Discuss about the Recommendations for Logistics and Supply Chain Management.
Supplier relationship is one of the major concerns for any organization, in which reseller organization buys products from the supplier in order to resell the products. Sourcing and selecting the right suppliers and maintaining strong relationship with them are the main priorities of the retail organizations towards successfully running the organizations (Islam et al., 2013). The organization that is chosen for this study is Popular Holdings, which is a distributer and retailers of books in the local education market.
The scandal that this organization has faced was to choose their preferred suppliers depending on their personal relationship and not depending on the quality and price of the products of the suppliers, which led to huge negative reputation in the market and even distressed supplier’s attention (de Souza et al., 2014). The study will represent issues related to supplier selection criteria of this organization. The study will recommend appropriate criteria to be applied in the supplier selection criteria of this organization. Through analyzing the importance of ICT in purchasing operation, the study will demonstrate ICT in improving the purchasing operation of the organization. Lastly, the study will also recommend appropriate tools to be considered in analyzing the cost of purchasing of this organization.
Popular Holdings is a renowned Singapore based retail organization that is engaged in publishing, distributing and retails different kinds of books in the local market of Singapore (Popularworld – Home. 2016). The organization operates in international markets through their subsidiaries in those markets. The organization also provides assessment titles, stationary products and multimedia products. It is the largest bookstore within Southeast Asia that has almost 143 retail outlets in all over the world (Thai, 2013). The organization has multiple number of sources from which the organization get multimedia sources and stationary products. The organization also uses global suppliers in getting books like autobiography. The main competitors of this organization are MPH Group and Page one that also design and sells different type of books in the market of Singapore. The goal of the organization is to provide quality books and multimedia products to the customers and provide it at value for money price. The strategy of this organization can be seen in provide all newly published books and e-learning facility to the overseas students. The organization offers their products at affordable price because they value for the money of the customers.
Popular Holding Group sells books, multimedia products and stationary products to the customers. Though the organization publish their own books and sell it the local market, the organization needs suppler in getting various type of story books for the adult customers. Apart from that, the organization also needs audiovisual products to be supplied by the suppliers. In order to match the syllabus of student of different countries, the organization needs international suppliers, who will provide books by matching the syllabus of the students (Sohal & Rahman, 2013). Furthermore, the organization is trying to expand its business through providing foods and beverages to the customers. Manufacturing of these kinds of products would need extra cost, which will be too costly in operating the business. Therefore, the organization needs supplies of readymade products that this organization resells to the customers.
The purchasing goal of this organization is to get quality products from the supplier so that it can meet the demand of the customers properly. Apart from that, the goal of purchasing is also to get the products at lowest cost so that it can minimize the cost of organization. However, the organization uses multiple source suppliers for getting different types of products in all the different areas of their business. In this situation, the organization is becoming failed towards maintaining good relationship with all the suppliers. The organization is not able in efficiently prioritizing their existing suppliers as their product standard. Apart from that, the organization has lack of information communication technology towards providing authentic inventory information to the global suppliers. Therefore, the suppliers are becoming failed in providing products timely and according to the needs of the organization. Lack of ability of the organization in prioritizing the supplier sometimes leads to wrong selection in terms of costly suppliers that increases the cost of the organization.
Figure 1: Supply risk and impact on value
(Source: Watanuki, 2015)
Cost analyzing
Cost analyzing of the suppliers should be one of the prime activities of Popular Holdings in selecting the suppliers from local as well as from global markets. The organization should look at the competitive pricing of the suppliers and thus, choose such supplier only who provides products at lowest cost so that cost of company is minimized (Fernie & Sparks, 2014). The organization should also analyze the financial stability of the organization towards selecting right suppliers out of many suppliers.
Quality and safety
Not only should the price of the suppliers, but also Popular Holdings incorporate quality of the products of suppliers before purchasing the products from their suppliers. The organization sometimes faces quality issue due to immediate selection of suppliers and therefore, they do not get time for analyzing the quality of the products. In this way, the poor quality of the products may disappoint the customers by decreasing the customer value. The organization should maintain a safety standard for their product to be sold to the customers, so the purchasing manager should follow those standard in choosing the suppliers.
Delivery
Due to global selection business, the organization has to select suppliers globally. The organization has to select those suppliers only who will be able to timely deliver the products to the customers. This will increase the value of the products to the organization through keeping its time value.
