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Analysis of the Importance of Procurement in the IT Sector

Discuss about the IT Procurement Challenges in the Retail Sector.

In the new age of Information Technology, many of the important decisions have an implication of procurement, which could impact the total cost of carrying out the decision. The cost could include the overall cost of the goods or services. In the IT sector, the function of procurement is seen as a strategic function that works to improve the profitability of the organization [2]. Procurement could be helpful in streamline of processes. It can also help in reducing the costs of the raw materials. The function of procurement is greatly concerned regarding obtaining the necessary services and goods from the proper suppliers. This could enable the organization to meet the strategic objectives in an effective, efficient and economic manner, which could influence the success of an organization [3].

Role of Procurement in Supporting the Strategy of Business

Procurement plays a major role in approaching the strategy of business. These could be achieved in two ways. Firstly it could be performed by different activities from competitors and by performing the same activities in a better way. Procurement could be supported in a different strategy. It could serve as a distinguishing competence in implementing same strategies in a better way than other competitors [6].

In the recent market, the professional people who are engaged in procurement are highly expected to develop options, which could help their business organization to stay in the competitive market. The proper evaluation of the costs of the transaction is a major issue for the trade purpose and the various decisions in investment. This could be helpful in ensuring the profit and larger volumes of purchases [4].

The structure of an organization describes the way in which the management and the employees would connect to each other in a particular organization. The IT sector should rely on the strict rules so as to accomplish their goals and objectives.

Vertical Structure: The structure has a director or departmental head at the top of the structure. It also has a middle level for the managers who would create plans for the company and some workers who would implement the procedures. In this structure, the heads of the department decide and dictate the procedures of the functions and operations. The middle level managers help in creating the plans and thus implement them. This type of strategy could help in the smooth working of the procurement procedures in the IT sector.

Structures of the Organization in the Industry Sector

Horizontal Structure: This structure use few levels between the workers and the management. This allows a clear and open connection between the layers. This kind of structure occurs at the higher levels of the organizational structure that have low budgets and few employees.

Divisional Structure: In this organizational structure, the entire department oversee their entire operation with a minimum input from other departments. The divisional structure is able to separate the employees based on their specialty of their job and the geographic location of the place.

Matrix Structure: This kind of structure of organization defines the relationship between management and employees that would be established as a matrix or grid instead of the hierarchy of convention. This kind of structure can allow the organizations to communicate with each other. This could also lead to the efficient communication between the employees and the management.

The following procedures are involved in the purchasing in the industry sector:

  1. The organization should know the facts about a certain product. The product should be something that would be new for the company.
  2. The organization should know the exact source from where the product could be obtained. Ensuring the right product is extremely crucial for the company [8].
  3. The organization should search for all the appropriate information in order to determine the most suitable prices and terms related to the product.
  4. The purchase order is used to define the price, specifications and the various terms related to the product.
  5. The order that is purchased should be delivered by using email, fax or some other electronic means within the proper time. The recipient acknowledges the receipt of the order purchased.
  6. The documents that should match when a payment procedure is requested by an invoice. The discrepancies should be resolved before the before the payment is done by the recipient.
  7. The company should maintain the records properly. The records includes the purchases in order to verify the tax information and conform the warranty information [11].

Most of the legal challenges that are being faced by the IT sector are being driven mobile and cloud computing technologies and various other kinds of software which are responsible for transforming and are critical in every industry. This procedure are in relation with the existing laws and regulations.

Data security is an important aspect in the IT sector. Securing and protecting the data are an important concern for various organizations. Hence a proper legal system is extremely necessary to define the rules.  

The public procurement could be defined as the purchasing or buying of goods and services. The importance of strategy related to procurement can also improve as the companies would emphasize on the fundamental capabilities and transmit the activities to the partners involved in business [1].

The procurement process in IT systems and their services would be perplexing as compared to the purchase of much more consistent services and goods. The decisions related to procurement should be made early in the process of procurement when the requirements would be uncertain for the organization. The buyer might link between the opposing and complex system options. The Information Technology systems should help in supporting the process although extensive research demonstrates the difficulties in implementing the process of e-procurement in the public sector.

The research is mainly concerned about the challenges and the several dilemmas, which are mainly faced in the procurement in the information systems and the related services in the IT sector [7].

