Supplier Management For The Challenger Company Case Study

The Selected Local Retailer

Discuss about the Supplier Management for Case Study of Challenger Company.

The primary purpose of this essay is to provide a detailed analysis of the three aspects of purchasing operations and management which include supplier selection and purchasing system evaluation, use of information and communication technology in conducting purchasing operations and purchasing cost analysis.  Purchasing may be defined as a function of buying goods and services from external sources of a firm.  The whole process of purchasing is always conducted by the purchasing department of an organization, (Amidoust, Ahmed, Saghfinia &Bahreininejad, 2012).  Purchasing management is a key aspect of an organization. Proper purchasing management enables enterprises to make informed decisions on whether to buy or make specific commodities, avoid stock outs, and maintain adequate stock levels, develop good relations with the suppliers and ensure that proper records of all transactions are kept, (Lin, 2012).

Based in Singapore, Challenger has been in operation in IT retail market for over 35 years. This company has received distinct reputation as the only homegrown consumer electronics chain with a large network of about 38 stores located island-wide, (Challenger, 2017).  It was established in 1982 and is well known for its strong brand name, strong partnerships with major international brands and attractive.

Challenger deals in IT products and accessories entailing brands like Hewlett Packard, Valore, Samsung, Acer, Asus, Canon, Toshiba, Nikon, and Olympus, (Challenger, 2017). The company buys these products from trusted suppliers and then stocks them in its stores, where customers buy them. It also offers services in bulk purchases, free domestic delivery for purchases worth 1000 dollars and above and purchases for occasions and special events like door and corporate gifts, (Challenger, 2017).

Challenger mainly targets smartphone and computer users, who are dedicated to deriving value from their purchases, (Hachi.tech, 2017). These consist of students living in urban and rural areas and use Laptops, tablets, and smartphones for their studies and some companies and organizations who buy IT products for office and business purposes.

The company's main strategy is based on providing high-quality products so that its clients derive a value for their purchases. The IT Industry faces a stiff competition as there are several companies providing the same IT products, (Rogers, 2016). Some of Challenger’s competitors include Best Denki Co Ltd., Pertama Holdings Limited and OA System Plaza Co. Ltd, among others. To remain competitive, the company has concentrated on providing high-quality products and venturing in e-commerce through its hachi.tech portal as its major, (Hachi.tech, 2017). It has also practiced partnerships so as to remain strong in the industry. For instance, the company has been working closely with Datapipe, so as to provide high-quality technology solutions, (Challenger, 2017).

Criteria for Supplier Selection

Challenger sources for its products from trusted suppliers of reputed companies such as Apple, Samsung, Acer, Asus and Toshiba among others. This has enabled it to continually win customer trust for its products.

According to Chen & Chao (2012), suppliers are people who provide the company with different products. Supplier selection is a complex process which involves evaluation of supplier attributes, products, and congruence to the organization's values, (Meena & Sermah, 2013). The best suppliers are those who offer goods that match or exceed the requirements of the firm, (Barney, 2012). Therefore, in choosing suppliers, managers must be aware of the specific business needs.

Challenger sources its products from different suppliers. It uses multiple sourcing approaches in obtaining supplies (Challenger, 2017). This has enabled it to escape the disadvantages of single sourcing, such as high indirect costs and complacency of single suppliers. The company is, therefore, able to maintain competition, protect its customers during shortages, strikes and emergencies and maintain a strong backup source.

The company follows the Peter Krailjic’s model in managing its supplies. It conducts proper classification of its products, proper market analysis to identify its competitors and consumer needs, strategic positioning of its products and outlay of clear action plans which enable it to source trusted suppliers, (Schulze, Seuring & Ewering, 2012). In selecting its suppliers, the company considers the following factors:

Competitive pricing: The main aim of Challenger Company is to make profits while providing its clients with high-quality products, (Challenger, 2017). Therefore, it majors on competitive pricing when selecting its suppliers. Normally, the supplier's bid and the company selects the best supplier based on the price range.

Product and service quality: The Company sources its products from reputed companies with strong brands. These companies include Acer, Samsung, and Apple among others, (Challenger, 2017). The company, therefore, selects suppliers of high quality and genuine products who would help it maintain its brand reputation.

Reliable delivery methods: Challenger Company has a wide range of stores where it stocks its IT products such as Phones, laptops, and Computers for its customers, (Hachi.tech, 2017). It selects suppliers who are able to safely deliver the supplies to its respective stores safely without damages or delays as required.

