L’Oréal Paris Company – Analysis Of Purchase Management Goals And Strategies

Product and Supplier Market

Question:

Write an essay about the “Logistics and Supply chain management”.
 

1.1 Key Information about L’Oréal Paris Company

Product – L’Oréal Paris Company is the largest cosmetics company all over the world and this organization has developed activities in the cosmetics field by concentrating on hair care, perfumes, make-up, sun protection, skin care as well as hair colour (L’Oréal – L’Oréal Group, 2016). The major product of this company is the cosmetics products for men and women all over the globe.

Supplier Market – L’Oréal Paris Company develops as well as creates sustainable and solid relationships as well with its supplier all over the globe based on high standards, mutual interest and trust (L’Oréal – L’Oréal Group, 2016). The purchasing policies of the group are mainly based on the mutual commitments in the service of shared growth of the company

Competitors – L’Oréal Paris Company possesses a huge and a good competition in the beauty industry all over the world. As this industry is an ever-growing industry, therefore, the competition or the number of competitors for L’Oréal Paris Company is increasing day by day (L’Oréal – L’Oréal Group, 2016). Therefore, the three major competitors of this company are Procter and Gamble, Johnson and Johnson as well as Avon.  

Organizational goals and strategies – the organizational goal of L’Oréal Paris Company is to make beauty, a language, to make beauty universal, to make beauty a science, to make beauty a commitment and to offer beauty to all. The core strategies of this company are as follows:

• Widening Customer Base
• Changing functions and operations of business
• Enhancing expense in Promotion and Advertising as well as Research and Development

The purpose of this particular study is to analyze the purchasing goals as well as needs of L’Oréal Paris Company and to recommend appropriate tools those are to be considered by analyzing several important areas of purchase management like supplier selection, purchase cost analysis and ICT for purchase operations. 

The major goal of the purchase management of an organization is that this particular business component is always responsible to manage as well as obtain product and service supply sources the respective organization need to operate (Ghodsypour & O’Brien 2012). Therefore, this department of L’Oréal Paris Company is always responsible for identifying the suppliers that can provide the offers of the best service. On the other hand, the purchasing management department of the company can also set as well as monitor objectives for reliability, value, cost and quality (Choi & Hartley, 2014).

The purchasing management department of an organization can always help for getting the best possible quality of all the supplies, equipment as well as services at a very low cost (De Boer, Labro & Morlacchi, 2014).This purchasing management department is most often a part of procurement section and manages the process of supply chain.

The major dimension of the goals of purchasing management of L’Oréal Paris Company is the social responsibility that among other things utilization of two focal activities such as the solidarity sourcing and social audits (Ellram, 2015). A priority is adherence to the basic rights and diversity of human being for L’Oréal Paris Company that inspires the entire Buy and Care Program of the organization (Spekman, 2016). On the other hand, L’Oréal Paris Company expects its suppliers for adhering to the fundamental conventions of the local legislation and International Labour Organization, especially in matters those are concerned regarding the occupational health and safety, work time and minimum wage.

Competitors

However, L’Oréal Paris Company needs to improvise purchase management in order to prevent unethical practices and to ensure quality. L’Oréal Paris Company has to set objectives or goals in terms of improving the cost as well as efficiency of purchasing within this company (De Boer, Labro & Morlacchi, 2014). In order to improve or improvise the overall purchase management system, L’Oréal Paris Company has to follow or implement some important and significant criteria those are to be selected by the suppliers of this organization (Ghodsypour & O’Brien, 2012). Hence, in this scenario, this organization has to make some effective decisions in order accomplish the improvisation of the purchasing goals. Hence, the supplier selection criteria can be effective. These criteria are as follows:

• Value – One of the most critical and crucial goals of purchase management of L’Oréal Paris Company is to obtain value (Ellram, 2015). Therefore, the purchase department of L’Oréal Paris Company should not look necessarily for the low price while they focus o the minimization of the supply costs.
• Quality – the purchase management of L’Oréal Paris Company determines the quality objectives. Therefore, L’Oréal Paris Company has to ensure that the materials or the components the company source comply with the quality standard of the organization. The purchase management department of L’Oréal Paris Company should closely work with the colleagues for setting quality costs in building, manufacturing quality standards into the specification for the suppliers.
• Reliability – the purchase management should agree on the schedules with the suppliers and also set up the processes of communication for ensuring reliability so that both of the parties are aware of any changes or delays to schedules (Spekman, 2016). Suppliers who deliver on time and meet quality standards consistently can help this company in terms of maintaining their operational efficiency.
• Strategic Relationships – An important long-term objective for the purchase management is building a strategic relationship with suppliers. Strategic Purchasing aim is for achieving cost minimizations while improving or maintaining the supply qualities (Choi & Hartley, 2014). Purchase management of L’Oréal Paris Company should recognize suppliers for achieving those outcomes that can play a role as long-term partners and work with them for achieving the improvements of quality and cost.
• Efficiency – The purchase management department of L’Oréal Paris Company should implement and develop policies for ensuring that the authorized individuals deal with the approved suppliers (De Boer, Labro & Morlacchi, 2014). They should work with different departmental managers for identifying their requirements of purchasing and ensuring that no order duplication is present between departments.

