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STRATEGIC PROCUREMENT

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Strategic Procurement

Case Study 1: Eagersaver.com

Introduction

The case seeks to understand the operations of Eagersaver.com as it seeks to float its

stocks on the stock exchange. Eagersaver.com is an online site for comparing care insurance and

other related products and services. The company has been able to grow through organic means

and the acquisition of other firms. Today, the company compares varied insurance offering

including home insurance, legal insurance, travel insurance, pet insurance, accident insurance,

and life insurance. In spite of all, the company has been able to diversify into offer other

comparison products in the financial sector, travel products, and utilities. The company enjoys a

turnover of £100 million.

Analysis

It is clear that Eagersaver.com company offer quality services and it has been able to

grow significantly over the recent years. It includes the acquisition of small firms and the

diversification into new and varied insurance comparison services. “The approach of moving

offline and open call center services and a TV shopping channel was useful. “

”The expansion of

the insurance services was useful in promoting the overall turnover in the company.”

The

strategy of the managing director of the company to float the company on the public stock

exchange required due diligence. Conduction of the due diligence exercise relies on the corporate

advisors to professionalize the procurement services and operations of the company. Colette's

corporate advisors revealed various issues including that many media firms operated without

significant competition and the company was spending highest in marketing services. 

Problems and Issues

From the review of the company by the corporate advisors, some issues and problems

were identified. One of the biggest problems was that the excessive spending on marketing

programs. The online marketing budget was £12 m, and the TV marketing budget was £ 8m.

The company should manage the marketing expenditures. It is also clear that they did not record

formal contracts with the vendors. “The verbal arrangements might be problematic for the

company.”

Other significant issues include improving management programs such as the

personal friendships of the CEO that creates problematic relationships.

Possible Solutions

Some of the potential solutions are the formalization of the organizational structure. It

would ensure that the CEO and departmental heads are more responsible for their actions. It is

because the CEO was found to engage in problematic relationships that undermine the

performance of the company. “Good communication and integration of supplier relationship with

the company would overcome potential problems.”

The creation of a supply contractual code

Minkyun, Kim, Suresh C. Nallan, and Kocabasoglu-Hillmer, Canan. "A contextual analysis of

the impact of strategic sourcing and E-procurement on performance." Journal of Business

& Industrial Marketing 30, no. 1 (2015): 9.

Francis, Gouillart. "The race to implement co-creation of value with stakeholders: five

approaches to competitive advantage." Strategy & Leadership 42, no. 1 (2014): 7.

Kevin P McCormack, and Johnson C William. Supply chain networks and business process

orientation: advanced strategies and best practices (New York: CRC Press, 2016), 56.

Angappa Gunasekaran, Irani Zahir, Choy King-Lun, Filippi Lionel, and Papadopoulos Thanos.

"Performance measures and metrics in outsourcing decisions: A review for research and

applications." International Journal of Production Economics 161 (2015): 164.

would also help in streamlining the contractual relationships with the suppliers. It is important

for the company to work with the suppliers well. Other strategic alternatives would help in

countering the informal operations in the organization.

Recommendations

It is recommendable for the management of Eagersaver.com to install and implement

effective corporate governance structures in the organization. It will include design a proper

organizational structure to guide the procurement departments and leadership in the varied

departments including the IT and agency employees. It will also be recommendable to

implement a cost reduction strategy in reducing the marketing costs and budget in the company.

Case Study 2: Wyldeburd Ltd

Introduction

The case evaluates Wyldeburd Ltd, a small niche producer of products for the garden

birds such as feeders, seeds, and related products. In the company, the best-selling product is the

sunflower seed hearts. The company distributed their products into varied sizes including 1kg,

3kg, 5kg, and 10kg packets to the garden centers, pet shops, and supermarket chains and through

direct retail approaches through the internet. The company obtained the seeds from China and

relied on relied on freight agents to deliver the products within 43 days.

Analysis

Based on the case study, the demand for the company’s products varies from 5 to 20 tons

in each month. The limit for storage of WL packing and distribution plan was 24 tons for the

finished products. The daily logistics for the company involved taking the products to the garden

centers and pet shops. “They also forecasted the demands in the supermarkets to ensure quality

delivery of the products.”

The direct sales to the public were made through the Royal Mail parcel

service. The company faced various logistical challenges. 

