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Introduction of Role Of Procurement In New Product Development Assignment
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Each organization needs to purchase some goods and services as raw materials to run a business, whether it is a manufacturing or Production Company. The term procurement can be stated as the variety of activities accepted by industries in acquiring goods and services. However procurement usually refers to the final step of obtaining with the whole procurement procedure. Corporate procurement needs payment processing,solicitation, and preparationwhich usually includes several regions of the company(Rehman Khan, and Yu, 2019).Procurement and its processes can necessitate a sizeable portion of an organization’s assets to manage. Whereas,Supply chain management is the whole process of managing the total production movement of goods and services to maximize delivery, profitability, quality, and customer experience.
Purpose of the report
The purpose of the report is highlighted through new product development (NDP) in the company, in which one should have to pay attention to the SCM and procurement process. Critical evaluation of SCM and procurement is discussed with the help of a case company Voltz HGV. Voltz HGV was founded in 1983 in the form of a business conglomerate group. The company gets huge expansion by offering batteries across the world (Voltz, 2022). The case company is a manufacturer a distributor of battery products that includes smelting and DC power with fascinating success. The company offers to lead DC power and smelting solutions. Voltz HGV also deals with heavy and electric vehicles.
Key findings
The report includes the key factors evaluations that contribute to supply chain management along with the broader landscape that define as internal organizational aspects. Different supply chain models are also considered in the report. The study also includes a supply chain management role that supports the overall goals of an organization. The critical evaluation of the operation is another aspect of the research covered through an evaluation on an organization because of sustainable supply chain performance measurement. The involvement of procurement and supplier in the new product development process with the critical evaluation of its advantages, challenges, and limitations is highlighted in the report. For a better understanding of the report, Voltz HGV is considered a case company.
Evaluation of an appropriate strategy
Every company is established to make high profits and for this goal, the company has to minimize its cost in each section. Those factors that affect the purchasing costs of goods and services of a business is called procurement factors.The effective use of procurement by the company's management helps a business in generating strong partnerships with suppliers, acquiring high-quality products and services, boosting the company's area of research and development, etc. According to As' ad, Hariga, and Alkhatib, 2019Strategies related to procurement in the company define the pathway for the business management process to accomplish external means within the company.It permits an organization to recognize and measure potential providers, selection of the best suitable supplier, and update approvals.
Procurement strategy
There are usually three categories of procurement strategies such as low-cost procurement, value-based procurement, and strategic sourcing.
Low-cost procurement -
The first category of procurement strategy focuses on identifying those suppliers who sale required goods and services to the company with the lower cost. A low-cost strategy of procurement can be an operative way to reduce expenses of the company, but sometimes it also lead to quality compromises and lost various opportunities of cost reserves.
Value-based procurement -
The value-based procurement strategy focuses on a total cost of proprietorship for the goods and services, rather than paying attention to exclusive prices of it(Hoshi Larsson, 2018). This strategy includes elements such as installation and setup costs, disposal costs, delivery time, purchase price, and maintenance or repair costs.
Strategic sourcing -
The third strategy of procurement focuses on a long-term connection between the company and its merchants(as cited by Rafati, Roelens, and Poels, 2018). The strategic sourcing approach proceeds into a description, of the particular needs of the organization and customs supplier range and managing to increase performance, mitigate risk, and reduce costs.
SCM strategy
An organization needs strategies to enhance supply chain supervision and to develop everyone's job that is intricate in it. The supply chain management includes the consumer, manufacturer, suppliers, and distributor. The supply chain strategy improvement aims to reduce distribution and production costs as efficiently as possible, although still assembling consumers’ demands (as cited by Arredondo, 2018). To effectively execute the supply chain process, an organization can go through two strategies such as business strategy and organizational strategy.
Business strategy -
The business strategy of the supply chain outline the growth of a business by including differentiation, focus, and the least cost of manufactured goods and services of a company. The strategy distinguishes the business from competitors and maintains or creates manageable competitive control in the market.
Organizational strategy -
The organizational strategy is a mixture of different types of strategies. Those companies who heavily invest in sourcing as a strategy of the supply chain will target lower-cost materials for achieving organizational goals in the emerging market. The sourcing of lower cost is estimated as the best option for the organizational supply chain strategy because acquiring machines contains low-labor expenses and huge capital investment which help a business to balance the asset costs. The supply chain strategy includes different strategic reactions in the case of horizontal supply chains and dominant firms. The organizational supply chain strategy is made up of four key factors that are interrelated with each other as company's competitive positioning, marketplace, the company's supply chain process, and the link between business strategy and supply chain process.
