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Procurement Strategy of Rosewood Limited

To manage the reducing prices of the production, being a procurement manager, it’s my responsibility to create a project plan for the procurement department of Rosewood Limited that can help in outsourcing the production task of the company. Procurement strategy of the company includes the two-way strategic relationship of Rosewood with the outsourced companies (Aaltonen and Ikävalko 2002). In this way, the company will be able to enhance their efficiency and highly contribute towards setting up the price of goods. Setting up the outsourcing relations with the other companies will offer significant advantages to Rosewood. This program will support in bringing up the learning curve advantages, along with infrastructure savings, improvement in productivity, which will make sure that both the companies holds a capability, which they required to work on a shared task (Aaltonen and Ikävalko 2002). Managed services as the procurement strategy of Rosewood Limited will help the company in supporting its customers in analysing the options for managing high value added activities such as supplier management, strategic sourcing as well as contract management. Outsourcing activities will also support in managing the cost of goods sold (Aaltonen and Ikävalko 2002).

Buyer- The role of the buyer is assigned to an individual, who want to directly communicate as well as negotiate with the vendors (Williams 2006). Buyers are also responsible for mailing the proposal request to the vendors, who are added to the list of buyers. In most of the cases, the officers share their duty about the buyer and then try to submit the buyer's list for the approval (Anfindsen, Løvoll and Mestl 2012). It is evident that purchasing officer at Rosewood Limited will act on behalf of the buyers while submitting the purchasing orders to all the approved vendors.

Manager- Managers hold the authority to take all the necessary decisions, which are related to the operational activities. However, they should communicate with the Rosewood director, to attain the long-term direction and strategies about procuring activities. In the outsourcing project of Rosewood Limited, managers will work with project managers, and take decision about the technical requirements and specifications of the procurement products, which are needed for project completion (Anfindsen, Løvoll and Mestl 2012).

Director- Procurement Director at Rosewood Limited, is highly responsible for negotiating with the government support as well as forbidding on the business contracts with the outsourced company. In the context of the department, directors take part in the official federal bids as well as tenders through registering within the e-procurement system by the web (Vlachakis, Mihiotis and Pappis 2016). The role of the director is to undertake particular significance when the project needs conclusion about the global procurement agreement and contract (Anfindsen, Løvoll and Mestl 2012).

Analyst- At Rosewood limited, the purchasing analyst is highly responsible for tracking the activities of spending against the non-contracted and contracted and made sure that best practices of procurement and policy compliance are followed.

The production manager of Rosewood Limited plan that, they will outsource their ten manufacturing lines, as they failed in creating the necessary production facilities within a particular time. In result of that, the company plan to outsource its production line to the Australian ship manufacturing company (Anton 2002). These companies hold advanced Enterprise Business’ System and even generate opportunities for e-procurement.

Structure of the Procurement Division

While outsourcing its production facilities to the other company, Rosewood limited even explore the e-procurement options, so that they can sell their products online. E-procurement also helps the company in collecting details about the vendors and suppliers through online, and save their information. E-procurement also helped the company in its supply chain activities (Anton 2002). E-procurement activities supported company in its business to business as well as business to customer activities, related to purchase and supply sale. Through e-procurement, Rosewood Limited was able to file its tender online (Anton 2002). It has helped the company in undertaking efficient paper-based transactions, and easily share their information.

Companies are usually confronted today with many challenges, and the most crucial are the progressing, due to the increase in globalization, changes taking place in the requirements of the client, adapting the current technological development as well as a shortage of the talented employees (Bemelmans, Voordijk and Vos 2013). The steadily rise in the competition, has increased price pressure, which renders towards the requirement for internationalization compulsory. To stay competitive in the environment, the outsourcing as well as offshoring, which includes relocation of the production or either shifting the business process in the overseas market, offers the solution (van Hoek 2004).

Outsourcing is noted to be an answer for make and buy strategy, which is undertaken by many manufacturing companies. Even Rosewood limited adopted this strategy, to outsource their production facilities so that that product cost can be reduced (Bemelmans, Voordijk and Vos 2013). Companies also outsource either partially or wholly, or they might outsource the complete distribution processor particular part. In the case of Rosewood, they are planning to outsource partial part of production process. The main idea of the concept is that companies can emphasize over product manufacturing and either carry out the activities, which make them competitive in the market (Bemelmans, Voordijk and Vos 2013). It is noted that transaction cost economies are important in discussing the make or buy strategy through pointing at the influence of the particular asset as well as uncertainty.