Problems and Issues

In the logistic process, WL faces various issues and problems. For example, the

company regularly faced a shortage of the 1kg and 3kg packs. The company also had to deal

with the high number of returned products from garden centers and pet shops due to the damaged

packing process during transit. The insufficient storage space and capacity in its packing and

distribution units and plans also limited the ability of the company store more products. “The

lead time for waiting for products procured from China was a huge problem.”

The management

of WL should deal with the problems.

Possible Solutions

Some of the potential solutions WL can consider expanding the warehouse capacity in

their packing and distribution plant. It would assist in accommodating a high level of finished

products. It is also critical to increase the 1 kg and 3kg packs to meet the demands of the

customers. “Technological supply chain solution will help in assist in advancing the supply chain

Phanish Puranam, Gulati Ranjay, and Bhattacharya Sourav. "How much to make and how

much to buy? An analysis of optimal plural sourcing strategies." Strategic Management

Journal 34, no. 10 (2013): 1156.

Voon-Hsien, Lee, Ooi Keng-Boon, Yee-Loong Chong, Alain and Lin Binshan. "A structural

analysis of greening the supplier, environmental performance and competitive

advantage." Production Planning & Control 26, no. 2 (2015): 124.

orders and inventories.”

Other actions reliable include using specialized packing of the goods to

the pet shops and garden centers. They would help to reduce the level of damaged products in the

organization.

Recommendations

It is recommendable for WL to integrate technology into the logistical needs of the

company. The implementing of technology would help in promoting the efficiency of delivering

products to the garden centers and pet shops. For example, WL should install supply chain

software to help with the demand forecasting and matching the supplier orders of the customers.

Such a software application in the supply chain is critical in promoting the supply chain process

of the company. “The company should hire technical support to come up with efficient logistics

applications.”

Such solution would provide an integrated solution to offer consistency in the

execution of the distribution process of products to the customers and retail and wholesale

centers. 

Maybury Security Ltd (MSL)

Introduction

The case evaluates Maybury Security Ltd (MSL) who was awarded a ten year contract to

offer IT system reliable in the detection and prevention of the computer offenses for the

specialist department of police forces. “MSL also partners with other security organizations in

countering cybercrimes.”

However, there were relationship problems that made it difficult for

them to achieve the objectives and performance level expected in the contractual agreements. As

a result, it is clear that MSL has the capacity and connections to enhance facilities management,

systems integration, and software development programs among other services.

Analysis

Based on the case study, it is clear that MSL has been able to form numerous

relationships. However, after 12 months, “the contracts of MSL started wavering due to the

failing relationships between the parties involved.”

1011

The late payment of invoices made it

difficult to promote contractual performance. In spite of efforts to resolve technical issues, “MSL

decided to keep the police representatives from engaging with the sub-contractors.”

Considering

Sriram Narayanan, Narasimhan Ram and Schoenherr Tobias. "Assessing the contingent effects

of collaboration on agility performance in buyer–supplier relationships." Journal of

Operations Management 33 (2015): 148.

Christian Schuh, Strohmer F. Michael, Easton Stephen, Hales Mike, and Triplat Alenka.

"Supplier relationship management." In Supplier relationship management, pp. 7-12.

Apress, 2014.

Sanjita, Jaipuria, Jenamani, Mamata and M. Ramkumar. "The strategic procurement of raw

material: a case study." International Journal of Procurement Management 9, no. 5

(2016): 541.

Friso, Zimmermann and Foerstl Kai. "A meta‐analysis of the “purchasing and supply

management practice–performance link”." Journal of Supply Chain Management 50, no.

3 (2014): 44.

Amir M Sharif, Alshawi, Sarmad, Kamal M. Muhammad, Eldabi Tillal, and Mazhar Aiyaz.

"Exploring the role of supplier relationship management for sustainable operations: an

OR perspective." Journal of the Operational Research Society 65, no. 6 (2014): 977.

the poor performance of the contract, the police did not make any payments. It is clear the

engagement of the diverse parties was problematic for MSL’s contractual performance.

Problems and Issues

Some of the key issues and problems include the excess costs of the contract. The

inability of the company to perform the contractual milestones was a huge issue. The proposal to

relax the agreed service levels by Maybury also raised concerns about the resources available to

deliver on the contracts. “Communication challenges between MSL, the subcontractors, and the

police was inadequate.”

It is critical that the management of MSL coordinate well with the

varied stakeholders in resolving conflicts facing the stakeholders.

