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Supplier Selection Criteria and Issues

Discuss about the Purchasing Management for Sheng Chee Retail Company.

Sheng Chee Retail Company is commonly recognized as a fresh food and beverages company, with its headquarters in Singapore. The company started as a food vending company but with time, it has diversified to sale of soft drinks, wine and spirits. However food sales remain their core activity which in turn contributes to up to 70% of the annual revenue. The retail company has multiple suppliers for raw products and machinery in the company. Its main target customers are students in nearby colleges and residents of the estates within the town. Sheng Chee does not face a lot of competition from the surrounding competitors. This is because of the highly specialized products.  The main goal of the company is meeting the customers’ expectations and exceeding their requirements. The success of the organization is attained by attracting and retaining the confidence of the target market and other engrossed party (Bodie, 2013). Understanding the current and future needs of the customers is their objective. The retail company is aiming at opening new branches within Singapore and other parts of the world. It also aims at having online services for their customers.

The company’s suppliers are different depending on the type of raw material needed, price of the products, and quality of the products. According to Nair et al. (2015), most global companies considers the prices of commodities and ignores the quality and reliability of the products and services bought.  This is a major shortcoming of the company as it may in turn result to poor quality products to the customers. The retail company aims at ensuring that there is always enough supplies to run the stock. It also ensures high quality at affordable cost. It does all this to make sure that the target customers are satisfied or the products exceed the customers’ expectations. There are various factors that the company should consider while choosing the suppliers (Gupta, 2016). The effective suppliers should provide products and services that match or exceed the needs and wants of the business. It would therefore be irrational if the purchasing manager was unaware of the business needs and wants.  Christopher (2016) suggests that one of the most sought skills in hiring a purchasing manager is cost management and reliability. In light of this suggestion, the purchasing manager of the retail company in this case should ensure that the selected suppliers are reliable and the operations cost of supplying and purchasing stocks are maintained at minimal levels (Pazhani et al., 2016). The purchasing manager should ensure that the suppliers are reliable. This means that if the suppliers fail you may fail the customers too. The suppliers should provide the business with quality supplies consistently (Abdollahi et al., 2015). This will help the business remain dependable to the market. The business purchasing manager should put in to consideration clear communication and strong services with the suppliers. The best suppliers should keep in touch with the business, know what the business needs at a particular time and know how they can serve the business better. The suppliers should also communicate with the business in case of suspected delay of supplies due to unavoidable circumstances. The purchasing management should also ensure that the suppliers have enough cash flow such that they can supply anything the business wants at any time (Johnson, 2014). The business can check the credits of the suppliers to make sure that they will not go out of business when they are needed the most. For effective supplies from the suppliers there should be strong partnership bonds. The purchasing manager has the responsibility of proving the importance of the supplies to the business. This will be beneficial to both the business and the suppliers.

ICT for Purchasing Operations

Sheng Chee Retail Company can acquire such suppliers through various methods which include, trade associations, exhibitions, business advisors, recommendations or through the trade press.  For instance, if the needs a supplier for food spices, the trade association can probably have associates with the matching needs. The trade magazines also advertise potential suppliers who may suit the business needs. The purchasing manager can also acquire reliable suppliers through exhibitions where the managers get to talk to various potential suppliers who are relevant to the business. Through business acquaintances and friends in the same line of business assists the purchasing managers get reliable suppliers. Directories such as Thomson and Yellow Pages can be used by purchase managers while searching for suppliers locally (Pazhani et al., 2016).

Information and communication technology refers to all networking devices, systems and applications that allow people and organizations to interact in the digital world. It makes the world a global village. Sheng Chee Retail Company uses Information technology when purchasing products and services from the suppliers. It uses newspapers and trade press which is quite inconvenient since not all suppliers are usually on the trade magazines and newspapers. Additionally not every purchase manager is able to access the trade press or newspapers in times of need. The Retail Company ought to use the improved news of information and communication technology. They include use of electronic point of sale (EPOL). This type of device is used to control the amount of stock in the company. It is also used to collect data from loyalty cards from the customers, know how frequent the customers spend in the retailer company and award them if they are regular customers (Rodríguez-Escobar & González-Benito, 2015). The EPOL is also used to perform the sales analysis. The EPOL will have a lot of advantages to the company, some of which include; there will be only few cases of ran out products in the shelves. There will always be fresh foods in the shelves as the stock is monitored digitally. Products can also be paid for using the electronic fund transfer which is easier for many customers. The managers will have up-to-date sales analysis that is more accurate than the manual one that was used in the old times. The customers will also be dealt with quickly at the checkout. The organization can also use the EPOL to analyses the customers buying patterns and know the customers to get offers for goods and services that they might be interested in.