Financial stability and credit strength: Most supplies are always delivered in credit. Challenger also sources its IT products in bulk at wholesale prices and then sells them back to customers at retail prices, (Challenger, 2017). It buys its products on credit, and the financial sustainability of its suppliers forms its major consideration.

Criteria to be utilized in Supplier Selection

Supplier selection criteria	Selected supplier functions
a)    Purchasing strategy	The supplier must provide high quality and adequate products that would enable Challenger's customers to obtain a value for their purchases.
Social of Processing	Identify and understand the background and brand reputation of the supplier firm, so as to ensure quality high brands are obtained
Optimisation	Aligning suppliers base with Challenger’s supply chain goals. Keep seeking appropriate techniques and alternative strategies. Identify the quality of products offered by the supplier and whether the supplier offers after sale services.
Globalisation	Establishing opportunities for international suppliers and embracing diversity. The Company has done this through partnerships and expansion of its internet presence.
Sustainability	Conducting a continuous review and evaluation of suppliers. Obtaining new suppliers by expanding its range of products to include spare parts and after sale services

For example, if the company wants to select Samsung company as one of its suppliers of smartphones, laptops, and appliances, the company will analyze the supplier before making a decision. After selecting the supplier, then the company should ensure that the delivery process is safe and convenient using the following steps:

First step: The Company finds suppliers through a competitive bidding. The company then evaluates and selects the best supplier on a competitive basis.

Second step: The supplier must meet all the prequalification procedures, (Stadtler, 2015). Normally, the requirements are based on the inventory management system and the reorder levels.

Third step: The order is placed using SAP ERP system to selected suppliers.  After placing the orders, the system is able to track all the purchases invoices and any payments made to suppliers, (Majadalawieh & Marks, 2017).

Fourth step:  Ensuring that the ordered items are safely delivered and stored in the retail outlets.

Fifth step: Inspecting whether all the delivered products are in good condition. The company also inspects the products in terms of specification, quality, and model. Supplier performance can be evaluated using a scorecard as follows:

Category	Metrics
Quality	Good quality Correct specifications Correct model
Deliver	On time delivery Early delivery Late delivery Partial delivery
Cost	Reduction of total cost per year Reduction of indirect costs
Responsiveness	Emergency requests can be delivered Compliance with terms of payment
Customer complaints	Industry capacity Availability of the product Insurance on freight Political events
Customer complaints	Number of complaints No customer complaints.

The main aim of Challenger Company is to make profits by buying IT products at competitive prices and then selling them at retail prices to the clients. The company uses SAP ERP system, which is a convenient tool for managing its supplies, (Challenger, 2017). This ensures timely tracking of supplies and ensuring that all transactions with the suppliers are recorded to eliminate inefficiencies, (Challenger, 2017).

Although the company benefits from all the advantages of multiple supplier sourcing, I would recommend the company should adopt single suppliers for some of its products. This will enable it to easily achieve economies of scale and get supplies at discounted prices. Single suppliers are also more trusted in times of economic slowdowns as they can easily supply products to the company on credit, (Sawik, 2014).

Challenger Company uses SAP ERP system, which allows for interaction between its various departments. ERP system is an important software in every organization as it enables interaction with different departments in the firm such as marketing, supply lines, quality control, and stocks, (Targett, Grimshaw & Powell, 2013). It integrates all sections of the company and functions across the whole firm with a single system.

The ERP system used by Challenger Ltd enables it to accurately keep track of its transactions. These involve monitoring stock levels in the stores, monitoring sales and assessing human resources, (Challenger, 2017). After the recommendations by Gartner, Challenger also landed on Datapipe, (Challenger, 2017). This is because it needed to avoid the uncertainties involved in automation and other concerns that arise from migrating to cloud environment.

As a way of increasing access to customers, many companies have embraced the internet and social media marketing. Challenger Ltd is not an exception to this development. It has tried to embrace internet marketing. This has been manifested through the development of hachi.tech, which is an internet platform, where customers can order products online, (Hachi.tech, 2017).

