Discuss about the Purchasing Management at the Far East Organization.
This report aims towards the analysis of the effectiveness of three different aspects of the purchasing management in Far East Organization in Singapore. These aspects include; criteria used in supplier selection, management of purchasing costs, and the use of (ICT) Information Communication Technology in the management of purchasing operations in the organization. As the purchasing manager at Far East Organization, it is my responsibility to ensure an efficient and smooth running of all purchasing activities.
The Far East Organization is a company that deals with property development. It was founded in 1960 by Ng Teng Fong. It is the largest property developer that is held privately in Singapore. It carries out development activities on properties ranging from commercial, hospitality, retail, residential, healthcare sectors and industrial properties. Far East Organization(FEO) has more than one hundred and eighty investment and development companies some which are publicly held and others that are publicly listed. It also has a sister company called Sino Group located in Hong Kong. Together these two organizations own assets with a net asset value greater than forty US billion dollars (KPMG, 2017).
The Far East Organization is a Christian company and aims to ensure the welfare of the city. It carries out activities that reveal its corporate social responsibility. Incidentally, it supports the needy in society as it strives to live up to the Christian value of loving one’s neighbor as one loves themselves. They also uphold these values today in a bid to honor the wishes of the founder of the company. The organization also ensures that the real estate properties it provides for its customers are of excellent quality and highly innovative (KPMG, 2017).
The Far East Organization has proved to be one of the best providers of real estate in the world by being the only developer worldwide to win the very prestigious FIABCI World Prix d’Excellence award. The organization seeks to inspire better lives and carry out operations that far exceed the customers’ expectations in a bid to earn their trust. This is the guiding principle that has enabled the company to outdo its very impressive competitors. Some of these competitors of the Far East Organization include; DLF, cornerstone real estate advisers, and Falco pacific resource group. The Far East has been able to weather the storms of bear and bull markets in the real estate industry and is expected to continue with these achievements into the future (Ak?n Ate?, van Raaij, & Wynstra, 2017).
In a bid to achieve its responsibilities, the Far East Organization requires different resources that it needs to purchase. First, it needs to buy land on which the different real estate buildings will be built upon. Next, it requires building materials that are needed in the construction activities. The process of purchasing all these building resources is complicated and can be categorized into five different sections. These are; first, the suppliers are expected to possess the ability to provide the materials over a given period continually. Secondly, the process of sourcing for the materials and suppliers must be efficient. Thirdly, the purchasing strategies must support organizational objectives and goals. Fourth, the goals that are aimed at during the purchasing process must be aligned with the stakeholders’ interests. Finally, there should be a well-developed supply base management (Yan, Yang, & Dooley, 2017).
Due to its corporate social responsibility, the company has a responsibility to all its stakeholders, and that is why it has to ensure that the procurement process is well managed. The stakeholders include; customers, shareholders, employees, investors, and the community (Dou, Zhu, & Sarkis, 2017).
It’s my responsibility to ensure that collaborative relationships exist between the organization and its suppliers. This enables the suppliers to see themselves as partners in the organization and therefore act in the interest of the organization. One theory that can be used to explain the relationship that exists between different organizations and their suppliers is the Agency Theory. This theory states that the principal hires an agent to perform a given task (Liang, 2015). In this case, Far East Organization is the principal while the suppliers are the agents. The theory further assumes that both parties act in their self-interest. In situations where the suppliers are motivated by self-interest, there is likely to be conflicts between the two parties.
It is therefore very important for Far East Organization to make the suppliers feel like partners in the organization. As such, they will share a common interest which is maximizing the gains for the organization and at the same time, they will be able to maximize their gains.
More factors that Far East Organization should consider when sourcing for suppliers include; First, the total ownership cost of materials should be considered. A specific price quoted by the supplier does not necessarily reflect the total cost associated with the product. There are additional costs such as logistics and transportation that should be put into account (Foerstl, Schleper, & Henke, 2017). Second, the quality of the products must be high. Therefore, the purchases manager has the job of ensuring that the suppliers who are recruited provide high-quality products. Third, the supplier should have a record of consistency. This is to ensure that they are always time conscious and keep providing quality products (Bals & Turkulainen, 2017). Finally, the chosen suppliers should be proper communicators with a partnership approach. This ensures that the suppliers always provide information required by the company and aim to work for the good of the company. Due to its corporate social responsibility foundation, Far East Organization has to work with suppliers who are ethical. They should carry out practices that ensure the environment is sustainable. They should also carry out responsible retailing practices, and build a conducive work environment for their employees (Akhavan & Beckmann, 2017).