Possible Solutions

The potential solutions would include promoting the communication between the

involved parties. The management of MSL should improve the communication with the

subcontractors and the police. It is useful to address the communication issues to promote the

management of the contracts. “Handling relationship problems should also be resolved through

ensuring the organizations works well.”

MSL should also start paying the payment of invoices

in time. It is because the late payment of invoices made it difficult for the subcontractors to

perform their roles well.

Recommendations

To deal with the problems in the case study, it is recommendable to improve the

communication and integration of the parties involved in the contract of offering security

services. “Conducting regular progress meetings would also improve the relationship among the

parties.”

However, the contractual issues could be resolved through developing strategic

communication actions.

Case Study 4: Veroxide Group (VG)

Introduction

Veroxide Group is a company that manufactures the different pharmaceutical products

including human vaccines and prescription drugs. In the previous year, the company increased

its R&D spending to 3.9 percent to match the 17.3 percent of the main business sales. The

company was also in the processing of obtaining approval for new products such as Zentonex in

the next six months. The challenge facing Veroxide Group is the need to empower the suppliers

in meeting the company's demands for products. 

Analysis

Following the potential approval of Zentonex, the company will need to expand the

production capacity to have the proper processes to improve the supply chain processes.

There was minimal contact between its buying functions because the R&D director assumed

responsibility for the budget. As Zentonex enters the production stage, the company would be

required to purchase a large amount of special chemical, Onulun. “The company will require 2

Caroline Booth. Strategic Procurement: Organizing suppliers and supply chains for competitive

advantage (London, UK: Kogan Page Publishers, 2014), 23.

Suman Reza "Is commissioning different from procurement?." American Academic &

Scholarly Research Journal 7, no. 7 (2015), 9.

Jens Roehrich and Lewis Mike "Procuring complex performance: implications for exchange

governance complexity." International Journal of Operations & Production

Management 34, no. 2 (2014): 227.

tons of this chemical to enhance production.”

“It is important that the company develops

quality supply chain processes for the supply of the chemical and improved facilities for

production in the company.”

Gardener is the regular supplier of items to the R&D department

for many years, and they have excellent delivery and quality performance. The case examined

concerns on the ability of Gardener to manufacture and supply the adequate levels of Onolun in

the company.

Problems and Issues

The key issue that emerges is whether Gardener, the supplier can deliver on the

production capacity requirement for the company. It is because Zentonex's approval will create a

huge opportunity for the company to work with the suppliers in improving the production

process. “Such actions are vital in the long-term production and supply of the drugs in the

organization.”

Other issues include the ability of the management to track the quality of

products supplied by Gardener.

Possible Solutions

Some of the potential solutions are to work with Gardener in expanding their production

capacity. The company could offer funding to the supplier to ensure that they have the financial

resources needed to deliver on the required chemical level. The demand for Zentonex product

would call for the company to hire additional suppliers to assist with the distribution of the

products to the customers. “The empowerment of the suppliers is critical as they would be able

to deliver on the demand of the company.”

Pharmaceutical firms require that their suppliers

should have consistent standards and processes of supplying quality items in the organization. In

spite of all, working with diverse partners to improve supply chain process is necessary.

Recommendations

It is recommendable for Veroxide Company to develop an enterprise development strategy that

would help Gardener with the production and supply of the special chemical. It is because

Gardener might be unable to meet the capacity required for the production of the company.

Investing in supply chain training and development of Gardener will also be useful. It would help

in expanding the supplier development program. 

Anand, Nair, Jayaram Jayanth, and Das Ajay. "Strategic purchasing participation, supplier

selection, supplier evaluation and purchasing performance." International Journal of

Production Research 53, no. 20 (2015), 6268.

Stefan Hoejmose, Brammer Stephen, and Millington Andrew. "An empirical examination of

the relationship between business strategy and socially responsible supply chain

management." International Journal of Operations & Production Management 33, no. 5

(2013): 598.

Frank Henrik, Hesping, and Schiele Holger. "Purchasing strategy development: A multi-level

review." Journal of purchasing and supply management 21, no. 2 (2015): 148.

Abhay Nath Mishra, Devaraj Sarv and Vaidyanathan Ganesh. "Capability hierarchy in

electronic procurement and procurement process performance: An empirical

analysis." Journal of Operations Management 31, no. 6 (2013): 380.