Service
Popular Holdings should select the suppliers based on the ability of the suppliers in providing service on the products provided to the organization. If the products come from the supplier seems to have any issues, they should take it in return through promising to provide right products (Dyckhoff, Lackes & Reese, 2013).
Convenience
The ways, the suppliers would provide the products, should be in convenient way. The organization should select the suppliers based on their convenience in providing the products. The organization should choose only those suppliers that use right vehicles towards providing timely delivery of products to the customers.
Risk evaluation
In order to evaluate the feasibility of the supplier selection, an organization has to evaluate the risk associated with it (Monczka et al., 2015). Popular Holdings should track all the records associated with the suppliers in identifying the risk with them and accordingly minimizing the risk through selecting right suppliers.
According to Musso and Risso, (2013), the concerned organization has to effectively deal with both inbound and outbound logistics, which will eventually enhance the firm’s distribution system. On the other hand, Frehe and Teuteberg, (2014) pointed out that ICT tools help in centralizing and communicating with the suppliers in real time basis, which helps in improving the lead time management.
Information communication technology (ICT) tools are highly important for accessing relevant and important information on time for getting competitive advantage over the competitor organizations (Frehe & Teuteberg, 2014). ICT tools will help the Popular Holdings in interacting with different other organization in terms of supply chain management through efficient data sharing, exchange of data in high speed towards meeting customer demands. Using ICT tool the organization will be able to provide timely information to the supplier organizations and thus, they will be able to provide timely delivery of the products to the customers. Apart from that, the ICT tools facilitate the organization in communicating authentic information about the inventory to the suppliers so that they can supply right amount of products to the organization (Fadiya et al., 2015). It will improve the purchasing operation of the organization through minimizing the waste of products due to overburden of supplied products.
Bar Code Tool
Bar Code readers will be effectively useful in implementing automatic data capture system, which improves the accuracy and speed of data entry in the computers (Musso & Risso, 2013). It will also improve in counting the raw materials stored in the inventory and count the finished goods. Thus, it will improve in accessing the exact amount of products needed from the suppliers. Apart from that, the bar code reader tools also can record the purchasing requirement of the organization 5 to 7 times quicker than the normal employees of the organization can, and thus, it would reduce the labor cost of the organization and increase the reliability of the organization in assuming demand of products to be purchased from suppliers. ICT tools also communicate the right motto of the organization with the supplier so that the supplier can provide products by meeting all the requirements of the customers.
RFID ICT tool
RFID ICT tool will facilitate Popular Holdings in bulk reading of organizational inventory. This technology will also help the organization in tracing the products throughout the process of supply chain management. ICT tools also help in reducing the cost of the supply chain management as it reduces the labor cost due to bulk reading of information of the organizational products (Tan et al., 2012).
The concerned organization is not following centralized procurement technique and therefore redundancy of raw materials is quite evident. On the other hand, the organization is not well equipped with real time inventory monitoring through e-technology. The organization follows traditional inventory management techniques and therefore, the system is not proven to be up-to-date (Santos et al., 2016). The organization is basically multi-source based retail outlet, which is not completely aware of allocating and disintegrating its updated inventory. Therefore, in terms of corporate sustainability and minimizing wastage of procurement, the organization needs to incorporate certain techniques for purchasing cost analysis.
Cost Analysis
An organization needs to analyze preliminary the actual cost to purchase regarding the good that needs to be supplied (Chen & Guo, 2015). This is because cost is related to storage, handling and delivery. The organization needs to centralize the types of sources of supply so that handling cost does not exceed further in terms of human resource. The actual cost of procurement is consisted of cost of supplies and cost of handling, where the later must not exceed more than 7 percent than the earlier (Simchi-Levi et al., 2013).
Maverick Spending
An organization that follows purchase requisition procedure, it eventually increases the cost of procurement (Fayard et al., 2012). Therefore, it is required for the organization to take care of the type of inventory management and implement ad hoc purchase technique in future. The maverick purchases will be identified and filtered out that will reduce the cost of procurement.
Centralized Warehousing
The organization follows multisource supply and therefore, each of the inventories is categorized. This has increased the purchasing cost for the organization. Therefore, it is recommended that the organization have to reduce the cost of purchasing by centralizing its warehousing so that handling cost is reduced.
Activity Based Costing
An organization needs to follow activity based costing so that the consumption cost of actual supplies is reduced (Kang, 2015). The cost of each day has to be organized in terms of concurrent activities, so that the final cost of handling inventory is reduced, which will be same for Popular Holdings.