Finally, when purchasing land, there is a need for Far East Organization to purchase land that is strategically positioned to ensure that after construction, the property will be purchased at good prices. This will assist in increasing profit margins as well as reduce costs associated with marketing activities (Rajala & Tidström, 2017).
Far East Organization is a company that has incorporated information and communication technology(ICT) in its operations. Incidentally, Far East Orchard, a subsidiary of Far East Organization owns a range of medical suites in Novena. These medical centers have made use of advanced technology for use by the medical specialists. They also have different modern infrastructure in place to aid in the medical activities (KPMG, 2017). The company has also been making use of data analytics (big data) which aids the company in discovering insights about their customers and competitors. This has helped the company to make more informed decisions that ensure improved profitability and increased efficiency. During the construction process, different technologies are also used to speed up the building process and make it less risky.
One technology that should be incorporated in the organization involves the use of artificial intelligence. The subsidiary of the organization in health can use the supercomputer which has proved to be an excellent diagnostic aid for use in the medical sector. It can be used to even train medical students as well as in the treatment of various diseases such as lung cancer. This tool will increase efficiency and enable the organization to help the people better (Pihlajamaa, Kaipia, Säilä, & Tanskanen, 2017).
Another technological innovation that Far East Organization can incorporate is the use of smart building technology. Smart buildings make use of information technology to remain connected to different systems in the building, the people who live there, and the rest of the world. They use processes that are automatic in controlling various functions such as air conditioning, ventilation, security, lighting, and heating among others (Kaufmann & Wagner, 2017).
Smart buildings also use microchips and sensors to collect data that is then used in the management of various functions in the building. This type of technology is very significant mainly in commercial property to enable the business owners to save energy, minimize environmental effects and improve security. These are just a few of the technologies that can be applied by this organization to reach a wider market and to better serve the needs of its customers (Ak?n Ate? et al., 2017).
One theory that can be used to explain the impact of information and communication technology to organizations is the Social Presence Theory. This theory explains the social effects associated with technologies in communication. The theory argues that the impact that a communication medium has depends on the social presence that it enables those using it to have. The theory has an assumption that increased contact improves the impact of the message.
The Social Presence Theory also says that the use of texts and emails in interaction, which are less social means, will not influence people as much (Yan et al., 2017). Far East Organization takes note of this theory because it uses different means of advertising that are more social to interact more with its clients to create trust as well as give them first-hand information on different concerns they may have. These platforms include; the use of social media such as Facebook and Twitter as well as having a website where people can air their concerns and commendations.
For a business to be profitable, there is a need for profit margins to exist. This requires Far East Organization to factor in the cost of land used for construction, the costs of construction taking account of both fixed and variable costs, as well as the costs associated with marketing activities. For the real estate ventures to be profitable, the buildings need to be of high quality and should be built in accordance with the targeted market (Sáenz, Knoppen, & Tachizawa, 2017).
The analysis of purchasing costs can take advantage of some tools. Software that comes in handy in the analysis of purchasing costs is Excel. One such tool is the allocation of gains of purchasing consortia. This is a tool that utilizes various practical methods as well as game theoretical methods to output the purchasing gains. Another tool which is more advanced is the allocation of costs and gains consortia. This tool uses macros. This tool also uses both game theoretical and practical methods to allocate the costs and gains of purchasing consortia. When using both tools, the purchasing price analysis tool is useful in the determination of cost functions (Dogan & Aydin, 2011).
To analyze quantity discounts, we can still use the purchasing price analysis tool which also uses macros in Excel. It also uses electre two and electre TRI in the process of selecting suppliers during the course of tendering (Chai & Liu, 2013).
In determining purchasing costs, Far East Organization needs to perform a cost analysis. This is to examine all the costs that the real estate properties have incurred until completion. This ensures that the price paid for the materials is not exorbitant. This analysis involves a calculation of; the costs of construction materials and construction costs, indirect costs, as well as overhead costs (Dogan & Aydin, 2011).