Effective strategy development
There are several roles of supply chain management that support an organization to develop an effective strategy (as cited by Baah, Agyeman, Acquah, Agyabeng-Mensah, Afum, Issau, and Faibil, 2021). The main roles of supply chain management are as follows:
Reduce production cost -
The supply chain manager purchases low-cost and quality-handled machines for the company uplifts workforce efficiency and reduces the failed or rejected items. This type of work will decrease the everyday production cost for a company which will lead the top managers of an organization to focus more on the growth strategy for a business.
Improve financial position -
Proper management of the supply chain helps in increasing the cash flow and profit leverage and decreases the fixed assets. This role of supply chain management will create the belief of customers that the company is developing and showing better results(as cited by Lee, 2021). As funds are always available in a business through this role of supply chain management, the company can develop an effective organizational strategy along with maintaining its financial position.
Customer services increased -
The most important role of supply chain management is to manage customer service and satisfy customers at any point in time. This role helps the organization to innovate new ideas for satisfying and attracting new customers to the company's products and services.
Best marketing strategy development -
The team of supply chain management is required to create the best marketing strategy for an organization to ensure that the company's product and services will be extant in the market in the best possible way. Marketing strategy development support from the supply chain departments helps an organization to consume its time on making different strategies for effectively achieving the company’s goals.
Improve quality products - T
his role of supply chain management assures that the quality of raw materials used in manufacturing the products is to be in high class because customers only attracted to quality products. The organizational strategy will get huge support from this role of supply chain management, as in making overall business strategy while keeping in mind the quality of a product which was a challenging task to adopt.
A review of supply chain and procurement concepts
Supply chain concepts
The supply chain management (SCM) team plays a major role, as all types of the company have a department of SCM to manage all marketing activities. But five key factors contribute to an SCM of a company; these are discussed below (Fernando, Warnars, Kosala, and Abdurachman, 2018):
Planning - Organizational planning affects the SCM work in a business. The SCM work according to the type of company i.e. whether the company is going to manufacture the products or them plans to purchase ready-made products. Voltz HGV is a manufacturing company, so the SCM of this company has to manage with quality of raw materials and their cost in making the company's product.
Sourcing - This factor of SCM involves the selection of the best vendor who offers raw materials to a company within an ideal price and delivers the required quantity in an estimated time frame for the company. The case company required graphite, cobalt, lithium, etc. things to manufacture batteries and for this, the company deals with different suppliers.
Inventory - All-time full stock is extremely important for a company that is managed by SCM in an organization. Voltz HGV wisely manages the inventory and it confirms that manufacturing plans are in alliance to meet consumer demands.
Production and transport - The factor includes a warehouse, transportation, and production which contributes supply chain management in a company. The case company operates at a large level in the market and it has a satisfactory area of warehouse and production with a well-managed transportation activity.
Return of goods - The SCM also has to manage the process of goods return from the customers. Satisfaction of customers from the company's product leads to growth for a company, and the return process of goods is to be clearly defined with procedure surrounding.
Internal organizational aspects of SCM
The internal organizational aspects which affect the SCM of a company are divided into three parts that are organizational culture, management commitment, and competitive pressure. Organizational culture play important role in SCM, as the culture of a company defines the working ability and coordination at the workplace. Management commitment is also crucial in SCM as it is affected by the way management is done by different managers in a company (Jamaludin, 2021). The third internal organizational aspect of SCM is competitive pressure which helps the SCM team to develop new changes with an effective strategy for getting higher profits over the competitors within an industry.
Models of supply chain
The SCM has six models to flow efficient work of the supply chain within an organization; such models are explained below (Cheshmberah, and Beheshtikia, 2020):
Continuous flow model - This model provides stability in large-size environments which affect the company on daily basis. This is a classic model which is well-matched for manufacturers who produces similar product constantly, with slight design variation or modification.
Fast chain model - This SCM model is made for responsiveness. It is ideal for manufacturers who modify their product route frequently. The model is well-matched for fashionable products with a short lifespan.
Efficient chain model - This model is for hypercompetitive industries where end-to-end efficiency is the ultimate goal. This model relies heavily on production forecasting to properly burden and sweat machinery assets.
Custom configured model- the model pays attention to offering custom configuration at the time of assembly and production. This SCM model is a combination of three models that are hybrid model, the continuous model, and the agile model.
Agile model - this model is a primary model of SCM that deals with an organization involved in specialty objects. The model is generally known for the expertise which is required to transport products.
Flexible model - this model focuses on offering the freedom of managing a long period to a business with high demand situations and low quantity movements.
Procurement concepts
Procurement is the act of purchasing products and services for continuing the business process in an organization (as cited by Grandia, and Voncken, 2019). Four types of procurement are discussed below:
Goods procurement - this type of procurement contains both indirect as well as direct procurement. It refers to tangible items and also contains objects like software.
