Cost reduction through effective procurement research proposal

 

 

 

Cost reduction through effective procurement

 

Introduction

The increasing emphasis on supply chain management is creating  focus on the supply management link in the supply chain. Cost reduction focus can become intense as companies continue to adopt e-procurement strategies to leverage competitive advantages of the Internet. Supply managers need to understand the impact of technology and gain competency in making good business case for e-procurement, research implications are profound for the industrial marketer. Research will involve preliminary literature as well as research based critique towards articles and journals that deal with procurement effectiveness by means of reducing costs towards electronic oriented cycles of chains and its valuation.

Background/Literature

E-business developments represent significant step in evolution of inter-organisational systems, impact on external supply chains is a major area of discussion and analysis in the literature, principally examining issues of governance structure and process efficiencies. This paper, however, addresses issues relating to the impact of e-business developments on internal customer service with a focus on electronic procurement introduction – in other words it concentrates on the intra-organisational system dynamics of e-business. The procurement process is basis of internal customer-provider interfaces and thus present valid and useful domain of study in internal customer service. In contributing to the emerging e-service field the article first contends that much of the recent research into e-service has taken a primarily external customer focus. However, reports suggest that the potential of e-business comes from applications both within and between businesses. Consequently, this paper focuses on the findings relating to internal e-service obtained from an extensive, primarily qualitative and exploratory, research program incorporating organisations. The article concludes that internal customer satisfaction is central to the success of e-procurement deployment and is significant determinant of the cost benefits to be gained from its adoption. In this economic environment, many companies are considering or implementing broad actions to reduce spend and streamline organizational design and processes. While these types of projects are never pleasant, if done correctly, they can not only help you achieve your immediate cost reduction objectives, but create an efficient platform and new capabilities that will create a competitive advantage for you when market conditions rebound.

In research, there would be no addressing of how a person determine financial objectives. Whether the research focus is company-wide, within specific functional areas, set percentage targets or vary those targets by area, organization can do to maximize the value of any cost reduction effort undertaken:

-        involve the organization. Putting in place a solid process to identify those ideas, build consensus around them, and get decisions made quickly is critical to achieving your financial objectives

-        use the right software. Microsoft Excel is good tool. It's also probably one of the most overused tools as well. Your organization needs the ability to track status, understand realized savings vs. target, identify problems early and generate roll-up reports without having to request, track, maintain version control of, and consolidate reports from across the organization. In our experience, this is one of the biggest frustrations that people responsible for coordinating cost reduction efforts have. Typically, everyone involved is working on cost reduction in addition to their full-time jobs

-        build an organizational capability. If to cut costs, the organization will look back on the effort as a negative event. However, if reduce your expenses using a process that gets people involved and changes the way decisions get made, people will remember that this difficult period was one in which organizational capabilities were strengthened. At the right time, these same processes can be used to grow revenue and support innovation

Problem statement

A lot of companies suffer as the result of poorly executed cost reduction effort. While they achieve their financial objectives, morale declines, cuts go too far into organizational muscle and processes don't change. People just work harder. However, done well, managers and staff will see that things really changed and that the company has new capabilities. These capabilities give the organization a voice and lead to a continuous improvement process in which everyone can participate. Some companies attempt to shed old habits and begin to view procurement as a strategic resource from which competitive advantage can be gained, there is a great deal of corporate baggage that must be shed. More importantly, there is a new mindset that must be instilled both in procurement and across the firm. Strategic supply symbolizes the importance of enterprise wide thinking where functional units inside the firm and key suppliers from the firm's supply chain all work in concert to bring value to the marketplace. The need to present data from Kenya that help researcher better understand and address issues that are key to managing across independent supply chain partners. The need to address some of the barriers to implementing such supply strategy. These barriers exist inside the firm as well as between the firms at its key suppliers and acknowledge that progress is being made, however the data suggest that the journey is far from over.

