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Supplier Selection Criteria and Issues

Discuss about the Principles of Purchasing Management for Sheng Siong.

In this assignment, the main objective delves with the selection of an organization and analyzing the efficiency of the three aspects regarding purchasing management, such as suppler selection criteria and related issues, costs of purchasing as well as the use of information and communication technologies in respect of purchasing operations as well as management.

The organization that has been taken into consideration is Sheng Siong Supermarket. It is considered as the third largest supermarket chain in Singapore. The business strategy of the organization is maximizing the margins of profit by continuously challenging itself towards churning out higher turnover per square feet of retail space. The organization is also strategizing the business in respect of offering products at a reduced price as well as providing effective service, which will be serving increased number of customers within similar time-period. The organization is predominantly engaged in the operations of the Sheng Siong Groceries Chain that includes 33 stores throughout Singapore.

The supermarket is having the design for providing the customers with both ‘wet as well as dry’ options of shopping, which includes a broad collection of live, chilled as well as fresh items, like meat, seafood as well as vegetables, along with food products that are considered to be processed, preserved as well as packaged and common merchandises like toiletries and necessary products required for household.

For supporting our retail functions, Sheng Siong Supermarket is also having an extensive network of distribution, facilities for processing of food as well as facilities for warehousing. The organizational mission of Sheng Siong Supermarket is striving towards offering the community where it is functioning with quality products at reasonable prices along with better services for creating better customer value.

To select the right supplier might be considered to be an arduous method in respect of the organizational supply chain. Although, to have a more basic process of supplier selection might be effective in respect of certain smaller supply chains, however having a more involved method to do the selection of the correct suppliers will assist many organizations for meeting or exceeding regulatory standards, drive the demand for the customers as well as erect a strong brand reputation regarding quality products (Morden, 2016).

There are certain steps that needs to be followed for the selection of the right supplier, which are mentioned as under,

  1. Identifying a Supplier. Prior to the selection of the supplier, it is necessary to do the gathering of the stakeholder’s viewpoints and do the defining of the criteria regarding the process of selection. This list of stakeholders might be including the members from the research and development, marketing, purchasing, quality assurance as well as any other organizational area that will be touching the selection process of the supplier. At this time, it is necessary for the identification of some suppliers for assessing their capabilities as well as doing the price comparison, and a major criteria to do the selection of the right supplier is value. In this respect, the total ownership cost needs to be considered that will be looking at the customer service of the supplier, delivery commitments of the supplier, reliability as well as responsiveness of the supplier and resource savings regarding the suppliers (Petty, 2015).
  2. Measuring Supply Performance. Another significant stage regarding the supplier management process is to do the development of an audit as well as evaluation program. The most outstanding supplier programs do the conducting of audits all through the various stages regarding the suppler relationship. There is the requirement for conducting an audit prior to the signing of the contract for confirming that the supplier doesn’t have any major failures relating to compliance or quality systems, which will be affecting the ability of the organization towards the production of high-quality products (Monczka, 2015). One more reason for conducting the audit in advance, is for understanding the strengths as well as weaknesses before the association gets official.
  3. Gaining the feedback of the suppliers. One more tool that can be utilized by Sheng Siong Supermarket, in respect of the suppliers is considered being a self-evaluation questionnaire. The self-evaluation regarding the supplier can be utilized in respect of doing the identification of the performance gaps, and also to do the discovery of the ways by which the suppliers will be able to have an understanding of their individual operation. Along with the audits as well as evaluations, it is effective as well, for monitoring the informative metrics that will be directing the value in respect of the business. Sheng Siong Supermarket is required discussing as well as selecting the suitable metrics with the suppliers for receiving their input as well as to understand the measurements that are considered to be purposeful (Ross, 2015).
  4. Achieving clarification. With the strengthening of the supplier relationship, and both the parties having the feeling that they are being able to receive positive performances, the supplier might be having the ability towards achieving a certified status. There must occur the obtaining of the certification through continuing successful performance and might get lost due to a negative compliance resulting from an audit (Solomon, 2014).
  5. Developing partnerships. Finally, the supplier relationship is at its optimum, when there occur the formation of a strategic partnership, which allows complete knowledge regarding the material’s source as well as to ensure better quality. Having a stronger business partnership will be assisting a supplier towards anticipating what is required from the manufacturer and start taking a role of leadership in communication, as well as communicating the delays in production when there is the requirement for maintenance (Varley, 2014).
  6. Ensuring consumer’s quality. Through the dependence upon a number of materials as well as ingredients that are required, the development of a supplier quality management program can be considered being a complex as well as upfront investment. There occur the realization of the benefits when the supplier quality team of the organization will be having a focus on concerns other than material quality, and the satisfied end-users are having the confidence regarding the products that Sheng Siong Supermarket is providing (Wisner, 2014).

Application of ICT to Improve Purchasing Operations

The applications of ICT regarding the selection as well as procurement function are having rapid evolvement. In the present scenario, there is the availability of different technological forms for assisting suppliers as well as buyers to do transaction. Those who are deciding the use of such tools will be undertaking a considerable streamlining of the purchasing cycle, distribution, receiving, storage, issuing, as well as use of the products. ICT that are used by the suppliers are including database of the customers, ordering systems, as well as global positioning systems (Larson, 2013). Most of the distributors are also using logistics as well as mapping software for outlining the routing progressions their delivery drivers are required following when products are being delivered.  Most of these tools have become an essential part of the process of procurement. There has been the development of various technological products for streamlining the process of selection as well as procurement and making life more easy in respect of the purchaser (Johnson, 2014). Sheng Siong Supermarket, being a large retail organization did the adoption of labour and time-saving electronic equipment for the enhancement the purchasing function as well as the entire process regarding inventory control. Technologies that are being used by the purchasing department includes Fax Machines, Computerised Point-of-Sale Processes, Personal Computers, Bar Code Reader, e-procurement, Product Identification and Specifications, Storage management, Inventory Tracking as well as the internet (Yawar, 2017). 