The base of the global outsourcing comes through the economic theory of competitive benefits. It is mainly used in the global trade, existing among the countries, but it might even apply the economics of global outsourcing. Along with that, corporate globalization is considered as the active driver, behind the outsourcing business (Bemelmans, Voordijk and Vos 2013).

Offshoring can both internally (make) as well as externally (buy). Through the external relocation, which is also known as outsourcing, the relocation activities of Rosewood is attained through external service providers or either the business partners. In this situation, the transboundary outsourcing lies without the need for having own facilities (Bemelmans, Voordijk and Vos 2013). Through the internal relocation, which is also known as captive offshoring. On the other side, these activities are attained by the organization itself. In this particular application, the requirement for own facilities is essential for any company. Decisions regarding the outsourcing are quite challenging as well as strategic (Bemelmans, Voordijk and Vos 2013). Below figure shows the core framework, which could be used for making decisions related to logistic outsourcing. 

Partnering

The outsourcing decisions rely on the consideration, such as, how critical is the logistic performance in particular market; if logistic depicts the necessary competencies of an organization. In case the answer is no, then the outsourcing decision is the right one (Bemelmans, Voordijk and Vos 2013).

The cost is considered as the most common reason for the outsourcing. The external producers of the company can reduce their operational cost through outsourcing (Bosire 2011). They also provide the less cost for undertaking the services or either product, due to the economy of scale as well as various other benefits that rely on as per the specialization. It should be noted that the companies that insist about the in-house production need to conduct high research, as well as require marketing cost for developing new products (Bosire 2011).

Kraljic model assists in documenting the complexity level, included in the Rosewood Limited supply chains through the process of supplier selection and evaluating it, as per related risks. Kralijic model will be applied in ten manufacturing lines, holding the considerable sub-assembly work. According to Kraljic figure, there are four key categories related with the relation of profit effect on the supply risk (Carson and Lamp 1990).

Leverage item- it refers to the standardized product that is offered through suppliers at less price and high quality. This process is not critical to the service quality, as they come in standard format as well as quality. The high standardization level mainly enables through the limited requirement of the special know-how that is also included in order optimization (Carson and Lamp 1990).

Strategic items- it is related to items or either process and provides an important degree of diversification towards the last service, as the same is customized, relying on the requirement of customers. They are also characterized by the high cost of service (Carson and Lamp 1990). It also includes few suppliers and impact over the product quality. High-quality services standards and on-time delivery are imperative; therefore, long-term relations are important.

Noncritical items- it includes products related to mass production, which is used in day to day operations of vessels. The high standardization level mentions about the fewer suppliers that can quickly supply the on-time delivery and standard quality products (Punniyamoorty, Mathiyalagan and Lakshmi 2012).

Bottleneck items- this category includes the vendors associated with the element and materials that are of low cost, and related with the high risk, because of the significance in the service performance and operations (Carson and Lamp 1990). The example is pilot services, port services, as well as malfunction, which can place service at risk.

Rosewood Limited has a small size, and it includes multiple business units, which provides ship manufacturing business. The company also operates the single vessel, during strategic intentions of expanding the services with additional capacity. The clientele of Rosewood Limited includes various age groups, having different characteristics of consumers (Carson and Lamp 1990). The aim of the company is to satisfy the diverse land and onboard services.

For the purpose of analysing the high level customized services provided by Rosewood limited, strategies are undertaken through the customers and suppliers, and they are assisted with Kraljic matrix. The process requires to offer service level is related to the necessary items (Carson and Lamp 1990). All these processes assist in its strategic importance, and include high risk as well as high-profit effect on manufacturing services, along with outsourcing services. The high level of risk is mainly attributed towards the fact that organizations importantly depend on them, as it includes different relations with market players involved in the chain. Their significance is critical (Celik, Kahraman, Cebi and Er 2009). That long term relationships are set up, for the purpose of managing the better coordination and cooperation level, that will also guarantee about less mistake and increase in customer retention through the satisfaction of clients, which later on lead towards profit optimization.

Adoption of Electronic Support

In case, players fail in offering the services within time, that they might be detrimental towards the operations, and the same also results in the key service customer dissatisfaction and service disruption (Chase, Jacobs and Aquilano 2004). Therefore, Rosewood Limited strategically prefer to develop the close link with the particular suppliers for low risk, but the high-profit effect on the ship operating capability, such as electronic equipment of ship and machinery equipment, e-procurement and manufacturing services (Chase, Jacobs and Aquilano 2004). The selection of the outsourced companies is important, as this process can guarantee the performance of Rosewood limited. The strategies of Rosewood for various suppliers can help them in attaining maximum operating cost. 

