Reference no: EM131144433

Ensuring Purchasing Management Tools

Nowadays, global supply chain has played an important role in almost every business. Most of the successful companies ensured supply chain strategy. Not only customers that important to supply chain, but also suppliers. Maintain supplier relationship could create alignment for supply chain network. This will improve operation performance. Another key to improve the sale and operation is to create robust supply plan. In order to build robust supply plan, company should ensuring purchasing management tools. The first tool is purchasing risk assessment. This will allow company to avoid impact of the potential risk. The second tool is Material management. This will help company to create good material managers.

The impact of risk in purchasing could disrupt the supply chain network. For example, late delivery could interrupt the production line. There are four dimensions of purchasing risks. The first dimension is market structure. Company need to know the supplier capability. For example, company would like to buy 50 units, but supplier capacity is 60 units. This means company has a great risk. The second dimension is supplier. Having less suppliers means company might have high risk. The third dimension is supply strategy. Company need to have a good relationship with supplier. If suppliers do not see the same way, the company will have a risk. The last dimension is supply chain. Company should use the proper transportation mode for the specific product like hazardous product. Using wrong transportation mode could create risks. This will affect to the entire supply chain network. More importantly, this will lead company to loss revenue.

In order to avoid or mitigate purchasing risk, company should ensuring purchasing risk management tool, which is Purchasing Risk Assessment (PRA). This tool will show all of the possible risks that could impact the purchasing plan. This tool also scales the level of probability and impact of each risk from low to high. This will allows company to see risk framework. After evaluate the potential risk, company can either implement mitigation plan or prevention plan. As a result, company will have the great supply plan which will improve the operation performance.

Another important tool for purchasing management is Material management. As can be seen, material manager role are challenge. They have to handle the multiple products which have complicated requirement. In order to be a skilled material manager, they should ensure these five skills set. First, they must familiar with supply chain system and measurement tools. This will allow them to ensure shipping efficiency. The next skill is to be innovated material managers. They need to understand the rapid change of supply chain, such as new logistic processes, mobile computing and real-time inventory management. Another skill set is project management. This will help them to align production schedule with purchasing schedule by using GANTT chart. Ability to communication is the other important skill set for material manager. Poor communication could create bad effect to the production. The last skill set is change management. Unexpected surprise could occur any place and any time. They need to be able to create change management plan.

Discussion question: do you think which risks dimension in purchasing risks that have the most impact to supply plan and have to response to it as fast as possible (Give the example of those risk and what could be the way to mitigate).