Using the organisation in which you are employed, provide a quick summary of its business, size and framework as well as the industry where it competes. With reference to this company you have selected, identify and express the main internal and exterior factors that affect purchasing.
(i) Clarify using instances where appropriate, if purchasing takes on a reactive or proactive role in the company.
(ii) Examine the ways that purchasing supports organisational goals.
(iii) Using one of the Purchasing Evolution Models analyse the organisation in regards to its purchasing level of development.
I am currently utilized by a Kilkenny based company called Veolia Drinking water Ireland, who deal mainly in the look, build and operation of water and wastewater treatment vegetation in the Republic of Ireland for within the last 30 years. We could a head in the water and wastewater alternatives market to local specialists throughout Ireland. Veolia Water Ireland (VWI) are a business unit of the bigger parent company Veolia Environnement who have over 330, 000 employees worldwide. VWI themselves have 2 individual entities, the design build function known as Bowen Drinking water Technology and the Businesses side of the business enterprise known as Veolia Water Operations Ireland Small. VWI in its entirety has over 150 employees at our Kilkenny head office and 30 operations sites nationwide and comes with an annual turnover of around 27 million. Each of the respective sections has its own Managing Director and Senior Management and accounts personnel apart from a communal Financial Director who executes the accounts for both entities. They are not only mixed up in municipal market but also the professional sector, servicing and domestic drinking water metering.
Internal & Alternative factors that have an effect on Purchasing
In any business there are 4 functions or management. They are planning, controlling, organizing and leading. All organisations or businesses work within two specific conditions, that being the internal and exterior environment. As failure to adapt to environmental trends can have disastrous outcomes for companies as successful businesses seek to identify its advantages and weaknesses (from an internal point of view) and appraise and respond to opportunities and threats (from an exterior perspective). Successful companies endeavour to capitalise on the talents, eliminate or reduce their weaknesses, and since I have previously stated appraise and react to their opportunities and threats.
(IIPMM; The Commercial Environment, 2012) "By learning the internal environment firms can determine what they can do with the resources and capacities. The second entails the organisation's wider, exterior environment which is shared with other organisations and stakeholders. By learning the external environment organisations identify what they could choose to do"
Internal driving pushes are those sorts of occasions that arise inside the business, and tend to be under the control of the business. Types of these for Veolia Drinking water Ireland would be as follows. The companies' stakeholders, company goals and goals, technological capacity on the market and development, organizational culture, management systems in the business, the financial management of the business and employee morale to name but a few. I'll now explain for the key points I've explained above how these internal driving forces make a difference the purchasing function.
Company goals and goals impact purchasing by determining the way and kind of purchasing performed. For example, it establishes whether purchasing has a proactive or reactive role in the company. A major push was made on the Veolia purchasing process within the last couple of years at a corporate and business level and now our key steps in the purchasing process phases have been detailed as: identify the necessity and the action; launch the action; analyse needs and markets; determine a purchasing strategy; unveiling a tender, contract; deploy the contract; guarantee constant improvement. So, much more emphasis has now been put on purchasing as it have been observed that for each and every euro preserved in purchasing, it then goes right to the bottom series where only a portion of each euro gained in turnover gets the same positive impact on the aforementioned bottom line or income.
Organisational culture also played out a huge part in how purchasing is rolling out. Purchasing is merely a four years young function at Veolia Water Ireland and at the beginning, as with most new functions, it was difficult but over time the key players realised that "the way they were doing activities" had not been as reliable as maybe it's and although change is seldom welcomed it was seen that the added value the purchasing function helped bring allowed others to focus on their own regions of responsibility.
External driving pushes are those sorts of situations or happenings that occur outside of the business and are by and large beyond the control of the company. Examples of exterior driving forces for VWI would be as follows; the industry itself, the economy, competition, government laws and regulations. For any external analysis then a PEST analysis is usually to be performed. The acronym PEST stands for political, environmental, economical and scientific. These external affects or factors affect purchasing and as such the next questions must regularly be asked; what's the competition doing? What exactly are the needs, would like, and desires of the client? How is the industry performing? What is the result of the economy currently (in an interval of development or recession)? Will there be any political movements or interference?
Specifically for Veolia the exterior aspects that could influence purchasing would be any strategic alliances that there may be and as we have various global construction contracts over numerous products and services then this might have a big bearing on companies VWI would select as potential suppliers. VWI also prides itself on coming to the cutting edge technologically and as such we've developed an "Actiflo Technology" to be able to maintain our competitive benefits over some of our current rivals in the market.
