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Company Background

Write an essay on Purchase management.

Purchase management is one of the most important activities for an organization, and it falls under the domain of material management. Purchase management is crucial for the business as it directly affects the continuity of business operation and profitability. The purpose of this report is to discuss and analyze the effectiveness of purchase management strategies adopted by G-Star Raw, which is apparel brand that caters to urban youths. The report discusses in detail about the supplier selection criteria, purchasing costs and the use of information and communication technologies (ICT) for purchasing and operations and management (Kumar et al., 2014).

G-Star raw is a Dutch designer clothing company that founded in the year 1989 by Jos van Tilburg. The company manufactures urban clothing. The company specializes in making raw denim (i.e. untreated and unwashed denim cloths). Military clothing styles from around the world inspires the designs produced by the company. The designs of the cloths manufactured by G-Star Raw have been drawn on the inspirations of vintage military appeals from around the world. The company markets its products by collaborating with major retailers (supermarkets, hypermarkets, etc.) to display and sell its products. The company has more than 6500 selling points across the world. The company has also flagship stores in some of the major cities around the continent. In addition, the company also markets its products to customers through online mediums (G-Star, 2016).

The philosophy that the company follows is “Just the Product”. It puts more emphasis on the development of high quality denims and apparels at an affordable price. The company targets urban youths and provides high level of craftsmanship with street level edge to create unique denim sector for itself; by positioning raw denims as a wearable and desirable material. Further, to attract urban youth towards the brand, the company has collaborate with many well renowned celebrities from different fields. Some of them include – Afrojack, Ellen Von Unwerth, Lily Cole, Phil Hale and many others. This association of the brand with different artists has help in enhancing the brand image as a modern and contemporary brand (G-Star, 2016).

G-Star Raw operates in apparel segment that is characterized by high inter industry competition. The major competitors of G-Star include – Diesel, Levi’s, Wrangler, Lee, Gas, Calvin Klein, Acupuncture, Flying Machine. In addition, many new denim brands that cater to youths through their customized denim products present significant competition to the brand. These brands include – Blue Cult, True Religion, Rock and Republic, Citizen of Humanity.  Apart for denim specific brands, G-Star also faces competition from other apparel brands (G-Star, 2016).

Supplier Selection Criteria and Related Issues

Purchasing goals and needs of organization:

G-Star Raw is known for its unique denim products and designs. The company is known to constantly experiment with its products in order to meet the expectations of its customers. The company is committed to create a style that is unique and identifiable for their G-Star look (Rajesh & Malliga, 2013).

The company boasts of strong supply chain partners that have helped the company in achieving its goals of producing strong products in a sustainable manner. The company has focused on maintaining long-term relationships with its suppliers in order to ensure continuity of operations in a cost effective way. G-Star Raw manufactures its products in 25 factories located in 5 different countries with an approximate 40,000 workers (Baily, 2013). However, these factories are of G-Star suppliers and the company monitors and regulates the terms under which its suppliers have to work to ensure compliance with local and international laws, and ethical and sustainable business practices. At present 50% of the products are being manufactured by the suppliers who are working for more than a decade for the company (Fernie & Sparks, 2014).

Since the company does not manufacture its products and is dependent on suppliers for its products, it is important to analyze underlying principles concerning purchasing goals and needs of the organization. The purchasing goals of the company are in line with its overall organizational objectives (Johnson, 2014).  Most of the suppliers are located in developing countries such as China, India, Vietnam, Morocco, and Bangladesh. These countries have cheap labor facilities and low investment costs. This helps in reducing product cost. Therefore, the company maintains strong relations with its suppliers so that the products are available as per the market demand and trends. Further, the company takes great care of the purchasing policies of its suppliers so that the quality and legal compliances are fulfilled (Kaur & Deb, 2015).

Appropriate criteria for supplier selection:

While selecting the supplier, it is important to determine supplier capabilities and policies. The supplier’s ideology must be in line with the organization in order to avoid future conflicts. G-Star Raw maintains selects its suppliers on the basis of its ability to meets the demands of the business, associated cost of doing business, capability of delivering products on time, legal compliance and business ethics of suppliers and agility of suppliers to meet unexpected demands. Further, to maintain steady business operations, G-Star Raw maintains long-term relationship with its suppliers (Chai et al., 2013).

