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Supplier Selection Criteria

Question:

How to understand the effectiveness of purchasing management of an organization? Explain.

The aim of the paper is to understand the effectiveness of purchasing management of an organization. The organization selected for the purpose is Marks & Spencer. The main aim of the paper is to carry out the operational management from the view point of a purchasing manager of the selected organization. The purchasing manager is responsible for buying and approving the acquisition of the goods and services of the company (Pettersson & Segerstedt, 2013). A detail analysis of the supplier selection criteria and the issues related to it will be made. Relevant information required understanding the ICT for purchasing operation and cost analysis will also be done in the discussion.

Marks and Spencer is a multinational retailer and is headquartered in Westminster, London. The company is specialized in selling clothes, home products and luxury food products as well. It has revenue of £10.3 billion as per 2015 data. The company has been founded for than a century ago with over 1000 stores and operating in more than 50 countries. The company is dominated in the regions of UK and other regions like Egypt, Russia, Greece, France, Hungary, Finland and Spain. Companies namely, NEXT Plc, ASDA Group and TESCO Plc. are the major competitors of Marks & Spencer.

The company always offers the best quality of things to the customers. One of their strategies behind increased price of their product is to provide the best quality of products. In order to fight with the intensive competition of the market, the company comes up with business strategies at regular interval. It has been observed that reducing price of products offers short term profitability in the business and thus, the company never compromises on the quality to fight with the competitors. Recent approaches have been made to sell products online by the means of their websites.

Selecting a right supplier involves scanning a wide range of factors such as value for money, quality, reliability and service as well. While making a strategic approach towards selecting an appropriate supplier is by weighing the purchasing capability of the consumers. Purchasing goods or items are done keeping the target market in mind. For the retail store like Marks and Spencer, suppliers could belong to various perspectives ranging from purchasing clothes, to vegetables and other things available in a retail store. As pointed out by Zhang et al., (2013), certain factors are important while selecting suppliers.

  • Identifying the potential suppliers: Short listing the potential suppliers from a variety of channels such as directories, trade associations, business advisors and others is the foremost thing that a purchasing manager has to keep in mind (Monczka et al., 2013). Selecting the best deal from the different stake holders identify a successful purchasing manager in the recent market perspective.
  • Strategic thinking: It has to be kept in mind that saving money is not the only way to think strategically. Other factors such as reliability speed and persistence also matters at the time of selecting a supplier.
  • Things to look in a supplier: At the time of selecting a supplier, primarily, a quotation is obtained from the supplier. Price is definitely a factor to consider while comparing the suppliers (Rodríguez-Escobar & González-Benito, 2015). Sometimes, negotiation also plays a role in finalizing the supplier for the company. At the time of looking at the supplier, the best potential supplier is selected among the various choices. Quotation of the products supplied by the supplier has to be gained and then a tactful decision is to be made keeping all the aspects in mind. It is also required to make a good comparison of the available supplier in the market and select the best suited one.

It can be recommended that the purchasing manager of the company has to keep a detail report of the various suppliers in the market. When a detail of the available suppliers in the market is known then a better decision can be made regarding the price or the quality of product. In this respect, one thing can be mentioned that Marks & Spencer focus greatly on the quality of the product. Thus, in any case when pricing is concerned, the manager might purchase the product if the same offers best quality to the consumers.

Information and Communication Technology for Purchasing Operation

Information and communication technology has turned out to be an efficient and effective way to maintain interaction with the suppliers and other associated people of the organization. When it comes to supply chain management and working with the various aspects of retailers, working in a specific framed time becomes mandatory. This can only be possible when people are connected with each other (Camarero et al., 2015). At the micro level of business, importance of ICT is increased by many folds. For most companies, collaboration with the central authority of the organization becomes most vital part of carrying out the business. For a purchasing manager, the importance of ICT cannot be neglected (Baily, 2013). The person has to remain in contact with the suppliers and the distributors at the same time for smooth running of the business. Certain roles played by ICT in improving the business of an organization can be discussed here:

  • Helps to improve the service delivery to customers: Today’s business take pride when they are able to provide the best kind of service to the customers. Keeping the same factor in mind, for a purchasing manager this factor become very critical (Oppong & Asabere, 2013). Providing e-commerce facilities can only be possible if there is a network of information communication technology to communicate with the suppliers and the distributors. With the availability of various technologies, it is expected that the company would utilize the various technological equipment to connect with the employees and other stake holders of the company.
  • Helps in improving organization’s responsiveness to new development: Keeping detailed information of the processing data generated from a diverse range of channels such as sales, inventory control, customers’ feedback and any such industrial data requires the support of ICT channels. Decision making process can be made simpler by using ICT channels (Cheng, Farooq & Johansen, 2014). With better response from the employees and other people related to the organization, the working of the organization will improve.
  • Helps to change the basis of competition: Keeping pace with the competitors in the market is the foremost thing to be kept check of in the recent market scenario. In order to streamline the internal and external processes of business operation and reducing the complexity, it is required to take initiative to improve connection with the internal and external stake holders (Poucke, Weele & Matthyssens, 2014). Understanding the steps of the competitors and then acting in a competitive manner is what requires for a company to survive in the market.
  • Helps to improve overall performance of the organization: Introduction of any kind of new services or changes in the existing services of the organization needs to be communicated with the other employees of the organization. A proper and regular connectivity become very vital (Wortmann et al., 2013). When this particular prospect is reached by an organization, then an overall gain in the performance of the organization is observed.

