZATIONS Enabling early involvement of Procurement in the New Product Development & Launch (NPDL) activities at Royal Philips.
Edler, J. and Yeow, J., 2016. Connecting demand and supply: The role of intermediation in public procurement of innovation. Research Policy, 45(2), pp.414-426.
Hackett, M. and Statham, G., 2016. The aqua group guide to procurement, tendering and contract administration. John Wiley & Sons.
Kim, S.H. and Netessine, S., 2013. Collaborative cost reduction and component procurement under information asymmetry. Management Science, 59(1), pp.189-206.
Mahapatra, S., Levental, S. and Narasimhan, R., 2017. Market price uncertainty, risk aversion and procurement: Combining contracts and open market sourcing alternatives. International Journal of Production Economics, 185, pp.34-51.
Martin, S., 2014. The Economics of Offsets: Defence Procurement and Coutertrade (Vol. 4). Routledge.
Morledge, R. and Smith, A., 2013. Building procurement. John Wiley & Sons.
Prasad, A.S. and Rao, S., 2014. A mechanism design approach to resource procurement in cloud computing. IEEE Transactions on Computers, 63(1), pp.17-30.
Procurement, O., 2015. Organ procurement and transplantation network. HRSA, DHHS, 9.
rtega-Vazquez, M.A., Bouffard, F. and Silva, V., 2013. Electric vehicle aggregator/system operator coordination for charging scheduling and services procurement. IEEE Transactions on Power Systems, 28(2), pp.1806-1815.
Shabihkhani, M., Lucey, G.M., Wei, B., Mareninov, S., Lou, J.J., Vinters, H.V., Singer, E.J., Cloughesy, T.F. and Yong, W.H., 2014. The procurement, storage, and quality assurance of frozen blood and tissue biospecimens in pathology, biorepository, and biobank settings. Clinical biochemistry, 47(4), pp.258-266.
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