Purchasing role in the Organisation
As previously stated the purchasing function for VWI is only 4 yrs young and it has been evident for the reason that period that the function has migrated from being an administrative function and reactive to the needs of others to a "proactive function, leading and initiating purchasing strategies of benefit to the organisation. " This itself, is apparent from the time spent between what's viewed as basic administration or paper driving to a more proactive approach also to added value of the function. Hand in hand with this change has also been the tactical notion of "total cost and value are key variables". There is no point is sourcing an exceptionally competitive one off purchase, the idea is to create proper partnerships between ourselves and our suppliers to ensure continuity of supply and also to ensure continuing benefits for both companies because if it does not benefit both attributes then ultimately the connection will not carry on. However, coupled with this move from reactive to proactive purchasing there is certainly one further essential aspect and that is technology. That's not technology of the suggested engineering solution however the technology available within the company. Currently we have an in-house system that is dated and although the motive is to move from reactive buying there is still the labour intense requirement of inputting and amending of purchase purchases, subcontracts and also any changes to orders that might occur after placement. That is in the process of being improved at the moment but presently this aspect must still be classed as reactive purchasing as the administration time required presently is abnormal.
Purchasing as a support to Organisational Goals
An organisational goal or proper goal and goals are long run open ended attributes that the company seeks and which gratify the organisations' objective. See Shape 1 on the next page for a graphical representation of the Organisational Goal Hierarchy. Purchasing, however, has only received the acceptance of being a fundamental element of the process in the past few decades. That is due in the primary to the realisation in most organisations of the contribution purchasing can have in attaining success running a business. One of the primary reasons why purchasing has advanced is its reaction to industry problems. As Veolia Drinking water Ireland is area of the global Veolia group then the ramifications of globalisation, competition stresses and volatile market segments have all impacted on it but it's the effect that reactions such as relationship sourcing, global sourcing, benchmarking and the need to add value to name but a few, in purchasing, each have aided in Veolia obtaining its goals of being a market leader in the commercial and municipal marketplaces both within Ireland and also now in the UK due to further recent changes in the Veolia Group.
http://images. flatworldknowledge. com/carpenter/carpenter-fig06_003. jpg
Figure 1 Exemplory case of Organisational Purpose Hierarchy
It can be an obvious statement that purchasing strategy must be aligned with company goals for this to succeed. This involves a formal process of setting aims and determining a strategic arrange for the function. Please refer to SMART objectives detailed in Appendix. It's the "Five Privileges" definition of buying goals which allow any business like Veolia to accomplish "affordability". These five rights are:
(IIPMM, 2012) "To purchase the right quality of material, at the right time, in the right number, from the right source at the right price".
Although this is regarded as a basic interpretation it can provide a basis for purchasing staff to check out and along with the SMART objectives complete in provides a more stable basic for purchasing to assist in the organisational goals of the business.
Purchasing level of Development - Purchasing Evolution
Well to analyse the level of buying development in Veolia I would have to employ the purchasing development model from Jones 1997. "His research mentioned that purchasing experienced five phases of measurable development. These he called
(1) Infant (2) Awakening (3) Growing (4) Mature and (5) Advanced.
The model his research led to showed the way of measuring of the company's development against 18 different areas. It suggested where the company was now and discovered any shortcomings. Then it facilitated development of an "ideal" profile and finally identified where developments were needed"(Jones 1997). Although as I have previously stated that the Procurement Department in VWI is only 4 yrs. old I can confirm that I feel we are currently at the mature stage of development. This is indicative of the facet of determined negotiations of the 80/20 or Pareto rule where 80% of a category of spend has been 20% of the sellers. We've definitely shifted from the developing stage where a "shot gun" way was used to accomplish some cost savings but with high quantities of work. We have found now that as we've moved from the purely clerical or order handling program works to a more tactical and proactive focus then the more performance has improved upon and the greater its activity from efficiency to performance and this subsequently has advanced Purchasing (or Procurement's) status within the organisation. This has recently been backed up by Farmers third law concerning the value of purchasing which is reflective of Veolia Water Ireland's business emphasis;
(David Farmer, 1981) "Purchasing is important when an company spends a substantial proportion of its income on purchasing goods and services to allow it to conduct business".
As this is true for the VWI business design, it has additionally proven to be accurate in its determination of its importance for the continuing growth of the company.
If there is whatever is stead fast and unchanging, it is change itself. Change is inevitable, and the ones organizations who do not keep up with change will become unstable, with long-term survivability in question. Whether they are internal or external driving forces, a very important factor is certain for both; change will occur. A firm must be cognizant and alert to these changes, be flexible, and eager to react to them in an appropriate way. A method which has shown the way over the past few ages is the increasing need for purchasing in the industrial sector. These areas have been indentified and now are in the process of being rectified so further development and improvement may be accomplished on a continuing basis.
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