Information Communication Technologies (ICT) for Purchasing Operation

The company has structured a compliance process integrating some tools to ensure that the suppliers comply with the code of conduct. Therefore, suppliers are checked on a regular basis by reputed and independent auditing firms. The company aims to improve the supply chain and to try their best to include the indirect suppliers in the compliance process to make the entire system more efficient to ensure continuity of the product. The company focuses on the building two-way relationship with the suppliers to reduce the production cost that will influence the prices of the end-product (Verma, 2014).

ICT helps the organization to develop effective and efficient communication within the organization and with its partners. With the help of ICT, the company has been greatly benefited as relevant information is easily communicated between the company and its suppliers. G-Star’s ICT department has around 70 employees. It has the broad range of customized and standard applications. It has introduced standard software packages to incorporate IT in the business to make it more efficient to serve the customers (Bloom et al., 2014).

The skilled infrastructure team of G-Star provides relevant information to all G-star offices, showrooms, and franchise stores. For the ICT business system, the company has appointed junior e-commerce system administrator; it has brought the new application to initiate changes in retail and e-commerce operations. The role of a system administrator is to grab the cutting edge technology in order to provide support to handle the e-commerce, retail and logistics system. Keeping this in mind the company is hiring ICT graduate who will be given the training to acquire knowledge about the latest technologies. The company has set criteria for the selection of ICT candidates. Further, the ICT aspirant should be result oriented, flexible, having excellent communication skill and soft skills and ability to work independently (Fitzsimmons & Fitzsimmons, 2013). 

The ICT department of the company comprises of 60 talented employees, located in Amsterdam. The department plays the major role in controlling the global ICT operations that include providing support to 400 stores, sales offices, and warehouses in around 50 countries.

ICT to be applied for improving purchasing operations

In order to improve purchasing operations information communication technologies can play a vital role in the manufacturing organizations. The optimum ICT should comprise of dedicated infrastructure and employees that actively maintains and monitors organizational needs. The organization needs to develop strategies to gather relevant data about market conditions and trends, competitor’s strategy and organizational internal communication needs. The data gathered from different sources should be quickly processed to develop contingency plans and it must be immediately communicated to the relevant departments or suppliers (Ward & Peppard, 2016). 

The role of an ICT executive is to keep the latest knowledge of the business. The operating process, should be well versed with the ERP systems to create the user profiles and the authorization, able to provide proper support while implementing the administration procedures and the ICT is efficient enough to address all the issues related to internal helpdesk logging system (Amin & Zhang, 2012).  Training will be given to the relevant areas and the departments where it is required. Software development skill is needed from the ICT to launch the new application to enhance the prospects of the business. The ICT is responsible for software testing and implementation of new functionalities in the system. The ICT team should be able to achieved integration between the offline and online stores and increase the brand experience and the brand value of the enterprise (Bloom et al., 2014).

The prices indicated on the website is the product price inclusive of all value added taxes, that is excluded shipping costs. The shipping cost would be charged separately for each agreement. The total purchase price will be summed up when the order is placed, and the process is confirmed (Standiford et al., 2012)

The seller tends to change the price and adds discounts and offer in it without giving any prior intimation. The price that is indicated when the order is placed is the final purchasing costs that form the agreement. Therefore, the payment must be cleared using the method on the website within 14 days from the date of delivering                                                                                                          a product. The buyer is compelled to inform the seller any details regarding any errors in payment. Moreover, if the customer fails to comply with the payment terms and conditions, the seller has the right to charge the buyer the interest on the due amount (Grant, 2016). 

In addition to that, the buyer is entitled to return the product without claiming any charge within 14 days after receiving the product without stating any valid reason for doing so, so far as the packaging is undamaged and in a right condition. Therefore, the buyer is not able to replace the product with a new product. If the purchaser wants to buy the new product, then the person must place a fresh order on the website (Zhang et al., 2013).

The seller will refund the purchase price within 30 days after cancelling the agreement. If the customers are not happy with the type of the product, one can return to John Lewis shops, Royal Mail, Collect+ in UK. If the customers need to get heavy items then they can contact on 03456049049 for international returns can contact on +44 1698545454.

 The agreement would be conducted between the buyer and the seller when the seller accepts the order from the buyer that is placed via website in the following way

  • The buyer has selected the desired product
  • The buyer has completed the steps while purchasing the product (that is filling up the address and delivery address details in case both the addresses are not same, the buyer has gone through the payment method to make partial or full payment in advance)
  • The order is placed and the buyer will get a confirmation of the order when placed via the website (Stadtler, 2015).

