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BMO2202 Purchasing And Supply Management

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BMO2202 Purchasing And Supply Management

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Course Code: BMO2202
University: Victoria University

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Country: Australia


Discuss the supplier selection criteria for an organisation of your choice.


Woolworth is owned by Woolworths limited and is one of the leading supermarket/grocery stores in Australia (Ghosh, 2015). The company deals with a variety of products, including electronics, clothing, and fresh foods, among others. To succeed in its operations, the company has unique operational and marketing strategies which most of its competitors have found hard to implement in their operations. Being a company which targets many customers and also one which operates in a competitive market, this company has implemented various strategies of selecting its suppliers, undertaking its purchasing operations, and identifying its purchasing cost (Robert, 2014). Irrespective of being one of the market leaders in the retail industry, this company faces competition from both local and international players. Some of its competitors include Carrefour, Coles group, Kroger, Target Corporation, Amazon among others.
The company operates by the use of mission of helping members of the Woolworths family to attain financial security and well-being by providing a range of relevant, competitively priced savings, leading and financial services (Huong, 2015). This statement has been enabling this company to commit itself towards ensuring it works for the satisfaction of its consumers through providing products which can make them realize value for their money. The company also has a goal of having its customers put it at first across all its brands
The purpose of this paper is to discuss the supplier selection criteria for this company, its ICT for purchasing operations, and purchasing cost analysis. The paper will provide an overview of Woolworths considering various factors used in its purchasing process. Because suppliers are essential in this company, the paper will identify how the process which the management use to select people involved in its supply. The paper will also discuss some of the things involved in its purchase process, especially how it uses ICT in this aspect, some of the ways it used to minimize purchase cost, and some of the tools it can use to measure costs involved in its purchase process.
Supplier selection criteria
For Woolworths, suppliers are essential stakeholders because they play a crucial role in ensuring the retail store has what it needs to provide customers with through assisting in moving products from producers to the store (Robert, 2014). To come up with a good team of suppliers, this company considers various things, like for instance, cultural fit, the cost, the value, experience in the current market and current references, flexibility among others. The management also focuses on enhancing its supply chain by ensuring all activities which are necessary for aligning supplier relationships the company’s overall business strategies and interests are undertaken.
According to Bryan & Matthew (2015), this company offers a wide range of products and therefore it considers selecting those who are able to provide a wide variety of products. The primary reason why Woolworth consider this factor is that its management understands that having many suppliers to supply different types of products may be costly, or may lead to inconveniences such as some products not being delivered on time. For this reason, it chooses suppliers who have sufficient resources to deliver a wide variety of products whenever an order is made.
The supplier selection criteria in this company include various things and processes targeted to ensuring the company attains suppliers who understand its goals and objectives, and also one who knows the importance of doing the right thing not only for the benefit of the company but also for the satisfaction of its stakeholders. Woolworth also focuses on ensuring its supply chain is made up of a team of professionals, and ones who value customers and other stakeholders.
When in need of suppliers, the management holds a meeting to discuss some of those that the company may need to consider. During this meeting, the management team deliberate various things such as the reputation of the stated suppliers, their resources, how they understand the business model of this company among other factors. After this, a final decision is made and the potential supplier contacted to state whether they can sign a contract with the company.
Once the supplier is selected, the company provides various details concerning its expectations. The company also negotiates about the cost, the terms of payments and other crucial information. According to Robert (2014), this Woolworths values relationship with its suppliers and therefore encourages the selected suppliers to ensure that they report all matter which can hinder a positive relationship with the company.
According to Teller & Korbrin (2015), this company has in some incidences experienced out of stock products due to supplier failure, a situation which affects its relationship with customers. Although the company has a purchase goal of ensuring its counters have sufficient stock, sometimes engaging in business with unreliable suppliers has seen it fail and therefore it should come up with a solution to address this issue.
For its management to ensure that it attains its purchase goal, it is recommended to ensure that it signs contracts with suppliers who are reliable, and ones who understand the importance of delivering products at the right time and in the right state (Joanna, 2015). It is also advisable for the management to ensure that the company has a good product ordering process so that it can minimize the chances of requesting for products when they have already gone out of stock.
ICT purchasing operations
Woolworth is a reputable company which serves many customers and therefore for it to remain successful, there are various purchasing goals that it wants to attain to ensure it maintains its relations with customers. According to Matiaz (2010), it management trust that consumers are crucial assets for this organization and therefore they should be given full value for their money, full satisfaction and should have their needs addressed through getting products which match their expectations. For this reason, the company has a goal of purchasing high quality products throughout its operations and therefore wants to engage in contracts with suppliers and organizations which have a similar belief in their operations.
The other purchasing goals that this company has is to ensure everything is available at stock at all times and therefore seeks to purchase enough and to have proper ordering process. According to Mike (2010), this company also focuses on continuing to offer high quality and delicious food at the best possible price for their customers to ensure they view the company as the only one which can address their needs.
Woolworth places customers at everything it does and therefore focuses on lower prices, more compelling offers and greater innovations. According to Robert (2014), some of the needs which the company has is that while it is clear that lower prices are crucial, the battleground relies on overall customer experience. Although the company needs to be price friendly to the customers, getting suppliers who can offer products at low prices is the big problem. Therefore, the Woolworth should procure products from organizations which offer high quality products at cheaper prices so that it can be able to sell them at relatively low prices to its consumers.
