Production process is an important factor for the company. Through effective material management system, it is possible for the companies to carry on with the operational activities for the organization. In this process, the management of the companies work towards drafting policies for purchasing the products on a timely manner. Shortage in the supply of the goods or materials can directly affect the production process, which then impacts the operational expenses. this report has been prepared project manager wherein the highlight has been done on the strategies adopted for entering into contract. The relevance of the selection process for the suppliers has to be done after collecting the required information. This would help in procuring the goods at a reasonably lower price (Ballou, 2007).
Business strategies play a key role in the development of the company. in this case, it is essential to develop and introduce an effective method for developing and retaining the buyer/supplier relationship. Shortage of vendors or the supply of raw materials for carrying out the operational activities for the business impacts the business strategies. Issues related to raw material can be handled in the right manner, as this will enable the management to carry out the production activities. Thus, the raw material procurement method has to be analysed on a timely manner. However, it is not easy to find the right type of suppliers who can handle the needs of the clients. At the time of selecting the supplier for the company, the operational manager consider the below mentioned factors –
Is the supplier capable enough to supply the needed quantity of raw materials on a timely manner? The price of the goods or the raw materials has to be reasonably priced (Barua and Mukhopadhyay, 2000).
The quality evaluation of the raw materials or the goods has to be reliable
Reliability of the vendor has to be evaluated (Burton et al., 2006).
Manufacturing companies like Toyota has adopted and implemented an effective supply chain management system. Through this process, the company attempt to maintain positive and long term relationship with the suppliers and the clients. This method helps in handling the supply chain for the industries that has larger number of customers. The procurement method has decided and followed by the company in order to procure the accurate raw materials on a timely manner. This also includes procuring the goods at the right price, which would save money for the company. Toyota has operational activities in majority of the countries across the globe. Through this method, the company attempt to get the value for money or VFM. In this method, the allocation of the raw materials to the production departments and the budget factors are taken into consideration. Such factors are required for maximising the profit earning margin. With contractual raw material procurement method, it is possible for the company to reduce the raw material procurement costs (Chalmeta, 2006).
The business development depends upon the procurement process and type of contract that has been entered into by the business. Supplier and customer relationship by the company has to be developed and maintained for a longer period of time. For this, it is essential to enter into effective contract through which the terms and conditions are clarified. In this process, the terms clearly mention the rules for the contract. This is essential for maintaining positive and reliable relationship with the clients. Toyota ensures to procure the raw materials from different suppliers, so as to carry on with the production activities without any interruptions. When goods and raw materials are procured by the company at the lowest possible price, the company can work towards reducing the offer price to the clients. The firm price has to be decided so as to overpower the level of competition that exists in the industry. Price negotiation is done on the basis of the negotiations that have been entered into between the company and the clients. Through this process, the parties work towards agreeing upon the estimated price for procuring the goods at the lowest possible price. At the time of deciding the procurement process, the company needs to consider the uncertainties that can impact the production process.
In this process, it is necessary to understand the contract life cycle, which is classified into important stages like –
The activities that needs to be done prior to entering into the contract (Craighead et al., 2006).
Preparing the tenders and submitting the sameClearly mentioning the details related to the contracts (Gable, Sedera, and Chan, 2008).
The contract term mentions the details of the sales of the products. Through contract terms, the company mentions the important details that are considered to be necessary for improving the relationship. Contract terms have to be differentiated as per the government or companies. In this case, the terms for returning the goods or raw materials purchased by the suppliers or the customers have to be mentioned.
In this method, the process that needs to be followed by the management for acquiring the raw materials from different sources has to be decided by the company. Through this process, the suppliers have to be streamlined, as this would help in procuring the goods or raw materials on a timely manner. In this process, the contract details that need to be mentioned so as to set out the right expectations with the clients or the suppliers. The contract needs to include the technical documents which will contain the required information about the procurement for the raw materials. It is essential to develop a positive and long lasting relationship with the suppliers (Gregor, 2006).
The company has drafted an effective procurement policy, through which the competitive advantage can be gained by the management. Over and under procurement method for the raw materials can secure the company from incurring additional expenses. For this, the company needs to prepare an effective inventory plan through which the requirement for the production activities needs to be drafted. This would help the management to analyse the future goals and draft the best polices through which the production process can be carried out. In this method, the raw material procurement is done based on the production process that has been determined by the company. With the help of the targeted procurement method, the company calculate or analyse the optimal inventory level. This would be useful in optimising the buying policies that is required for placing the order with the suppliers. In this method, the purchasing condition for the raw materials has to be analysed. The price for the raw materials is one of the important factors that would have to be considered at the time of selecting the model. Through such method, the management attempt to improve the raw material procurement process. Budgeted price and quantity of the raw materials has to be prepared. The contract has to be entered into by the public and private sectors. Rules and regulations that are required to be mentioned on the contract have to be clearly mentioned. This would help in clarifying the terms that is necessary for entering into the contract (Gutierrez, 2002).
