Assignment Sample on Procurement and Supply Chain

Introduction

Procurement and supply chain are the two critical organisational functions. The product organisation has to procure the raw materials for making the finished goods. Supply chain refers to moving the material from one business location to others to accomplish the production and distribution activities to avail the finished products to the end-users. The two functions play a critical role in most of the business sectors like the construction sector and manufacturing industries etc. The report will evaluate the significant factors influencing the choice of procurement systems. It will also evaluate the advantages relating to the use of the supply chain in the construction sector.

Task 1

Critical evaluation of the significant factors influencing the choice of procurement systems

Procurement systems refer to the purchasing system that allows the business organisation to conduct the process of purchase-including automation. It also involves managing inventories and managing all the processes involved in producing the raw materials. It consists of the agreement between the two parties on price, quantity and expected delivery, and location (Mena et. al. 2018).

There are various kinds of purchase systems. These purchase systems are categorised based on the data needed by the business organisations to track and record (Kwofie et. al. 2020). The Stockless procurement system involves suppliers holding the entire raw material purchased by the organisation and deliver them based on the need. The blanket order system involves ordering on daily basis. E-procurement system is critical and has been using by many organisations. It involves making purchases and sale of raw materials and supplies using the internet (Aminah et. al. 2018). The rate contract procurement system involves developing the parameters for procuring services and goods. Capital procurement refers to high capital purchases to perform procurement functions.

Selecting the procurement system based on the several influencing factors which drive the organisations to procure the resource for further performing functions. These factors are significant to consider in selecting the appropriate procurement system:

Material demand: The first and foremost factor is the demand for the material. Resources are very critical for performing the production processes. The organisation procures resources to accomplish the aim of producing finished products and delivering them to the end-users. The organisation wants to keep continue the process of manufacturing. The procurement system is selected based on the material to be procured from suppliers (Ismail et. al. 2018). The materials that cannot be stirred for a longer period and are perishable need to procure on time. Thus, the nature of material influences the selection of the procurement system.

Schedule: The procurement should not only meet the materials to be procured but also meet the time scale in which the materials are demanded. The material should be procured in time. If the resources do not procure in time, it tends to stop the overall production processes which increases the time and costs of the production. This in turn reduces overall organisational productivity. The system opts which keep on delivering the products on time and meet the production needs.

Quality of material: The second foremost factor that influences selecting the choice of procurement is the quantity demanded. The quality also influences the overall decision system. To get the quality, a rate contract system is useful. It enables the organisational procurer to get the quality demanded. The quality of the finished products depends on the quality of suppliers (Li and Shou, 2020). Organisations must focus on producing high-quality products from the effective and efficient suppliers

Managing inventories: The organisation needs to manage the inventories if the resources procured are not used. Inventory management increases the costs of the organisation. The organisations that do not want to make expenses in managing the inventories select the Blanket order system. In this, the suppliers make immediate deliveries based on the demand by the organisation. It requires an effective supplier relationship to ensure delivering the products on time to avoid extra losses. The capacity of managing inventory influences the procurement system decision.

Procurement budget: The budget is vital to perform procurement functions. Sometimes procuring in bulk quantity incurs less cost as compared to procuring in small quantity (Suresh and Nathan, 2020). The organisations that are mostly demanded in the market need to procure a large number of materials. Thus, just in time system will not prove to be effective to increase the overall supply chain costs. The companies can use an e-procurement system to feed the detail relating to the purchase events for managing receipts and calculating profits.

Task 2

Critically evaluating the advantages associated with the use of supply chain management by a construction contractor

Though managing the supply chain is one of the tedious organisational tasks, but it can make an overall improvement in saving costs and producing outcomes. Supply chain refers to the network of business entities, organisations, technologies, and individuals to fulfil product-related demands (Alaloul et. al. 2020). The supply chain management functions play a most significant role in performing overall organisational activities. It refers to managing the supply chain activities of the organisation.

In the construction sector, the supply chain processes hugely impact profits and loss. Inefficient supply chains incur greater construction costs which disturb the relation between the contractor and clients. There are several benefits of supply chain management by a construction contractor:

Improve quality control

Supply china management involves selecting the suppliers that are appropriate to meet the organisational standard in delivering quality products. The supply chain manages an effective network of business entities to retain the quality at each level for maintaining productivity. The individuals in each level of the supply chain should communicate to maintain ethics and focus on clients to deliver the quality of the materials (Fernandes et. al. 2017). In the field of construction, raw material used in constructing buildings need to be procured. Thus, the quality of bricks, sand, cement, iron should be high to improve the quality of the infrastructural developments.