Moving through the non-critical items like food beverages, fuel supplies, and tools required for maintenance are also encapsulated (Power, Desouza and Bonifazi 2006). All this link with the suppliers from both the low risk as well a slow profit effect, without giving profound importance to the day to day operations of the company, as the same is directly linked to the satisfaction of customers (Chryssolouris, Makris, Xanthakis and Mourtzis 2004). Again the supply chain strategies of cost effectiveness are adopted, as suppliers select it by cost.

In the case of bottleneck items, such as financial services, and the pilot is included. All these factors include low-profit effect, but it can have high risk, when not offered to the highest level (Chryssolouris, Makris, Xanthakis and Mourtzis 2004). For example, characteristics exist in this case, in which lack of port facilities or either the infrastructure, might result in accidents, which result in delay, satisfaction and poor image of customers.

Financial services might also act as the bottleneck, mainly in case of the lack of economic activity, in which additional amount is needed. In the event of lack of understanding or either the inability can offer the required financial support, which can importantly lead in delay of the new building as well as project expansion and even lead towards the implementation of programs related to internal restructuring (Chryssolouris, Makris, Xanthakis and Mourtzis 2004). The strategic choice applies multiple suppliers at individual level, and it’s not required, due to the cost imposed on suppliers for providing appropriate service customization (Chryssolouris, Makris, Xanthakis and Mourtzis 2004).

The supplier relationship management programs needs that every supplier as well as contractor, who are interested in doing business with Rosewood limited should be pre-qualified, relying on their ability towards managing the safety and health, quality and environmental aspects of the material, along with satisfying the commercial and technical needs of supply (Chyan and Huang 2000). The supplier relationship management program creates the essential part of the Rosewood Limited ISO 9001, ISO 14001, and OHSAS 18001. Through this, suppliers will be able to fulfil the exceeding needs (Corbett 2004).

Rosewood Limited is increasing their amount of goods and services. They are even increasing 45% of their cost in manufacturing, and 15% in service industries. The increase in the supplier expenditure is highly driven towards virtualization, which is the development of the conventional supply arrangement, which includes buying the sub-assemblies, in place of element and rise in the use of suppliers for the business outsourcing practices (Espino-Rodriguez and Padron-Robaina 2006). For example, business process outsourcing and contract manufacturing. As the expenditure with the suppliers is increasing, their ability towards directly affecting the performance of corporate gets an increase. For the purpose of enhancing or sustaining the financial performance, companies should aggressively try to manage the supply base (Fleischer and Kohler 1999).

Evaluation of a 'Make or Buy' and 'Outsourcing' Strategy

In the case of the macroeconomic environment, having the less growth in revenue, the supply side expenditure management offers an opportunity for increasing the profits by controlling the cost. Nevertheless, suppliers depict, instead of a just cost centre. They can act as the source of expertise, which is highly capable towards delivering the more innovative items in short duration and that too at right cost (Gakii 2010). Huge variations existing in the philosophies and practices of supply chain management rely on both the local and domestic shipbuilding industries, which is also true in the industry sector. Few companies are instituted, and various best practices and few others are almost none (Gilley and Rasheed 2000).

Actual progress towards minimizing the material cost as well as enhancing the time of delivery relies on the deep analysis of integration and internal process and suppliers in the system of production (Greaver 1999). Successful shipbuilding companies have understood the design supplier networks, which reduces the waste and increase the advantages of supplier knowledge along with material and process management capability. It is also known as infancy in the process of shipbuilding.

E-procurement in relation with the procurement function is helped by different types of electronic communication, and it’s also used at Rosewood limited. Rosewood limited to make use of various e-procurement activities like electronic data exchange, through which the company makes use of inter-organizational information system, along with structured data exchange protocols, which also include value added networks. Rosewood also makes use of enterprise resource planning, in which automation of the procurement associated with the workflow (Laios and Moschuris 2004). It also includes auto-emailing and auto-faxing, and different types of messaging directly to the supplier. It also uses web-based enterprise resource planning for the purpose of automated procurement workflow. It also emphasizes on e-sourcing for exploring new sources of supply, by the use of internet technologies (Michael 2001). Through e-procurement, Rosewood also fills e-tenders and conduct e-reverse actioning.

It is recommended that outsourcing is the best way for Rosewood limited to reduce its product cost. By outsourcing, the company can better manage their services. The concept of make and buy is also helpful for rosewood limited, as in that manner, they can take better outsourcing decisions. The company can even apply the procurement strategies, which can help them in better management of supply chain. They can even hire more talented workforce that can help in improving company’s performance.