The development of the internet has assisted Sheng Siong Supermarket with various major scopes in respect of improving the services like on-line vendor catalogues, capability for paying invoices electronically, the capability for being more responsive towards the challenges related to customer service, the ability for reducing the service costs as well as response time and so on (Stadtler, 2015). The internet usage will also be assisting in improving the relations of the supplier through the improvement in communications as well as flow of data amongst the purchasing department as well as the suppliers. Moreover, electronic mails enable Sheng Siong Supermarket for communicating with the primary sources, intermediaries, colleagues as well as any other individual having an email address (Hoye, 2015).

The advantages of the internet usage can, as a result, equate to ‘real’ savings through the reduction in the costs. In this context, it can be stated that the digital technologies will be bringing about 8-35% reductions in the costs related to supply, 22-85% inventory reductions, 12-24% improvements in delivery as well as 17-68% improvement in cycle-time.

Appropriate Tools to be Considered for Analyzing Purchasing Costs

The different tools that should be taken into consideration to analyze the costs of purchasing are mentioned ass under,

In an obvious manner, the primary aspect that needs to be considered is the actual cost for the purchasing of the goods. Costs are not stopping there unfortunately, there also exists the incurring of costs in respect of the handling of delivery as well as storage. Sheng Siong Supermarket, might also be having a supplier that is having the requirement for advanced payments. Therefore, when an organization orders large items that requires several individuals for moving them and the company is required paying for their delivery, the actual costs of the organization are far higher than the simply the costs related to the products. When there is an overstocking of these products, there is the requirement for doing the addition of the holding costs to the total cost. A complete procurement evaluation will be identifying the overall expense related to purchase from a specific supplier (Grant, 2017).

Another most significant area is analysing the costs related with the storage of the products and the costs relating to the unavailability of the products in respect of sale. An appropriate procurement evaluation regarding the current inventory of the organization will be having the ability for predicting the optimal future inventory. It will also be providing information about the optimum inventory stages that will not be having a negative impact upon sales or productivity.

At times, specifically when the requisitions for purchase are being used, there might occur the ordering of the products that are not suitable or of increased price or reduced quality than is generally purchased. It might also be that there occurs the purchasing of a product from one supplier, when the other supplier could have been cheaper. A procurement evaluation of every requisition of purchase regarding the organization as well as ad-hoc purchases will soon do the identification that such maverick purchases, which will be costing Sheng Siong Supermarket far more than it is required (Fredendall, 2016).

Delivery Time Analysis can be considered having significance in respect of certain large organizations such as Sheng Siong Supermarket, especially when concerned with products that are considered being perishable as well as large. A large delivery that is having the requirement to be paid for in a very quick manner will be playing mayhem with a tight cash flow. Large products are having the requirement for staff handling and a respectively large area of storage. Certain products require special facilities regarding storage like areas for freezer that might not be having the availability (Crandall, 2014). There is the requirement for maintaining a careful control of the inventory of an organization. There will occur the highlighting of each of these areas with a detailed procurement evaluation of the delivery times.

When there are a number of suppliers, there might occur the analysis by the organization regarding who is supplying what to the company. It might be found out that the organization is relying upon one supplier too much and this should not take place. On the other hand, it might occur that through the consolidation of suppliers, the organization might be getting better prices as well as terms that are corresponding to larger orders (Baily, 2013).

Conclusion

To conclude it can be stated that there has been a discussion regarding the criteria as well as issues relating to the selection of suppliers. In this regard, the appropriate criteria that need to be taken into consideration when making the selection of the suppliers have been recommended. Moreover, the decisions have been made in respect of issues concerning the selection of suppliers. In respect of ICT for purchasing operations, the ICT to be applied in respect of improving the purchasing operations have been recommended and finally, the pertinent tools that need to be taken into consideration in respect of evaluating the purchasing costs have been recommended.

References

Baily, P. J. (2013). Purchasing and supply management. Springer.

Crandall, R. E., Crandall, W. R., & Chen, C. C. (2014). Principles of supply chain management. CRC Press.

Fredendall, L. D., & Hill, E. (2016). Basics of supply chain management. CRC Press.

Grant, D. B., Wong, C. Y., & Trautrims, A. (2017). Sustainable logistics and supply chain management: principles and practices for sustainable operations and management. Kogan Page Publishers.

Hoye, R., Smith, A. C., Nicholson, M., & Stewart, B. (2015). Sport management: principles and applications. Routledge.

Johnson, P. F. (2014). Purchasing and supply management. McGraw-Hill Higher Education.

Larson, E. W., & Gray, C. (2013). Project Management: The Managerial Process with MS Project. McGraw-Hill.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.

Morden, T. (2016). Principles of strategic management. Routledge.

Petty, J. W., Titman, S., Keown, A. J., Martin, P., Martin, J. D., & Burrow, M. (2015). Financial management: Principles and applications. Pearson Higher Education AU.

Ross, D. F. (2015). Distribution Planning and control: managing in the era of supply chain management. Springer.

Solomon, M. R. (2014). Consumer behavior: Buying, having, and being (Vol. 10). Upper Saddle River, NJ: Prentice Hall.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Varley, R. (2014). Retail product management: buying and merchandising. Routledge.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A balanced approach. Cengage Learning.

Yawar, S. A., & Seuring, S. (2017). Management of social issues in supply chains: a literature review exploring social issues, actions and performance outcomes. Journal of Business Ethics, 141(3), 621-643.

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