Martin Spring and Araujo Luis. "Indirect capabilities and complex performance: implications

for procurement and operations strategy." International Journal of Operations &

Production Management 34, no. 2 (2014): 163.

Case Study 5: Winstanley Airlines (WA)

Introduction

The case evaluates Winstanley Airlines which operates short and long flights from

London. The company has old aircraft and around 45 have serious internal restructures of the

seating and in-flight catering units such as the cabin crews. The serious complaints in the

catering department create complications on the ability of the airline to increase the production

levels. After a tendering process, “the company gave Ozland Flight Equipment (OFE) to fit

quality ovens equipment in the airlines.”

OFE showed their qualifications and accreditation in

offering in-flight catering equipment to renowned airline companies such as Quantas and South

Africa Airways. As a result, the hiring of OFE sought to deal with the problems in the in-flight

catering departments.

Analysis

Based on the case study, it is clear that the management of WA has been facing

numerous complaints from the catering department. For example, “the first class passengers’

complaints triggered the aircrew to threaten to strike."

The airline had to incur additional costs

to issue vouchers to passengers as a sign of goodwill. The vouchers sought to show their

commitment to addressing the complaints in the in-flight catering department and services. After

OFE had installed the ovens, they had a problem with the wiring. “The airline had to address the

OFE’s quality delivery issues in the installation process.”

Possible Solutions

Some of the potential solutions include requesting OFE to install the ovens well. Direct

communication with OFE would help in pushing for quality services. The company can also hire

quality control experts to conduct regular quality inspections. It is because conducing quality

inspection is vital in overcoming any queries about the ability of the supplier, “OFE to resolve

oven problems in the company.”

Considerations should also be directed towards the

implementation of a long-term strategic solution to the problems in the catering department.

Addressing the quality problems with OFE is vital in overcoming the production and operation

issues in the airline. OFE should work with staffs in the catering and in-flight catering

department to overcome quality issues.

Recommendations

It would be recommendable to analyze the specifications on the output requirements for

the catering department. Such an action will help in lowering the quality problems facing WA’s

in-flight catering equipment. “Output specification is useful in understanding whether the

Yahaya Yusuf , Gunasekaran Angappa , Musa Ahmed, Dauda Mohammed, El-Berishy M. Nagham,

and Cang Shuang. "A relational study of supply chain agility, competitiveness and business

performance in the oil and gas industry." International Journal of Production Economics 147

(2014): 536..

Suzanne M., Carter and Greer, R. Charles. "Strategic Leadership: Values, styles, and organizational

performance." Journal of Leadership & Organizational Studies 20, no. 4 (2013): 378.

David R. Rink "Executives reactions to a prescriptive strategic procurement planning

model." Journal of Supply Chain Management Systems 3, no. 2 (2014),78.

Constantin, Blome, Hollos, Daniel and Paulraj, Antony. "Green procurement and green supplier

development: antecedents and effects on supplier performance." International Journal of

Production Research 52, no. 1 (2014), 49.

suppliers can deliver on the required needs of the customers.”

The procurement process is

useful in controlling and managing the quality of products well. It is because it helps in

evaluating the ability of production process of the company to meet the varied specifications for

the products. The hiring of the best suppliers and production contractors would help in dealing

with the quality problems in the company.

Marcelo M. Azambuja, Ponticelli, Simone and O’Brien J William. "Strategic procurement practices for

the industrial supply chain." Journal of Construction Engineering and Management 140, no. 7

(2014): 06014005.

Bibliography

Azambuja, Marcelo M., Simone Ponticelli, and William J. O’Brien. "Strategic procurement

practices for the industrial supply chain." Journal of Construction Engineering and

Management 140, no. 7 (2014): 06014005.

Blome, Constantin, Daniel Hollos, and Antony Paulraj. "Green procurement and green supplier

development: antecedents and effects on supplier performance." International Journal of

Production Research 52, no. 1 (2014): 32-49.

Booth, Caroline. Strategic Procurement: Organizing suppliers and supply chains for competitive

advantage. London, UK: Kogan Page Publishers, 2014.

Carter, Suzanne M., and Charles R. Greer. "Strategic leadership: Values, styles, and

organizational performance." Journal of Leadership & Organizational Studies 20, no. 4

(2013): 375-393.

Gunasekaran, Angappa, Zahir Irani, King-Lun Choy, Lionel Filippi, and Thanos Papadopoulos.