Bidding System
The concerned organization has expanded from the past to a large extent and therefore, it has created good reputation in the market. Therefore, in order to reduce purchasing cost, it needs to follow bidding technique, where the lowest bid will be granted. The supplier with lowest cost will be granted and it will reduce the cost of inventory.
Conclusion
While concluding the study, it can be said that Popular Holdings has multiple source of suppliers and they are unable to maintain strong relationship with the suppliers. On the other hand, due to global sourcing of suppler, the organization is unable to provide timely information to them and prioritizing the suppliers. However, the organization can be able to mitigate this supplier selection issues through adopting appropriate supplier selection criteria. The organization will choose those suppliers, who will be able to provide quality products in timely manners with lowest price. In order to maintain consistent relationship with the suppliers, Popular Holdings should incorporate ICT tools in improving purchasing operation of the organization. ICT tool like bar code reader will facilitate the organization in automatic counting of raw materials in the inventory and accordingly place order of purchasing to suppliers. On the other hand, RFID would facilitate the organization in recording bulk information about the purchasing of the organization in shortest possible time. Purchasing cost analysis tools would facilitate the organization in prioritizing the suppliers to be selected in terms of cost benefit analysis. In order to analyze purchase cost, the organization should use centralized warehouse system that will keep record of each of the inventory of the organization. Activity based costing will reduce the give an accurate estimation of overall cost.
References
Chen, L., & Guo, Z. (2015, September). Logistics Cost Control Performance Evaluation of Third Party Logistics Enterprises. In Fifth International Conference on Transportation Engineering.
de Souza, R., Goh, M., Lau, H. C., Ng, W. S., & Tan, P. S. (2014). Collaborative urban logistics–synchronizing the last mile a Singapore research perspective. Procedia-Social and Behavioral Sciences, 125, 422-431.
Dyckhoff, H., Lackes, R., & Reese, J. (Eds.). (2013). Supply chain management and reverse logistics. Springer Science & Business Media.
Fadiya, O., Georgakis, P., Chinyio, E., & Nwagboso, C. (2015). Decision-making framework for selecting ICT-based construction logistics systems. Journal of Engineering, Design and Technology, 13(2), 260-281.
Fayard, D., Lee, L. S., Leitch, R. A., & Kettinger, W. J. (2012). Effect of internal cost management, information systems integration, and absorptive capacity on inter-organizational cost management in supply chains. Accounting, Organizations and Society, 37(3), 168-187.
Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers.
Frehe, V., & Teuteberg, F. (2014). The Role of ICT in Green Logistics: A Systematic Literature Review. In Information Technology in Environmental Engineering (pp. 53-65). Springer Berlin Heidelberg.
Islam, D. M. Z., Meier, J. F., Aditjandra, P. T., Zunder, T. H., & Pace, G. (2013). Logistics and supply chain management. Research in Transportation Economics, 41(1), 3-16.
Kang, M. (2015). Activity-based Costing Research on Enterprise Logistics Cost Management. Business and Management Research, 4(2), p18.
Monczka, R., Handfield, R., Giunipero, L., & Patterson, J. (2015).Purchasing and supply chain management. Cengage Learning.
Musso, F., & Risso, M. (2013). ICT Innovation for Buyer-Seller Relationships in International Supply Chains. In Driving the Economy through Innovation and Entrepreneurship (pp. 659-670). Springer India.
Popularworld – Home. (2016). Popularworld.com. Retrieved 10 June 2016, from https://www.popularworld.com/en/index.php
Santos, T. F. D., Gonçalves, A. T. P., & Leite, M. S. A. (2016). Logistics cost management: insights on tools and operations. International Journal of Logistics Systems and Management, 23(2), 171-188.
Simchi-Levi, D., Chen, X., & Bramel, J. (2013). The logic of logistics: theory, algorithms, and applications for logistics management. Springer Science & Business Media.
Sohal, A. S., & Rahman, S. (2013). Use of third party logistics services: an Asia-Pacific perspective. In Handbook of Global Logistics (pp. 45-67). Springer New York.
Tan, M. I. I., Razali, R. N., & Desa, M. I. (2012). Factors influencing ICT adoption in halal transportations: A case study of Malaysian halal logistics service providers. International Journal of Computer Science Issues, 9(1), 62-71.
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