Meeting the material demands

Supply chain management also manages purchase functions. It looks towards maintaining the integration between the parties involved in value chains. It is the role of the supply chain department to ensure the availability of materials for continuous construction (Manu and Knight, 2020). If the resources do not arrive on time or absent, it will ruin the entire construction system and the contractors cannot avoid paying wages to the labour present at the construction site for performing assigned tasks.

Develop better logistics functions

The raw materials need to move from source to destination based on the generated needs. These movements take place through roadways, seaways, and railways in the construction sector depending upon the construction projects and suppliers identified. It is the responsibility of the supplier to transport the materials safely and in stated quality to the contractor. The transparent logistic system help in improving functions of the supply chain networks and also elevate performances (Shaikh et. al. 2020). Logistics in the supply chain involves recording every transaction to keep a record of the to and fro movements for estimating the costs and calculating the profits.

Better information flow

Traditionally, supply chain management involves a lot of paperwork between the parties like dealers, suppliers, distributors, transporters, and contractors. This resulted in delaying the payments which become less engaging for the parties. But due to advancements in technology, communication becomes much easier and convenient to make on-the-spot deals which also reduces the chances of losing the entities involved in the supply chain process (Alaloul et. al. 2020). Technological-based supply chain avoids any errors and easily communicates the information to develop a clear understanding of the roles to be performed by the supply chain parties.

Improve construction efficiency

Based on the construction plan, the effective supply chain helps in maintaining a balance between the planning and implementation relating to procuring resources and delivering the outcomes of construction on time. The construction people often face the complexity of late deliveries which overall increases the time of construction and the contractor failed in keeping the promise to deliver the services on the negotiated time frames. But with effective supply chain management, the overall performance of construction improves and meets the standard to deliver quality outcomes in the state period.

Improve the flow of cash

Supply chain management provides immense benefits in minimising the cost of construction to increase profits. The costs of resource movement largely impact the construction costs (Manu and Knight, 2020). The proper management of the supply chain help in eliminating the extra costs of material handling and costs of transportation. The overall costs of inventories also reduce which controls the cash outflows of the construction organisation. The timely deliveries help in saving the warehouse costs and maintenance of the warehouses to improve the net profits.

Conclusion

The effective supply chain and procurement activities are the two significant aspects upon which organisational effectiveness is measured. It is concluded from the above report that the organisation should consider several factors that can impact the decision of selecting the procurement system. It is important to assess the need of the organisation before making any decision. Supply chain management is crucial for every organisation to improve the costs and minimise the time of organisational activities to deliver the products to the end-users. The report has discussed the significance of the factors impacting the selection of the procurement system. It has also evaluated the advantages of the supply chain management function in the context of the construction contractors.

References

Books and Journals

Alaloul, W.S., Liew, M.S., Zawawi, N.A.W.A. and Kennedy, I.B., (2020). Industrial Revolution 4.0 in the construction industry: Challenges and opportunities for stakeholders. Ain shams engineering journal, 11(1), pp.225-230.

Aminah, S., Ditari, Y., Kumaralalita, L., Hidayanto, A.N., Phusavat, K. and Anussornnitisarn, P., (2018). E-procurement system success factors and their impact on transparency perceptions: perspectives from the supplier side. Electronic Government, an International Journal, 14(2), pp.177-199.

Fernandes, A.C., Sampaio, P., Sameiro, M. and Truong, H.Q., (2017). Supply chain management and quality management integration: A conceptual model proposal. International Journal of quality & reliability management.

Ismail, W.N.W., Isa, S.S.M. and Yusop, N., (2018). Ideal construction procurement system based on transaction cost approach. International Journal of Academic Research in Business and Social Sciences, 8(1), pp.807-814.

Kwofie, T.E., Aigbavboa, C. and Thwala, W., (2020). Procurement Systems: Underscoring Their Particularities. In Effective Construction Project Delivery (pp. 39-46). Springer, Cham.

Li, Y. and Shou, B., (2020). Managing supply risk: Robust procurement strategy for capacity improvement. Omega, p.102352.

Manu, E. and Knight, A., (2020). Understanding supply chain management from a main contractor’s perspective. Successful Construction Supply Chain Management: Concepts and Case Studies, pp.251-269.

Mena, C., Van Hoek, R. and Christopher, M., (2018). Leading procurement strategy: driving value through the supply chain. Kogan Page Publishers.

Shaikh, F.A., Shahbaz, M.S., Din, S.U. and Odhano, N., (2020). The role of collaboration and integration in the supply chain of construction industry. Civil Engineering Journal, 6(7), pp.1300-1313.

Suresh, M. and Nathan, R.A.R., (2020). Readiness for lean procurement in construction projects. Construction Innovation.

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