Purchasing Concepts And Models For WalMart

Supplier Selection Criteria and Related Issues

Discuss about the Purchasing Concepts and Models for WalMart.

The report will discuss in detail about the purchasing model of the company called Wal-Mart. Three components will be covered in the report that is the supplier selection criteria, purchasing cost analysis and ICT for purchasing operations and management.  

With so many people spending a huge amount of money on the goods and services the success of the company largely depend on the overall communication with the suppliers, the amount paid to the purchasing of goods and services and the role of information and communication technology in suppliers operations (Shaw et al., 2012). Also, the role of purchasing manager is also transforming the industry and has become very crucial which usually involve money value which is staggering with each passing day. There are some reports and surveys which show that companies are spending a huge sum of money on the purchasing manager. In the company like Wal-Mart, the role of purchasing manager become even more crucial since the entire business cycle depend highly on suppliers and their efficiency as a manufacturer. It is important to understand here that with so much money spent on the outsourcing of some services which are complex by nature and calculate the best kind of values which means that for companies, buying and implementation of procurement decisions as per the demand (Shaw et al., 2012).  

Supplier selection is defined as a process where the company can recognize, test and then contract with some vendors. The process of vendor selection also deploys a lot of financial resources on the company, and in return, companies also expect some significant advantages from contracting with suppliers that offer some value as well. The process of supplier selection consists of recognizing them, collecting the data, formation of the terms of the contract, negotiation and testing their efficiency and effectiveness (Shaw et al., 2012). Following are the detailed discussion of supplier’s process: –  

1. Recognizing the potential of suppliers: – to sustain this fierce market, it is crucial to growing the present suppliers but also looks for new and innovative kind of suppliers. Some reasons make new type providers essential. First there exist different kinds of vendors that are higher in some manner to the existing providers. For instance, a new type of vendors that grows a different kind of production and technology or aligned with the process that permits it to decrease the cost of production which about dominates output and technicality related to it (Mani et al., 2014). There is supplier’s qualification that screens and it also involves a different kind of features. The buyer has the power to contact past customers and at the same time also asks about the delivery performance of the suppliers.
2. Information needs to vendors: when the buyer has recognized the potential suppliers, the very next step in the selection of suppliers is formally asking about the vendors who give data related to goods and services. Some things cover following aspects: –
   1. Request for proposal is given when the buyer can sense the market and also offer a statement of work that consists the set of performance that is needed. For instance, the RFP can define a formed part with particular strength, resistance to fire and the higher level of flexibility, however, mentions that specific composition of different material (Mani et al., 2014). Suppliers can respond to RFP with various details on how one can satisfy the performance of the buyer needs and the price that can be accepted for certain things.
   2. Then there is a request for different quotes where the customer can grow a statement for work that defines the present specification for different goods and services (Mani et al., 2014).
3. Contract terms: the process consists of a contract that is present between the suppliers and buyers. The data received from different suppliers through various kind of requests defined in formal contractual terms that are before the contract (Dai & Blackhurst, 2012).
4. Negotiation can be set for contract awards decisions that the buyers that considered every qualification as well as terms for a contract that can be offered (Mani et al., 2014). A qualification for suppliers that are considered exogenous, for instance when the reputation of the providers is based on historical performance and it does not change the short terms.
5. Evaluation of vendors and contract award: this part of buyer tests the suppliers, decides the winner of the contract and also performs the follow-up that examines the future supplier’s selections. Suppliers test is the process where the buyer can rank the orders different kind of suppliers (Dai & Blackhurst, 2012).

The code of ethics includes the respect for the individual, service to our customers, with striving for excellence. Walmart works on the code of ethics or conduct for Medical Corporation with accountability, integrity to fellow employees, potential customer and clients. The issues are concerned about the rules and regulations which are set in regard to the equal opportunities, including equal pay for equal work for any corporate environment. The code of conduct includes the regular basis with training utilized in order to ensure a greater understanding for codes to sign corporate code of conduct.

Purchasing Cost Analysis

Purchasing cost analysis can be defined as a breakdown and tests of different kind of costs. The basic model is utilized, but in practice, the breakdown will have a lesser and bigger degree or level based on the need of the purchase in the company, the more sophisticated kind of purchase the more will be the depth of the breakdown. For example, a buyer of the manufactured parts is needed to understand the prices and percentages of the cost of raw material, logistics and different kind of overhead (Dai & Blackhurst, 2012). Here it is important to understand that it’s hard to understand the definition and there are companies like Wal-Mart, options of lump packaging, marketing, and sales expenses goes into the complicated part. It is also important to get a different kind of methods that is the easy way to understand the concept. There is non-disclosure of different concepts, or there is also some agreements to provide the information as well. One can ethically agree to keep the data confidential in any way and also remember the agreement by writing it. In some cases, when there is any suspicion for suppliers that make the part and also may also require signing the agreement as well. The company can also decide not to disclose any information related to cost and purchases. At the same time, the supplier may not understand or know the overall costs, and this situation can be harmful since it is easy to slip into a case where no one performs since the cost of purchase was underestimated (Thornton et al., 2013). On the other hand, the supplier can also need to provide some cost since one is paying a lot which cannot be justified on an economic level. In either case, all the situations require an action which brings immediate remedy.  

