University of Nebraska at Omaha Purchasing & Supply Chain Management Discussion
- Discuss how a purchasing department can influence the financial performance of a large manufacturer or a large retailer (Please provide an example for an existing manufacturer or retailer).
- For a growing number of manufacturers, the purchasing department is increasingly involved in purchasing secondary services and noncritical components. Why is the role of purchasing expanding for so many organizations today?
- The article in SC247 summarizes several methods for optimizing procurement and inbound supply management. Select two optimization methods discussed in the article and discuss how a manufacturer or retailer could use each method to gain a competitive advantage.
- Please provide an insightful question about the materials assigned this week to share with the class.
The first discussion:
The two are intertwined with each other as the purchasing department helps keep the company financially healthy by spending each penny of the company correctly. Whereas the financial performance is how well the assets generated revenue, as its goal is to keep the balance sheet in black (profitable). For example, 3M is looking for ways to make each penny count and to spend it well. They have a reputation to keep and try to maintain, but they are always needing to improve their systems. Therefore, 3Ms purchasing department would manage the procure-to-pay process efficiently and effectively. That can be done by determining staffing levels, administrative budgets, professional training, and the growth opportunities for employees, along with improving the buying channels. When it comes to needing to improve the system, the needs and wants would need to be evaluated. Therefore, the needs of the users would want to improve the system, to accumulate the correct data to have the system beneficial. With 3M, during the beginning stages of COVID, the procure to pay process had to be significantly improved in order to keep up with the ongoing increasing demand. Within the production floor, monitors were placed in departments to keep employees reminded how important their job is and how to do it correctly. Therefore, the monitor showed the highlighted key points like successful products against defective products ratio.
2. The role of purchasing is expanding for so many organizations today is always needs to negotiate with suppliers as economic and political disruptions are higher than ever. Although the outlooks for purchasing managers have not changed as it always wants to minimize the purchasing but not slow down behind other departments of the company. Therefore, it needs to be continuously needing to acknowledge and adjust to worldwide environmental and economic changes which the continuous change can be the most costly. Therefore, if the company can get secondary services to obtain the same information, that takes the stress off needing to find the right employees and still gain more of a profit as that company is now doing “all the work” and having that become their vision compared to the original company taking the risk of potentially losing money.
3. Within the SC247 article, one of the methods used is to propagate demand to upstream tiers. An example of how Coca-Cola gains the competitive advantage is, within their retail stores, they do not run into the problem of their shelves being empty. That is because the relationship between Coca-Cola and the retail store is modified so Coca-Cola knows each level of supply within each other their retailers. Otherwise, Coke knows if they run out, and their shelves go empty then they start paying to have the empty shelves sit within the retailer. Which Coke would not want more expenses on their balance sheet. Being that way, Coke is not available to their customers. Another method is 3M uses, automatically reallocate inbound materials. That was shown in the beginning stages of COVID, as 3M facilities did not run certain machines every day of the week, for 24 hours straight, but as COVID came about, they automatically adjusted to increase the machines, and automatically reallocate so their machines never shut off so it reduced the risk of shortages as it saw the demand through COVID, and 3M supplied around the clock.
4. Will there ever become a way to have a company stay ahead of the economic and environmental changes so the risks can become more secure and less risky?
This is the second one
1. The purchasing department has a major impact on the financial performance of a large organization. The department is responsible for providing the manufacturer/retailer with an uninterrupted flow of high-quality goods and services that are required by the stakeholders. It does this by sourcing products/services at the correct price, getting them from the right source, sourcing the goods at the right specification to meet the needs of the user, getting them in an appropriate quantity, and arranging for delivery/service to the right customer at the right time. If all of these are done correctly then the financial performance of the firm will increase. Amazon sources products from all over the globe and their purchasing department has done a marvelous job in following the actions listed above to maximize financial profit.
2. I believe that cause of this expansion can be traced to an organizations goal of maximizing value and minimizing cost of goods and services. Purchasing managers have a strong grasp on the wants and needs of internal stakeholders as well as how to adequately source the best products from suppliers. These same skills allow a purchasing department to acquire secondary services and noncritical components at the optimum price, which may be overlooked by a different department within the firm. Overall companies do this to save money on these products.
3. The first method is the automatic reallocation of inbound materials. This involves a system that can track the demand automatically across several facilities, and reallocate in-transit materials to the most appropriate destination based on demand data. Using this method to optimize supply management can give firms a competitive advantage in reducing the risk of shortages as well as saving money on automatic orders. The second method is incorporating a real-time platform for transportation in which material supply is able to meet volatile demand, and transportation costs are reduced. This allows companies to maximize shipment container use and drive out expediting costs which gives reduces monetary amounts for orders and saves the firm money.
4. The article linked above describes a phenomenon called the “bullwhip effect” in which communications between purchasers and suppliers are increasingly lagged down the supply chain as it gets longer. What is the best method for combating this effect within an expanding company?