Procedures of Purchasing in the Industry Sector

The procurement by the public could be viewed as a system which is in action. It mainly consists of making and defining the policy of management, authorization, appropriations, and regulations of procurement and the proper implementation of the policies of procurement. One of the identified challenges of procurement should be in the concern of the issue of the several internal stakeholders who possess conflicting goals. In addition to the challenges, the public sector involves the complication of the various complicating needs of various stakeholders [12].

Another related issue is of asymmetry of information when services are procured from consultants of information security. The theory of different agencies suggest that contract and monitoring of the work should be able to bind the speculation of the vendor. This may be insufficient in order to manage with the various problems as several consultants have much more information of the critical areas of the problem.

The profession of procurement is becoming a core component of the innovation of the organization. When the procurement strategies are related to the IT sector, there are several unique challenges that would be present in order to successfully implement the strategies, processes and systems into the existing operations. The managers of the procurement in the public sector should have an open framework within their proper work area [9].

The major challenges of procurement that have been found are:

  1. To realize the true benefits from data analytics in the division of procurement.
  2. To ensure the benefits and advantages of embedding the sustainable practices of procurement, which are fully realized.
  3. To balance the outsourcing and maintain the high quality of internal capacity.
  4. To get the maximum benefit from the suppliers.
  5. To develop the strategies in order to engage effectiveness with indigenous suppliers [10].

Conclusion

Based on the above discussion, it can be concluded that procurement is a necessary component in the retail sector. The function of procurement are having a major role in the success scenarios of several global firms. The study also supports the previous identified challenges that would be related to several stakeholders who are involved in the process of procurement. The relevant groups of stakeholders should be involved in the project related to procurement. The challenges in the procurement strategy is complex and regulations are present [5]. This could make the process much more complex and thus could increase the costs. The public procurement of the IT systems is a difficult task and could take a lot of time to be able to seek the information. The problem could be overcome by replication of the strategy from several known procurement processes. Risk is a matter of high concern for the procurement process. More and more emphasis should be laid on the assessment of the risks in order to ensure a smooth functioning of the process of procurement.

References

Moe, Carl Erik, and Tero Päivärinta. "Challenges in information systems procurement in the public sector." Electronic Journal of e-Government 11, no. 1 (2013): 307-322.

Amann, Markus, Jens K. Roehrich, Michael Eßig, and Christine Harland. "Driving sustainable supply chain management in the public sector: The importance of public procurement in the European Union." Supply Chain Management: An International Journal 19, no. 3 (2014): 351-366.

Loader, Kim. "Is public procurement a successful small business support policy? A review of the evidence." Environment and Planning C: Government and Policy 31, no. 1 (2013): 39-55.

Roberta Pereira, Carla, Martin Christopher, and Andrea Lago Da Silva. "Achieving supply chain resilience: the role of procurement." Supply Chain Management: an international journal 19, no. 5/6 (2014): 626-642.

Lember, Veiko, Rainer Kattel, and Tarmo Kalvet, eds. Public procurement, innovation and policy: International perspectives. Springer Science & Business Media, 2013.

Uyarra, Elvira, Jakob Edler, Javier Garcia-Estevez, Luke Georghiou, and Jillian Yeow. "Barriers to innovation through public procurement: A supplier perspective." Technovation 34, no. 10 (2014): 631-645.

Ashworth, Allan, Keith Hogg, and Catherine Higgs. Willis's practice and procedure for the quantity surveyor. John Wiley & Sons, 2013.

Chong, Eshien, Carine Staropoli, and Anne Yvrande-Billon. "Auction versus negotiation in public procurement: Looking for empirical evidence." (2014): 120-142.

Danzon, Patricia M., Andrew W. Mulcahy, and Adrian K. Towse. "Pharmaceutical pricing in emerging markets: effects of income, competition, and procurement." Health economics24, no. 2 (2015): 238-252.

Nojavan, Sayyad, Behnam Mohammadi-Ivatloo, and Kazem Zare. "Optimal bidding strategy of electricity retailers using robust optimisation approach considering time-of-use rate demand response programs under market price uncertainties." IET Generation, Transmission & Distribution9, no. 4 (2015): 328-338.

Tokta?-Palut, Peral, Ecem Baylav, Seyhan Teoman, and Mustafa Altunbey. "The impact of barriers and benefits of e-procurement on its adoption decision: An empirical analysis." International Journal of Production Economics 158 (2014): 77-90.

Musanzikwa, Michael. "Public procurement system challenges in developing countries: The case of Zimbabwe." International Journal of Economics, Finance and Management Sciences 1, no. 2 (2013): 119-127.

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