Indirect procurement - The indirect procurement might obtain anything that is a part of workplace supplies, and required furniture for advertising operations, and equipment maintenance.
Direct procurement - this refers to acquiring anything that is a priority for producing the finished product of a company. The companies that are involved in manufacturing activities contain essential components and raw materials.
Service procurement - this type of procurement puts the complete focus on services procuring that are dependent on different people. This also includes the hiring of contractors sometimes. It contains both direct and indirect types of procurement.
Recommendations
According to Prior, Mudiyanselage, and Hussain, 2021 Procurement will lead the company to select the long-term profits by offering its unique perception before product manufacturing decisions will be solidified.Several factors are to be kept in mind while developing a new product in an organization.The elements that highly affect the NDP are discussed as follows:
Inner network– for the Company, it is essential to make sure that the construction of the new product is well-organized with a present inner network. A company can adopt subcontracting even for a long-term or short-term period.
Plan- Before developing a new product a company needs to plan perfectly the entire product life phase and estimate the potential outcomes from it. To increase the efficiency of NDP, the company has to focus on the effects of all the potential outcomes that might affect SCM.
Procure-It is important that flexibility for a provider to respond to the changes that occur in the demand for the material. A supplier should have to learn about the requirements of raw materials forproduction.
Delivery of finished goods- it is necessary for the development of a new product in a company, to study the needs that the customers are looking for in the products along with the trends in the consumer market.
Conclusion
From the above-mentioned report, it is concluded that procurement activity plays important role in the new product development of a company. Voltz HGV is a leading supplier of electrical vehicles and heavy goods in the consumer market, so it should appropriately manage procurement and supply chains. It is concluded that a suitable model of the supply chain will lead to the highest position in the consumer market for an organization. There are several strategies for procurement and SCM so it is required to opt for satisfactory strategy for a company that matches the marketing and organizational strategy of the company. For better growth and new product development of the company, it is necessary for the case company to work on proper and suggested solutions for successful procurement and SCM in NCP.
References
Appendix, A, 2022. Procurement - a critical role in new product development and introduction (NPDI) process? (online). <https://www.procurementflow.com/blog/npd-npi-procurement> (accessed on 13 October 2022).
Arredondo, C. R. (2018). Participation of SCM Strategy in the definition of Business Strategy and its further conditions for operationalization. The status of SCM in LATAM.
As' ad, R., Hariga, M., &Alkhatib, O. (2019). Two stage closed loop supply chain models under consignment stock agreement and different procurement strategies. Applied Mathematical Modelling, 65, 164-186.
Baah, C., Agyeman, D. O., Acquah, I. S. K., Agyabeng-Mensah, Y., Afum, E., Issau, K., ...&Faibil, D. (2021). Effect of information sharing in supply chains: understanding the roles of supply chain visibility, agility, collaboration on supply chain performance. Benchmarking: An International Journal, 29(2), 434-455.
Cheshmberah, M., &Beheshtikia, S. (2020). Supply chain management maturity: An all-encompassing literature review on models, dimensions and approaches. LogForum, 16(1).
Fernando, E., Warnars, H. L. H. S., Kosala, R., &Abdurachman, E. (2018, September). Critical success factor of information technology implementation in supply chain management: literature review. In 2018 5th International Conference on Information Technology, Computer, and Electrical Engineering (ICITACEE) (pp. 315-319). IEEE.
Grandia, J., &Voncken, D. (2019). Sustainable public procurement: The impact of ability, motivation, and opportunity on the implementation of different types of sustainable public procurement. Sustainability, 11(19), 5215.
Hoshi Larsson, M. (2018). The role of context, activities, and organization, in Value-Based Procurement (Doctoral dissertation, Linköping University Electronic Press).
Jamaludin, M. (2021). The influence of supply chain management on competitive advantage and company performance. Uncertain Supply Chain Management, 9(3), 696-704.
Lee, R. (2021). The effect of supply chain management strategy on operational and financial performance. Sustainability, 13(9), 5138.
Prior, D. D., Mudiyanselage, L. K. H., & Hussain, O. K. (2021). Does formalization or centralization mitigate uncertainty in knowledge-intensive procurement?. Journal of Business & Industrial Marketing.
Rafati, L., Roelens, B., &Poels, G. (2018). A domain-specific modeling technique for value-driven strategic sourcing. Enterprise Modelling and Information Systems Architectures (EMISAJ)–International Journal of Conceptual Modeling: Vol. 13, Nr. 8.
Rehman Khan, S. A., & Yu, Z. (2019). Procurement. In Strategic Supply Chain Management (pp. 191-206). Springer, Cham.