ICT or Information and Communication Technologies are one of the most essential and effective enablers of the significant supply chain management. Hence, it has also a huge impact on the purchase management department of L’Oréal Paris Company as it is an important component of supply chain management (Prajogo & Sohal, 2013). ICT mainly helps the processes of purchasing streamline, enhances information as well as obtains effective access to the required data (Giertz et al., 2015). The ICT tools help for streamlining the process of purchasing as well as facilitating communication externally and internally. Thus, L’Oréal Paris Company chooses “IBM PureSystems” for providing a new computing infrastructure and a new cloud-based system to operate its purchase management operations (Giertz et al., 2015). L’Oréal Paris Company has been capable of reducing the overall size of the IT infrastructure of the organization and its power consumption. This particular system incorporates database technology that can give accurate as well as timely input to the supply management for the tactical activities and strategic planning by means of purchase management process of that organization (Gonzálvez-Gallego et al., 2015). The relationship between IT as well as purchasing is changing quickly as the technology for sourcing effectively the services as well as products of an organization.

However, L’Oréal Paris Company has to follow several recommending strategies in order to improvise the ICT infrastructure of the company in terms of improving the purchase management system of L’Oréal Paris Company. The modernization on the ICT tools can provide the organization a cloud-ready and secure that would be able to meet the business growth strategy of the organization (Roy & Roy, 2013). Hence, in this scenario, IBM PureFlex help for providing L’Oréal Paris Company with the Information Technology backbone for expanding its supply chain management operations into the cloud and delivering the latest offerings those are more personalized for the customers by means of purchase management (Pohjola & Puusa, 2016). This system combines all management, virtualization, network, storage and compute of L’Oréal Paris Company into a single system that is expected for anticipating the needs of infrastructure and optimizing resources (Prajogo & Sohal, 2013). This system incorporates integrated knowledge pattern that is designed for optimizing and automating the workload maintenance and deployment, helping for improving the purchase management through ICT infrastructure (Giertz et al., 2015). 

Organizational goals and strategies

Cost Analysis is the examination as well as a breakdown of the constituent costs. The dominant obligation of an organization and duty of a certain organization should be for managing costs (Weisbach, 2014). Cost analysis is a more complicated strategy as it incorporates the application of indirect and direct costs into the formulas due to which is an essentially comprehensive product breakdown (Christopher, 2016). Therefore, in case of L’Oréal Paris Company, there are few objectives of the purchase management department of this organization in terms of purchasing cost analysis.

• The prime objective of purchase cost analysis of L’Oréal Paris Company is for providing an estimation of what the costs and benefits of a program are likely to be before its implementation (Stadtler, 2015).
• Another significant objective of the purchase cost analysis of L’Oréal Paris Company is for improving the program operation understanding and saying what intervention levels are very much effective.

There are several approaches with the help of which the L’Oréal Paris Company can improve their purchasing cost operations. These are as follows:

• Cost Analysis – the first thing that L’Oréal Paris Company should look at is the exact cost for purchasing the products is. L’Oréal Paris Company should have a particular supplier that needs advanced payments (Bozarth & Handfield, 2016). therefore, the actual cost of the organization are far higher that only the costs of the beauty products of L’Oréal Paris Company, if the company is ordering huge items that take many people for moving and the organization has to pay for them to be delivered (Monczka et al., 2015). The holding costs have to be also added to the total cost, if L’Oréal Paris Company has also an overstock of these goods. Thus, the entire purchasing cost from a specific supplier would be identified by a complete analysis of procurement (Weisbach, 2014).
• Inventory Analysis – The next significant area for analyzing is the storing costs of the items and the cost of not having the items present for production or sale (Christopher, 2016). A proper procurement analysis can be capable of predicting the optimal future inventory on the current inventory of the organization (Monczka et al., 2015). This procurement analysis should also tell L’Oréal Paris Company regarding the levels of optimum inventory that would not impact productivity and sales negatively.
• Analysis of Delivery time – It can be very essential for L’Oréal Paris Company, specifically while large and perishable goods are concerned. Huge amount of goods require a correspondingly large storage area as well as staff handling (Monczka et al., 2015). Some products require specific facilities of storage like freezer areas that may not be available. Careful f control of the inventory of the company has to be maintained. 

5.0 Conclusion

This report has become a successful reflection of the explanation or the analysis of purchase management by means of supply chain management and logistics of L’Oréal Paris Company. the goals of this company in several areas like supplier selection, ICT in purchase operations and purchasing cost analysis has been successfully implemented. After the entire discussion, it has been clear that all of the recommending strategies or the appropriate tools those have been referred in this report should be carefully maintained by this company. This is because, L’Oréal Paris Company should keep improvising their purchase management system by means of supply chain management and logistics of the organization with the help of these tools.    

References

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Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.

De Boer, L., Labro, E., & Morlacchi, P. (2014). A review of methods supporting supplier selection. European journal of purchasing & supply management, 7(2), 75-89.

Ellram, L. M. (2015). The supplier selection decision in strategic partnerships. Journal of Purchasing and materials Management, 26(4), 8-14.

Ghodsypour, S. H., & O’Brien, C. (2012). A decision support system for supplier selection using an integrated analytic hierarchy process and linear programming. International journal of production economics, 56, 199-212.

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Gonzálvez-Gallego, N., Molina-Castillo, F. J., Soto-Acosta, P., Varajao, J., & Trigo, A. (2015). Using integrated information systems in supply chain management. Enterprise Information Systems, 9(2), 210-232.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.

Pohjola, I., & Puusa, A. (2016). Group dynamics and the role of ICT in the life cycle analysis of community of practice-based product development: A case study. Journal of Knowledge Management, 20(3).

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Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Weisbach, D. A. (2014). Distributionally Weighted Cost–Benefit Analysis: Welfare Economics Meets Organizational Design. Journal of Legal Analysis, lau009.