In the tender method, the government companies approach the suppliers to apply with the quotation. Through the tender, the companies analyse the best tender and choose the one that would serve the needs of the company. In this method, the details are collected as this would help in maintaining positive relationship with the suppliers. Through this process, the company attempts to introduce commercial environmental factors. It is not possible for the companies to retain regular relationship with the suppliers, as there are many factors that impacts decision. The cost involved in the process and the standards of the goods and services has to be analysed. Through this process, the procurement staffs of the company review the suppliers. This is done for analysing the standards for the raw materials has to be communicated with the suppliers. For this, the alternatives for analysing the suppliers have to be analysed (King and Burgess, 2008).
In the procurement process, the staffs check on the regular suppliers. For this, the cost of the raw materials and the quality of the goods are analysed. The staffs need to conduct meeting with the suppliers, as this will help in setting the right expectations with the clients. Through discussions, the details of the business and the raw material requirements are shared with the potential suppliers. If required, the company introduce quality function deployment process, which indicates the importance of the role played by the suppliers. This would be useful in conducting the team approach, especially for the new products and setting up of new service department. The suppliers have to be assessed, as this will help in successful dealing with the potential suppliers. Some of the steps that would have to be followed by the company include –
Analysing the past performance of the chosen supplier (Kondracki and Wellman, 2002)
Checking on the track record, along with the reputation of the suppliers.
Introduce site visits, and this is done through objective appraisal method.
If required, introduce third party certification method (Kotzab, et al., 2006).
Through vendor rating process, the company accumulate the data that is required for conducting the supplier’s real or actual performance. In this method, the performance of the supplier is measured in the below mentioned manner –
Quality of the services rendered earlier by the company
Timeliness for supplying the goods and services
Reliability of the services rendered by the company.
Price quoted by the company, when compared to others available in the industry (Liu, Zhang S, and Hu, 2005).
The process of procurement is impacted by the economic outlooks of the products. During recession, the process for procurement for raw materials slows down. Thus, at the time of economic downfall buyers or companies expect to adopt and implement effective strategies through which the inventory levels and cost for the materials are reduced. In the quantitative and qualitative method for procurement of the raw materials, the management need consider the alternatives that are required for procuring the raw materials on the timely manner. The role of the procurement staff in the process of buying the raw materials plays an important role. In this method, the interpersonal skills and other factors have to be considered. In the quantitative method, the information regarding the product procurement is analysed from various sources. Through this process, information regarding important purchases of the raw materials is collected. This is required for conducting the research that would help in selecting the best supplier who would help in procuring the raw materials. In the qualitative method, the company collect required information that would help in procuring the required goods on a timely manner. The marketing department conduct research through which the right steps could be followed for producing the goods. In this method, negotiations are done with the suppliers and the right expectations are set out with the clients (McLaren, 2004).
The details regarding the contract have to be specified in the contract, proposed to be entered into between the company and the suppliers. In this process, the details of the contract need to be specified. For this, the multiple incentive pricing arrangements would include the below mentioned factors –
Cost incentives – this includes the relevance of the pre-requisites that consists of technical specifications. Such a specification clearly mentions the requirements and the process that would be followed for achieving the set target (McLaren et al., 2004).
The contract is entered into by the parties, through which the different factors associated with the incentive areas has to be analysed. Thus, at the time of entering into the contractor through which the technical management process is introduced. The objective has to be determined, as this will help in improving the profitability for the company.
The contractor needs to understand the relevance of the performance of the prospective contract, through which the expected results can be achieved. Details regarding the contract have to be analysed, as this will help in improving the details related to goods and raw materials procurement. This is quite important, as this will help the management in improving the relationship with the suppliers ( Pang, 2008).
The details about the contract have to be clearly mentioned in terms of costs, expected time frame, and technical performance that form an important part of the contract. Required information about the contract has to be included in the process, as this would help in improving the performance (Raman et al., 2006).
The principles for contractual negotiation includes the below mentioned factors –
Highlighting the details of the contract, as this will help in improving the relationship with the suppliers.
Analyse the benefits that would be provided to the suppliers in terms of cost and incentives pay. Such factors are quite important, as it would help the management to retain the suppliers (Richards and Jones, 2008).
List down the details related to the raw material procurement in the right manner, as this will help in improving the relationship and business procurement process.
Analyse the benefits that is associated with the contract (Sedera et al., 2003)
The raw material procurement method has to be developed and implemented in the right manner. Through this process, the management can enter into positive dealings with the suppliers, which is required for sustaining the tough competition. In this method, the challenges involved in the process of raw material procurement have to be analysed. This would help in improving the relationship with the suppliers and handling the challenges in the right manner.
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