There can be two type of cases where a new kind of supplier or periodically based reviews on performance. In the event of a new supplier, it has to go through the process for qualification; there is also a risk of loss for new customers that make everything very responsive to the analysis of cost. It is important to compare the cost structure to other suppliers and also test testing the reasons for differences. The purchasing of goods may not impact or receive a discriminatory kind of price which can be risky for the company (Thornton et al., 2013). There are some edges or risks in case of sourcing, and at the same time, there are some advantages as well that shows that suppliers can justify the difference in costs.   

The use of ICT for Purchasing Operations and Management

Renewal of contractor testing the other ideal time specifically when there have been some cases of fail or loss in recent time. Suppliers and consumers have the option to test and analyze on reducing costs over the past time. Deleting the value further reduce the price. For instance, when one buy a part for $100 and the organization eliminates per piece cost despite the logistics or packaging costs then there is saving of $2 that can be applied to the reduction of the price to 98 dollars (Xie et al., 2011).  

The operation of the company like Wal-Mart is for different kinds of approaches that aim at managing the inventory and supply chain. It also covers the performance from the sales. The overall success of the company is based on effective management of return in operation management (Chai & Liu, 2014). Particularly, the management of the company covers all kind of decisions of service management, and these types of decisions are related to some issues and cases that any manager can face on a daily basis.  In turn, there is also a priority that shows the importance of different kind of decisions areas in operations, and it exists in the business as well.

There was a time of the inter-organizational system which is also known as IOS which is expressly supported by the automation of many kinds of manual based function like setting the accounts and placing the orders. There is the range of new kind of characteristics for different sharing the information, communication, and collaboration that has increased different systems (Chai & Liu, 2014). Various studies show that there are around thirty thousand of IOS that are in use presently and also support large proportion B-to-B functions. In the present time, there are different network leaders as well like Dell or Wal-Mart that have made significant changes and took efforts to bring the advantages of collaboration with some suppliers by utilizing the specific form of IOS in supply chain management. It is important to give a lot of understanding about the benefits that these kinds can provide to suppliers and this is why there is a challenge of interest on both sides. Despite any importance, studies have shown that leaders especially the suppliers has aimed at gaining the advantages that are driven from supply chain management system by different kind of network leaders (Chai & Liu, 2014).  The network of suppliers can be characterized by a principal amount of vendor firms that work with different kind of system leaders. The association between the providers and the network manager, described as asymmetrical. There are network leaders that play a significant role in understanding the quality of vendors. The advantages of the information technologies are distributed in an uneven manner and skewed in support of many kinds of network leaders (Olson & Wu, 2011). Although when there is a participation of suppliers, it is necessary for different kind of network leader to drive the advantages and the company of suppliers can be seen as a benefit from various kind of networks. Despite the network leaders who can be seen as advantages is at the cost of suppliers, many times change the functions and costs for them. For example, the move from vendor managed inventories move the tasks based on supervising and at the same time maintaining the inventories of the suppliers and also creates advantages for different network based leaders, and it also adds to the functions perfumed by the suppliers. In a similar manner, there is also a quick response based programs that help in creating different advantages for auto production and retailers while burdening providers with making more deliveries and also incurring a higher cost for holding the inventory (Olson & Wu, 2011).  

Conclusion

Wal-Mart has the vast network of committed kind of suppliers that assist them in satisfying the requirements of millions of consumers all across the world every week. The company takes it as a responsibility to manufacture the product and services. The company is committed to working very closely with the suppliers and to find more methods to associate with different kind of new suppliers as well (Johnston & Marshall, (2016).

It is important for the company to understand that when any provider are based on similar kind of region and the buyer is also very vulnerable towards the cost. For example, a cost of transportation between the location of buyer and the area of a supplier. In this case, there is any risky situation like strike at port of origin with the vulnerability of consumer (Hassini et al., 2012).

Therefore the selection of suppliers in a different kind of location decreases the correlation that exists between the buyer and the supplier. However, this also assists the buyer when one can prevent the windfall by low-cost suppliers (Tate et al., 2011). 

Reference

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Dai, J., & Blackhurst, J. (2012). A four-phase AHP–QFD approach for supplier assessment: a sustainability perspective. International Journal of Production Research, 50(19), 5474-5490.

Hassini, E., Surti, C., & Searcy, C. (2012). A literature review and a case study of sustainable supply chains with a focus on metrics. International Journal of Production Economics, 140(1), 69-82.

Johnston, M. W., & Marshall, G. W. (2016). Sales force management: Leadership, innovation, technology. Routledge.

Mani, V., Agrawal, R., & Sharma, V. (2014). Supplier selection using social sustainability: AHP based approach in India. International Strategic Management Review, 2(2), 98-112.

Olson, D. L., & Wu, D. (2011). Risk management models for supply chain: a scenario analysis of outsourcing to China. Supply Chain Management: An International Journal, 16(6), 401-408.

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Tate, W. L., Dooley, K. J., & Ellram, L. M. (2011). Transaction cost and institutional drivers of supplier adoption of environmental practices. Journal of Business Logistics, 32(1), 6-16.

Thornton, L. M., Autry, C. W., Gligor, D. M., & Brik, A. B. (2013). Does Socially Responsible Supplier Selection Pay Off for Customer Firms? A Cross?Cultural Comparison. Journal of Supply Chain Management, 49(3), 66-89.

Xie, G., Yue, W., Wang, S., & Lai, K. K. (2011). Quality investment and price decision in a risk-averse supply chain. European Journal of Operational Research, 214(2), 403-410.