Additionally, Far East Organization can carry out a supplier analysis and find out which supplier is providing given products in the best quantity and quality at the most optimal price. This may even involve consolidation of vendors to get better prices through higher economies of scale (Hassanzadeh, Ramzi, & Zhang Gouiqing, 2011).
Indeed, the Far East Organization has been able to achieve its mission continually, and it has also grown to be one of the best real estate investment companies in the world. It has been able to accomplish these goals mainly due to proper management of its purchasing activities. It has been able to work with reliable suppliers who are also ethical. Furthermore, the company has integrated information and communication technologies in its operation which has enabled it to experience exponential growth over the years. Finally, proper management of purchasing costs has allowed the company to enjoy significant profit margins as well as sell properties that are affordable to its wide range of customers.
References
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Ak?n Ate?, M., van Raaij, E. M., & Wynstra, F. (2017). The impact of purchasing strategy-structure (mis)fit on purchasing cost and innovation performance. Journal of Purchasing and Supply Management. https://doi.org/10.1016/j.pursup.2017.05.002
Bals, L., & Turkulainen, V. (2017). Achieving efficiency and effectiveness in Purchasing and Supply Management: Organization design and outsourcing. Journal of Purchasing and Supply Management. https://doi.org/10.1016/j.pursup.2017.06.003
Chai, J., & Liu, E. (2013, August 1). Application of decision-making techniques in supplier selection: A systematic review of literature. Expert Systems with Applications. Pergamon. https://doi.org/10.1016/J.ESWA.2012.12.040
Dogan, I., & Aydin, N. (2011). Combining Bayesian Networks and Total Cost of Ownership method for supplier selection analysis. Computers & Industrial Engineering, 61(4), 1072–1085. https://doi.org/10.1016/J.CIE.2011.06.021
Dou, Y., Zhu, Q., & Sarkis, J. (2017). Green multi-tier supply chain management: An enabler investigation. Journal of Purchasing and Supply Management. https://doi.org/10.1016/j.pursup.2017.07.001
Foerstl, K., Schleper, M. C., & Henke, M. (2017). Purchasing and supply management: From efficiency to effectiveness in an integrated supply chain. Journal of Purchasing and Supply Management. https://doi.org/10.1016/j.pursup.2017.08.004
Hassanzadeh, S., Ramzi, J., & Zhang Gouiqing. (2011). Supplier selection and order allocation based on fuzzy SWOT analysis and fuzzy linear programming. Expert Systems with Applications, 38(1), 334–342. https://doi.org/10.1016/J.ESWA.2010.06.071
Kaufmann, L., & Wagner, C. M. (2017). Affective diversity and emotional intelligence in cross-functional sourcing teams. Journal of Purchasing and Supply Management, 23(1), 5–16. https://doi.org/10.1016/j.pursup.2016.07.004
KPMG. (2017). About Us – Far East Organization. Retrieved September 20, 2017, from https://www.fareast.com.sg/about-us
Liang, C. (2015). What Is the Importance of Purchasing Management? Retrieved September 20, 2017, from https://www.linkedin.com/pulse/what-importance-purchasing-management-chen-liang
Pihlajamaa, M., Kaipia, R., Säilä, J., & Tanskanen, K. (2017). Can supplier innovations substitute for internal R&D? A multiple case study from an absorptive capacity perspective. Journal of Purchasing and Supply Management. https://doi.org/10.1016/j.pursup.2017.08.002
Rajala, A., & Tidström, A. (2017). A multilevel perspective on organizational buying behavior in coopetition–an exploratory case study. Journal of Purchasing and Supply Management, 23(3), 202–210. https://doi.org/10.1016/j.pursup.2017.03.002
Sáenz, M. J., Knoppen, D., & Tachizawa, E. M. (2017). Building manufacturing flexibility with strategic suppliers and contingent effect of product dynamism on customer satisfaction. Journal of Purchasing and Supply Management. https://doi.org/10.1016/j.pursup.2017.07.002
Yan, T., Yang, S., & Dooley, K. (2017). A theory of supplier network-based innovation value. Journal of Purchasing and Supply Management, 23(3), 153–162. https://doi.org/10.1016/j.pursup.2017.02.002
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