The seller can reject the order placed by the buyer by following terms and conditions

  • When the total value of the order exceeds the value described in the payment segment in FAQ
  • The information filled by the buyer is incorrect
  • When the buyer does not comply with the payment terms and conditions
  • If the buyer has violated some payment norms in the past
  • If the buyer fails to accept or collect the payment order in the past
  • If there is a mistake in the prices indicated on the website
  • If the delivery address does not belong to USA, the seller will inform the buyer about it, and the order is not accepted.

 The buyer may also request a copy of the agreement from the seller by contacting the seller by clicking on the ‘About G-Star Raw' button on the website (Christopher, 2016). 

By improving the product quality and by adding the new features in the product can bring new customers whereas able to retain the existing customers at the same time. A recent survey has revealed that 56% of women and 52% of men prefer to buy a product of a reputed brand of their choice. So the brand name is a major factor that influences the purchasing decision of a buyer (Fernie & Sparks, 2014).

Tools for analyzing purchasing cost

            In order to analyze purchasing cost, an organization can implement various tools such as –

Cost analysis: it involve determining actual cost of products that is to be purchased. The cost of a product is dependent on many factors such as delivery, handling and storage. Therefore, a full procurement analysis helps in determining total costs associated with purchasing from a particular supplier (Monczka et al., 2015). 

Inventory analysis: it involves analyzing cost of storing and handling materials once purchased from the suppliers (Amindoust et al., 2012).

Best use of supplier analysis: in case the company has more than one supplier, it is important to identify which supplier is providing value for money, delivery time, and past experience of doing business with the suppliers (Heizer et al., 2016).

Conclusion

 From the above discussion it can be concluded that the company’s dedication to artistry and continuous effort towards developing the product has given it a competitive advantage and growth to operate the business in a long run. The supply chain and logistic operations has helped helps the company to achieve benchmark in the industry. In this context, G-Star Raw has implemented optimum purchase management strategies. The company’s suppliers have same vision as of the company, this has resulted in developing long term relations with them. Furthermore, the company have employed technologically advanced ICT mechanism that provides the company competitive edge over its competitors.

References

Amin, S. H., & Zhang, G. (2012). An integrated model for closed-loop supply chain configuration and supplier selection: Multi-objective approach. Expert Systems with Applications, 39(8), 6782-6791.

Amindoust, A., Ahmed, S., Saghafinia, A., & Bahreininejad, A. (2012). Sustainable supplier selection: A ranking model based on fuzzy inference system. Applied Soft Computing, 12(6), 1668-1677.

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

Bloom, N., Garicano, L., Sadun, R., & Van Reenen, J. (2014). The distinct effects of information technology and communication technology on firm organization. Management Science, 60(12), 2859-2885.

Bloom, N., Garicano, L., Sadun, R., & Van Reenen, J. (2014). The distinct effects of information technology and communication technology on firm organization. Management Science, 60(12), 2859-2885.

Chai, J., Liu, J. N., & Ngai, E. W. (2013). Application of decision-making techniques in supplier selection: A systematic review of the literature. Expert Systems with Applications, 40(10), 3872-3885.

Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.

Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers.

Fitzsimmons, J., & Fitzsimmons, M. (2013). Service management: Operations, strategy, information technology. McGraw-Hill Higher Education.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Heizer, J., Render, B., & Munson, C. (2016). Principles of operations management: sustainability and supply chain management. Pearson Higher Ed.

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

Kaur, H., & Deb, M. (2015). Establishment of effective purchase management system: a study of leading manufacturer of wire and strands in eastern india. Management insight, 11(1).

Kumar, A., Jain, V., & Kumar, S. (2014). A comprehensive environment friendly approach for supplier selection. Omega, 42(1), 109-123.

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

Rajesh, G., & Malliga, P. (2013). Supplier selection based on AHP QFD methodology. Procedia Engineering, 64, 1283-1292.

RAW, G. (2016). G-Star RAW | Official Online Store. G-star.com. Retrieved 21 June 2016, from https://www.g-star.com/en_nl

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

Verma, R. K. (2014). Implementation of interpretive structural model and topsis in manufacturing industries for supplier selection. Ind Eng Lett, 4(5), 1-8.

Ward, J., & Peppard, J. (2016). The Strategic Management of Information Systems: Building a Digital Strategy. John Wiley & Sons.

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