In case of Marks & Spencer, the technology used by the company for overall performance of the company is very advanced. The stores operating in the regions of UK and USA use the most modern technologies for connecting with people. However, in stores of Singapore, using better equipment for detecting the quantity and price of the supplied product can prove to be a better option in purchasing management. Collaborating with the other stores in the network by the means of ICT channels might prove to be really fruitful in conducting the various activities of business.

Managing cost of the purchased goods and services is one of the important issues to look into while making any kind of purchasing decision. Cost analysis is based on various factors such as the cost of the raw material, production cost, cost of raw materials and packaging cost as well (Verma, 2014). For a purchasing manager, keeping an account of the details of the cost of the various things operating in the organization is indeed important. A supplier may not know the cost of a substance, but the purchaser has to know about it. Maximizing the value of the equipment and the asset of a company is what required for proper management of cost in an organization (Chai et al., 2013). Certain factors can be mentioned here for analyzing the purchasing cost of an organization.

  • Customizing the data: For evaluating the cost of various goods and product, primarily it is required to customize the data available. These include the all kinds of transactions of goods and other equipment (Deng et al., 2014). Customizing the data can be made using the excel sheets, that there remains a details of the entry and exit of the goods in the company.
  • Creating a comparison chart: The purchasing manager must ensure that the product that has been purchased offered the best deal to the organization. In order to look into this matter, a comparison chart can be prepared referring the various goods and products one by one (Govindan et al., 2013). A wise decision should be made after comparing the various data and the quotation of the price offered by different companies.
  • Similar item comparison: The market offers similar kind of product in variety of prices. The difference could be very minor but still it keeps effect for the consumers at the time of making purchase (Monczka et al., 2015). Thus, it is expected that the purchase manager has to compare the different products and make the best decision that would provide the greatest return to the company. The purchasing manager might also keep various options for the consumers to choose from. There could be similar kinds of product available. More products would provide greater chances of selling of the product.
  • Comparison of the price set by law: Some companies keep their price extremely high without following any kind of assigned pattern of price set by the government. At this time, the consumers become quite aware of the high prices and at par refuse to buy the product (Schweiger, 2016). This calls for better look out at the price from the side of the purchase manager before keeping the same item in the store because a faulty decision might result in loss of the company.

With the above mentioned points it is clear that price of a product is indeed important at the time of making any kind of purchasing decision for the company. Thus, it can be recommended that prior to making any kind of decision, keeping a good knowledge of the market and the price of similar products is required.

Conclusion:

Analyzing the various factors related to the purchasing management, it can be said that a purchasing manager has great responsibility towards an organization. It might be said that for a retail shop, purchasing decision is the primary requirement that needs to be fulfilled. For the same purpose, conducting a detail analysis of the cost of the goods is to be done. In this respect, the importance of ICT cannot be neglected. It is only with the help of information and communication technology, the process of carrying out the operation of the organization can be made with greater ease. In case of Marks & Spencer, it can be said that the company has been operating with great prosperity in the market. The annual revenue of the company is growing as well from time to time. The credits for this prosperity of the company can be given to the purchasing manager as well. It is the insight of the purchasing manager who maintains a balance of between the purchase and the sale of the product. Analyzing the basic factors responsible for guiding the decision of a purchasing manager, certain recommendations have been also made in the above discussion.

Reference list:

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

Camarero Izquierdo, C., Garrido Samaniego, M. J., & San José Cabezudo, R. (2015). How Strategic Purchasing Orientation and Transformational Leadership Impact Performance: The Mediating Role of Information and Communication Technologies. Journal of Business-to-Business Marketing,22(4), 269-292.

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

Cheng, Y., Farooq, S., & Johansen, J. (2014). Global Operations: A Review and Outlook. In International Operations Networks (pp. 161-179). Springer London.

Deng, X., Hu, Y., Deng, Y., & Mahadevan, S. (2014). Supplier selection using AHP methodology extended by D numbers. Expert Systems with Applications, 41(1), 156-167.

Govindan, K., Rajendran, S., Sarkis, J., & Murugesan, P. (2013). Multi criteria decision making approaches for green supplier evaluation and selection: a literature review. Journal of Cleaner Production.

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

Oppong, D., & Asabere, N. Y. (2013). Information and Communication Technology (ICT) Related Courses in the Department of Purchasing and Supply, Accra Polytechnic, Ghana: The Necessity and Significance of Change. International Journal of Computer Applications, 78(6).

Pettersson, A. I., & Segerstedt, A. (2013). Measuring supply chain cost.International Journal of Production Economics, 143(2), 357-363.

Rodríguez-Escobar, J. A., & González-Benito, J. (2015). The role of information technology in purchasing function. Journal of Business & Industrial Marketing, 30(5), 498-510.

Schweiger, J. (2016). Concept of a Purchasing and Supply Management Maturity Framework. In Supply Management Research (pp. 153-176). Springer Fachmedien Wiesbaden.

Van Poucke, E., van Weele, A. J., & Matthyssens, P. (2014, April). The interrelationship between purchasing maturity, internal customer satisfaction and purchasing performance: an empirical case study. In Proceedings of the 23rd annual IPSERA Conference (pp. 13-16).

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

Wortmann, H., Alblas, A. A., Buijs, P., & Peters, K. (2013). Supply chain integration for sustainability faces sustaining ICT problems. In Advances in Production Management Systems. Sustainable Production and Service Supply Chains (pp. 493-500). Springer Berlin Heidelberg.

Zhang, Q., Zhou, D., Zhou, P., & Ding, H. (2013). Cost analysis of straw-based power generation in Jiangsu Province, China. Applied Energy, 102, 785-793.
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