Since the company has majored in e-commerce by developing the hachi.tech portal, I would recommend that it increases its relations with Datapipe's so as to improve the security of its operations in the cloud. The company would then be able to increase its market presence and expand its customer base. It should also combine SAP with Ariba network. This would enable it to strengthen its transactions with its suppliers and discover new business opportunities. SAP combined with Ariba network is a business software which enables adequate purchase management and direction of the entire operations of the workforce system, (Majdalawieh & Marks, 2017). It will also be able to manage the entire procurement process and build an ethical supply chain, (Chang, Huang, Chen & Hung 2013).

The main reason for conducting a purchasing cost analysis is to test whether the cost of purchasing items is reasonable, (Stadtler, 2015).  Prices of commodities charged by the suppliers may fall into three categories- market prices, previous prices, and published prices, (Stadtler, 2015). Challenger as a company acts as a retailer, by purchasing products at wholesale prices and then selling them at a profit, (Challenger, 2017). Therefore it must clearly evaluate the supplier process to determine the cost at which it is able to purchase the products from the suppliers, without making losses.

The cost of obtaining products largely dictates the prices at which they are sold. If a company spends less on purchasing its supplies, then it may be able to avail the same goods at lower prices to the consumers, (Bokor & Markovits-Somogyi, 2015).

Challenger Company uses total cost of ownership (TCO) model to determine the prices of its products, (Challenger, 2017). In this model, cost of products is done with regards to other costs associated with maintenance and ensuring that the products are in good condition, (Mahal & Hussain, 2015). These may include service, maintenance, and administration.

The benefits enjoyed by Challenger from adopting TCO include ensuring that all the costs associated with the business are identified and incorporated when attaching prices to the products, enhancing overall cost management, through proper cost planning and ensuring that prices of products are achievable by the customers, (Challenger, 2017).

Although the company has adopted a TCO approach which is a good cost management tool, it has continued to suffer the disadvantages associated with this tool. These include lack of a uniform method of cost analysis and time wastage in trying to identify all the costs associated with all the cost centers, (Mahal & Hussain, 2015). I would, therefore, recommend the company to adopt Activity-based costing approach to assign costs of its supplies.

ABC model would enable the company to classify all the costs in their cost centers. In this approach, the managers of the company would be able to identify the specific cost centers so as to classify every cost adequately to avoid confusion and time wastage in conducting a cost analysis, (Bokor & Markovits-Somogyi, 2015).

In conclusion, Challenger Company is a leading retailer, dealing with IT products. Its competitive strategies which include the provision of high-quality products and use of trusted suppliers have enabled it to maintain high profits. The company also embraces IT in its supply chain management, through use of SAP ERP software.  The company also uses proper cost management strategies, through use of total cost of ownership approach to attach prices of its products and select reliable suppliers. However, the company should also select single suppliers for some of the product brands so as to easily enjoy the benefits of receiving goods in bulk such as discounts.

The company should also combine its SAP system on Ariba network and increase its relations with Datapipe to alleviate risks associated with automation. Although the company has adopted the total cost of ownership approach in costing its supplies, it should change to ABC approach so as to be more organized and be able to assign every cost to its cost center and avoid the confusion and time wastages associated with TCO. 

References

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Barney, J. B. (2012). Purchasing, Supply Chain Management and Sustained Competitive Advantage: The Relevance of Resource?based Theory. Journal of Supply Chain      Management, 48(2), 3-6.           

Bokor, Z., & Markovits-Somogyi, R. (2015). Applying Activity-based Costing to Logistics Service Providers. Periodica Polytechnica. Transportation Engineering, 43(2), 98. 

Challenger. (2017, September 20). Challenger Help Center. Retrieved from Do You Have an Online Store?: https://support.challenger.sg/hc/en-us/articles/227036668-Do-you-have-an-Online-store-

Challenger. (2017, September 20). Challenger Technologies Ltd. Retrieved from About Challenger: https://www.challenger.com.sg/store_locator?storeType=Challenger         

Chang, Y. K., Huang, C. J., Chen, K. F., & Hung, T. M. (2013). Physical Activity and Working Memory in Healthy Older Adults: an ERP Study. Psychophysiology, 50(11), 1174-1182.          

Chen, Y. H., & Chao, R. J. (2012). Supplier Selection Using Consistent Fuzzy Preference Relations. Expert Systems with Applications, 39(3), 3233-3240.           

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Sawik, T. (2014). Joint Supplier Selection and Scheduling of Customer Orders under Disruption Risks: Single vs. Dual Sourcing. Omega, 43, 83-95.           

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