Purchasing Cost Analysis

ICT can also be used to store and protect important information about the past purchases .through electronic storage systems. It help store customer files that may be vital to the integrity of the business. Using strong passwords the business organization can secure important information away from hackers or being swept away. The company can remotely communicate with the suppliers easily through emails which are relatively fast and reliable. The suppliers and company can hook up through video conferencing equipment and internal chat rooms (Yeh, 2015). ICT can also ensure that the customers work remotely with the company. Such that they can get access to the company’s electronic network and fresh food can be delivered at their door steps without them necessarily going to the retail company. 

Like any other organization, it is very important to consider the price of the purchases, analyzing the cost of storing the products and the costs incurred if the organization had not bought the products. The purchasing manager should recommend several tools while analyzing the purchasing costs (Hingley, 2017). To begin with the purchasing should consider the cost analysis. The cost of the products and services should be the first thing to check on. The cost goes further to the cost of transporting to the company, the cost of storage and handling cost too should be looked at. Some suppliers want part of the payments to be paid in advanced. This also contributes to the total cost analysis (Heizer & Barry, 2013). Therefore, several days before delivery, the purchasing manager should have paid for the purchases. The total cost also entail the holding cost which is the amount of money charged to store goods in case the retail company has an overstock of a particular.  Talk (2016) stipulates that a rational purchasing manager should recommend the least total cost analysis yet the most reliable supplier in the industry. Additionally, it is important to analyze the inventory analysis. This refers to the cost of storage of the products as well as the cost of not having the items in the retail company for sale or manufacturing. For instance it would be expensive for the company to purchase machinery that will not be put in work. It would be easier and more sensible if the company did not buy the machine. In fact, this would lead to losses incurred to the company (Pazhani et al., 2015). It would negatively influence sales and productivity. Best use of suppliers should be also analyzed by the purchasing managers. For any procurement analysis, one should know the number of suppliers the company has, what products each supplies to the company and what particular day and price.

Conclusion

In conclusion, the purchasing manager should recommend the maverick spending. This is when an order from one supplier is of low quality or high prices yet can be ordered from another supplier at a cheaper price. This helps the organization in cutting the cost of production and maximization of profits. Moreover, the retail company should take into consideration the delivery time analyses. Sheng Chee being a food specialized retail company deals with a lot of perishable products. The suppliers should therefore inform the purchasing manager about the delivery date and if possible the specific time in order to prepare the storage area as most of the food stuffs is perishable. In addition some products require quite a large amount of money to purchase which can cause havoc in the company especially if it has a tight cash flow. It is there necessary for the suppliers and the purchase managers to keep in touch.

References

Abdollahi, M., Arvan, M., & Razmi, J. (2015). An integrated approach for supplier portfolio selection: Lean or agile?. Expert Systems with Applications, 42(1), 679-690.

Bodie, Z. (2013). Investments. McGraw-Hill.

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

Gupta, S. (2016). Operational considerations in purchasing management (Doctoral dissertation, The University of Texas at Dallas).

Heizer, R., & Barry, R. (2013). Operation Management, Sustainability and Supply Chain management (Vol. 11). Pearson, UK.

Hingley, M. (2017). Introduction to the special issue of Journal of Business & Industrial Marketing Contemporary Purchasing Practices. Journal of Business & Industrial Marketing, 32(2).

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

Nair, A., Jayaram, J., & Das, A. (2015). Strategic purchasing participation, supplier selection, supplier evaluation and purchasing performance. International Journal of Production Research, 53(20), 6263-6278.

Pazhani, S., Ventura, J. A., & Mendoza, A. (2016). A serial inventory system with supplier selection and order quantity allocation considering transportation costs. Applied Mathematical Modelling, 40(1), 612-634.

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.

Talk, O. M. (2016). Operations management.

Yeh, H. (2015). Effects of Ict's Innovative Applications on Brand Image and Customer's Purchase Intention. International Journal of Organizational Innovation (Online), 7(4), 31.

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