References

Aaltonen, P. and Ikävalko, H. 2002. Implementing Strategies Successfully. Integrated Manufacturing Systems, 13(6), pp. 415 – 418

Anfindsen, O.J., Løvoll, G. and Mestl, T. 2012. “Benchmarking of marine bunker fuel suppliers: the good, the bad, the ugly”. Benchmarking: An International Journal, 19(1), pp. 109-125.

Anton, O. 2002. Logistics Services Providers and Managing Supply Chains. In Jencek, P., Strubelj, M. (eds.). ICTS 2002: Proceedings. Portoroz: Fakulteta za pomorstvo in promet.

Augustine, J. 2012. The Shipping Industry Finds an Unusual Survival Tactic in Outsourcing. WNS Global Services.

Bemelmans, J., Voordijk, H. and Vos, B. 2013. “Designing a tool for an effective assessment of purchasing maturity in construction”. Benchmarking: An International Journal, 20(1), pp. 1-4.

Bosire, G. 2011. Impact of Outsourcing on Lead time and customer service among supermarkets in Nairobi. University of Nairobi

Carson, J.P. and Lamp, B. 1990. “US commercial shipbuilding in the 1990s: the global context”. Marine Technology, 27(6), pp. 387-400.

Celik, M., Kahraman, C., Cebi, S. and Er, I.D. 2009. “Fuzzy axiomatic design-based performance evaluation model for docking facilities in shipbuilding industry: the case of Turkish shipyards”. Expert Systems with Applications, 36(1), pp. 599-615.

Chase, R. B., Jacobs, F. R. and Aquilano, N.J. 2004. Operations Management for Competitive Advantage, lOth ed. Boston: Irwin/McGraw-Hill

Chryssolouris, G., Makris, S., Xanthakis, V. and Mourtzis, D. 2004. “Towards the internet-based supply chain management for the ship repair industry”. International Journal of Computer Integrated Manufacturing, 17(1), pp. 45-57.  

Chyan, Y. and Huang. J. 2000. A Decision Model for IS Outsourcing. International Journal of Information Management, 20(3), pp. 225-239.

Corbett, M. F. 2004. The Outsourcing Revolution: Why it makes sense and how to do it right?. Chicago: Dearborn Trade Publishing

Espino-Rodriguez, T.F. and Padron-Robaina, V. 2006. A review of outsourcing from the resource-based view of the firm. International Journal of Management Reviews, 8(1), pp.49-70.

Fleischer, M., and Kohler, R. 1999. Marine Supply Chain Management. Journal of Ship Production, 15(4), pp. 233-252

Gakii, S.M. 2010. The Challenges of Implementing Business Outsourcing in East Africa Breweries (K) Ltd. University of Nairobi.

Gilley, K.M. and Rasheed, A. 2000. Making More By Doing Less: an Analysis of Outsourcing and Its Effects on Firm Performance. Journal of Management, 26(4), pp. 763-90.

Greaver, M. F. 1999.  ?Strategic Outsourcing: A Structured Approach to Outsourcing Decisions and Initiatives.? AMA Publications

Laios, L. G., and Moschuris, S. J. 2004. ?Make-or-buy Decisions – Major Factors to Consider?. Journal of Supply Chain Management, 3, pp. 85-87

Michael, M. J. 2001. Outsourcing, Supplier Relations and Internationalization: Global Sourcing Strategy as a Chinese Puzzle. Rotterdam School of Management, Erasmus University Rotterdam.

Power, M. J., Desouza, K., and Bonifazi, C. 2006. “The Outsourcing Handbook: How to Implement a Successful Outsourcing Process”. London: Kogan Page Limited

Punniyamoorty, M., Mathiyalagan, P. and Lakshmi, G. 2012. “A combined application of structural equation modeling (SEM) and analytic hierarchy process (AHP) in supplier selection”. Benchmarking: An International Journal, 19(1), pp. 70-92.

van Hoek, R. I. 2004. ?UPS Logistics and to Move Towards 4PL – or Not??. Philadelphia: Logistics Research Network Annual Conference.

Vlachakis, N., Mihiotis, A., and Pappis, C. P. 2016. A methodology for analyzing shipyard supply chains and supplier selection. Benchmarking: An International Journal, 23(2), pp. 443-455

Williams, M. 2006. ?3PL, 4PL, LLP – is there a real difference and what is the future?. Presentation to an invited audience, Coventr.

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