 

 

Purpose of study

The purpose is towards procurement effectiveness particular SME companies operating in Kenya which have greater geographical presence or multinational can achieve better price by buying bigger volume instead of buying for individual units. Central buying policies are recommended for such unit. Hence research can book maximum amount of requirement issues happened. Cost reduction can be achieved through reduction , elimination , modification , substitution or innovation as cost drivers are taken into account and with thorough analysis the best  and least cost path is adopted for each activity. The best method to  achieve results are to bench mark operating parameters to world class  companies. In today’s competitive world Corporates and businesses are struggling to  maintain profits and healthy bottom lines, those who have opted for focused cost reduction strategies have survived those who could not managed have perished. Companies have to develop its own cost reduction  program for savings without cutting jobs .

Research questions and Objectives

Even as more organizations are moving towards implementing Web-based B2B procurement solutions, they are unsure of the real benefits of the Web. In other words, what is the value of B2B e-procurement to an organization and how to measure this value? What factors affect this value? In this paper, there is a need to discuss evaluation framework to determine value of B2B e-procurement and the effect of process characteristics on the value. Research will use empirical study to highlight the different value created by different procurement types. Thus, the need to develop comprehensive cost reduction model to capture effects of demand volume and process complexity. The integration of conceptual/theoretical approaches provide strong foundation to develop and evaluate useful adoption strategies for B2B related e-procurement ways. Furthermore, web-enabled business-to-business e-commerce enhances inter organizational coordination, resulting in transaction cost savings and competitive sourcing opportunities for the buyer organization. However, organizations are uncertain whether this is an improvement over existing information technology. What is the value of B2B e-commerce to buyer organization, and how can it be measured? What factors most affect the realization of the value of B2B e-commerce? Using the case of Web-based B2B procurement systems, framework is proposed to quantify and measure the value of B2B e-commerce systems and identify the factors that determine it. The methodology is applied to help SME related equipment manufacturer located in Kenya evaluate the potential of its Web-based procurement system. The preliminary results indicated that, even though stages of B2B procurement are affected by the Web, value of Web-based procurement is most determined by process characteristics, the organization of business units and such presence of an extended business enterprise.

Scope

The scope will be focus on product offerings in competitive environment do not support economic viability. Time-based dimensions of e-procuremt effectiveness as a result of cost reduction and of becoming imperative component in assessing strategic advantage in research execution. Thus, conceptual framework will be provided to further analyse cost reduction and how it is manifested in the procurement pathways such as those that relate people environment tenets as based on production/consumption gaps that can lead to augmented product and service in chain related assimilation . Traditional lead times and high inventory level can be less appropriate and costly endeavours may achieve even for the sake of e-procuremt success and its function to business.

Limitations

Research limitations can deal with e-procurement effectiveness only for cost reduction study that relates to manpower side, people management in the right process, a possibility of not letting employees be a top factor in cost reduction of the business, comparing of cost reduction on production as well as operational cost in relation to employees lay off as part of the cost reduction plot to achieve better procurement and its effective nature. Research is limited only to primary and secondary research wherein there is ample grasp of e-procurement strategies and approaches that SMEs in Kenya can use into respectively.

Significance of study

Research is significant to supply and value chain managers which uses e-procurement often as a result of cost reduction tactics and considerations. Thus, significant also to manufacturing consultants and experts of procurement process and its management cues. Thus, significant also to graduate students taking up master studies in procurement management and any other business management related courses.   

Conceptual framework

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comments

[Gravity Gardener]

If you are looking to move your organization into the 21st century by dumping that old paper based purchasing process, you may be in for a pleasant surprise when it comes to the overall procurement costs.

Of course there are many overpriced e-procurement providers that can charge more than the market can stand, but an online web based solution can be very cost effective. Because there is no software or hardware to install, it becomes much easier to implement than applications hosted within your network.

Taking steps to replace the 4 part purchase order process will allow the enterprise to become more efficient and still maintain the control points necessary for accountability purposes. Initiating a replacement to the manual paper process does require some change management, but once in place, stakeholders will wonder how they got along without out it.

Gravity Garden
http://gravitygarden.com/procurement-engineering/web-based-procurement.html