"Performance measures and metrics in outsourcing decisions: A review for research and

applications." International Journal of Production Economics 161 (2015): 153-166.

Heizer, Rander, and Render Barry. Operation management, sustainability and supply chain

management. Vol. 11. London, UK: Pearson, UK, 2013.

Hesping, Frank Henrik, and Holger Schiele. "Purchasing strategy development: A multi-level

review." Journal of purchasing and supply management 21, no. 2 (2015): 138-150.

Hoejmose, Stefan, Stephen Brammer, and Andrew Millington. "An empirical examination of the

relationship between business strategy and socially responsible supply chain

management." International Journal of Operations & Production Management 33, no. 5

(2013): 589-621.

J. Gouillart, Francis. "The race to implement co-creation of value with stakeholders: five

approaches to competitive advantage." Strategy & Leadership 42, no. 1 (2014): 2-8.

Jaipuria, Sanjita, Mamata Jenamani, and M. Ramkumar. "The strategic procurement of raw

material: a case study." International Journal of Procurement Management 9, no. 5

(2016): 524-547.

Kim, Minkyun, Nallan C. Suresh, and Canan Kocabasoglu-Hillmer. "A contextual analysis of the

impact of strategic sourcing and E-procurement on performance." Journal of Business &

Industrial Marketing 30, no. 1 (2015): 1-16.

Lee, Voon-Hsien, Keng-Boon Ooi, Alain Yee-Loong Chong, and Binshan Lin. "A structural

analysis of greening the supplier, environmental performance and competitive

advantage." Production Planning & Control 26, no. 2 (2015): 116-130.

McCormack, Kevin P., and William C. Johnson. Supply chain networks and business process

orientation: advanced strategies and best practices. New York: CRC Press, 2016.

Mishra, Abhay Nath, Sarv Devaraj, and Ganesh Vaidyanathan. "Capability hierarchy in

electronic procurement and procurement process performance: An empirical

analysis." Journal of Operations Management 31, no. 6 (2013): 376-390.

Nair, Anand, Jayanth Jayaram, and Ajay Das. "Strategic purchasing participation, supplier

selection, supplier evaluation and purchasing performance." International Journal of

Production Research 53, no. 20 (2015): 6263-6278.

Narayanan, Sriram, Ram Narasimhan, and Tobias Schoenherr. "Assessing the contingent effects

of collaboration on agility performance in buyer–supplier relationships." Journal of

Operations Management 33 (2015): 140-154.

Puranam, Phanish, Ranjay Gulati, and Sourav Bhattacharya. "How much to make and how much

to buy? An analysis of optimal plural sourcing strategies." Strategic Management

Journal 34, no. 10 (2013): 1145-1161.

Reza, Suman. "Is commissioning different from procurement?." American Academic & Scholarly

Research Journal 7, no. 7 (2015).

Rink, David R. "Executives reactions to a prescriptive strategic procurement planning

model." Journal of Supply Chain Management Systems 3, no. 2 (2014).

Roehrich, Jens, and Mike Lewis. "Procuring complex performance: implications for exchange

governance complexity." International Journal of Operations & Production

Management 34, no. 2 (2014): 221-241.

Schuh, Christian, Michael F. Strohmer, Stephen Easton, Mike Hales, and Alenka Triplat.

"Supplier relationship management." In Supplier relationship management, pp. 7-12.

Apress, 2014.

Sharif, Amir M., Sarmad Alshawi, Muhammad M. Kamal, Tillal Eldabi, and Aiyaz Mazhar.

"Exploring the role of supplier relationship management for sustainable operations: an

OR perspective." Journal of the Operational Research Society 65, no. 6 (2014): 963-978.

Spring, Martin, and Luis Araujo. "Indirect capabilities and complex performance: implications

for procurement and operations strategy." International Journal of Operations &

Production Management 34, no. 2 (2014): 150-173.

Yusuf, Y.Y., Gunasekaran, A., Musa, A., Dauda, M., El-Berishy, N.M. and Cang, S., 2014. A

relational study of supply chain agility, competitiveness and business performance in the

oil and gas industry. International Journal of Production Economics, 147, pp.531-543.

Zimmermann, Friso, and Kai Foerstl. "A meta‐analysis of the “purchasing and supply

management practice–performance link”." Journal of Supply Chain Management 50, no.

3 (2014): 37-54.

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