Using ICT for purchase operations is also crucial for not only enhancing efficiency in purchasing but also for cutting costs so that the company can be able to sell the products competitive prices (Bhavik, 2012). Although this company has been striving to ensure its purchasing process is guided by IT, there are a lot of things that it requires to consider to ensure it has advanced ICT tools that address record keeping, monitor field agent activities, operations of procurement, tasks of credit and payment among others.
To attain this Woolworth should implement reverse auction because price is one of the key things which can make it to continue holding a significant market share. According to Melody (2015), reverse auction means a type of auction in which various sellers offer their products for bidding, and compete for the price which a buyer will accept. This strategy can work better for this company because its selling prices largely depend on the purchase cost (Joanna, 2015). When different suppliers or organizations compete for price, it means that the company will be able to choose the one which offers the products at a favourable price, and therefore be able to sell them at friendly prices to the consumers.
Reverse auction involve only prequalified suppliers selected through a prequalified process, and according to Xuan (2016), suppliers compete through offering bids to the buyer for the supply of products whose specifications, quality, quantity, design and related details have been clearly defined. This means that through this strategy, Woolworth can be able to define the type of products it finds best based on its customer needs and expectations.
According to Patrick (2014), embracing ICT and innovation has various benefits it business operations. From the reduction of purchasing to increased efficiency, reverse auction an assist Woolworth to go beyond the traditional procurement procedure by enhancing the procurement process and potentially attaining a global supplier base in a dynamic real-time competition. According to Joanna (2015), reducing purchasing cost is crucial for this organization because it wants to attract as many customers as possible through offering competitive prices. Therefore, because the savings in reverse auction cannot be understated as they can have a significant impact on reducing purchasing cost, it is advisable for this company to use it in its operations.
Purchase cost analysis
According to Bridget (2014), one of the primary goals which this company is minimizing its purchase costs in order to ensure it attains other objectives in its operations. Although the company has been trying to implement various measures to ensure it incurs minimal purchase cost, it has not succeeded and this has been one of the reasons why irrespective of trying to be competitive in terms of selling prices, it has been experiencing challenges.
The company also has a goal of engaging in bulk purchase to ensure it attains the advantage of economies of scale. According to Santamu (2016), Woolworth in most cases order products for individual units because it deals with a wide variety of products and this has been one of the factors which make the company to incur huge purchase cost. With the recent increase in competition especially through prices, its management has realized that a company with a greater geographical presence such as Woolworths can attain better price through purchasing bigger volumes instead of buying for individual unit, and therefore is focusing on working with suppliers who can assist it to implement this strategy.
Although cost efficiency and reduction continue to be a top priority in wool worth’s purchase process, dealing with many suppliers and changing them from time to time has prevented the company from attaining these factors (Huong, 2015). This is because for a company to realize reduction of the cost incurred in procurement, it should build a positive relationship with the suppliers so that they can be able to work jointly to ensure they engage in activities which can assist the organization to realize minimal purchasing cost.
One of the factors that have majorly contributed to incurring higher purchase costs for this organization is lack of using efficient supply chain, failing to fully implement innovation and technology in its purchase processes and failing to consider economies of scale while ordering for products. Myers (2014) also affirms that Woolworth fails to engage in a contract with suppliers who can assist the company to minimize its purchase cost through procuring products from producers who are price friendly and also ones who consider discounts and other factors which can assist the company to realize minimal purchase costs.
According to Huong (2015), measuring purchase price is essential because t assist an organization to determine what it incurs in procuring its products or services. One of the purchase cost analysis tools which this company can use in its operations is purchase price variance. Using this tool is crucial because it can assist the company to develop a market-basket approach to evaluate the competitiveness of purchasing.
The company can also come up with a computer system to assist it in identifying the cost it incurs in undertaking various purchase process (Robert, 2014). The system, in this case, should be able to determine when a new order is required, the cost expected to be incurred, the income generated from the previous order and so forth. This will play a crucial role in enabling the management to identify when the company incurs unnecessary costs during its purchase process and also when it attains its cost targets.
Wool worth is one of leading retailers in not only Australia but also in other countries. The company deals with various products which include foods, clothes electronics among others. To make these products available to its consumers, the company has various suppliers who have established a positive relationship with the company. While selecting its suppliers, the company should consider various factors such as things, like for instance, cultural fit, the cost, the value, experience in the current market and current references, flexibility among others.  The section process follows certain criteria which include holding a meeting to identify the kind of supplier which the company require to have and how to identify him.
Woolworths is one of the retailers which seeks to win customers through offering competitive prices in the market. For this company to attain this goal, it must first ensure that it implements measures which can assist it to reduce its purchase cost.  Although this company has been focusing on implementing ICT in its purchase operations, there are a lot of things that it has not considered and that is the reason it has not attained its goals of being competitive in terms of prices in the market. From the various ICT techniques available, Woolworth should implement the use of reverse auction because it an assist it to significantly reduce its purchase cost based on its business model.
Bhavik, P. K. (2012). Comparison Shopping Agents and Online Price Dispersion: A Search CostBased Explanation.  Journal of Theoretical and Applied Electronic Commerce Research, 7(1), 143-165.
Bridget, M. (2014).  3 Reasons to Give Cooperative Purchasing a Try: Districts Can Save Time and Money on Their Ed Tech Purchases by Joining One of These Buying Groups.  T H E Journal (Technological Horizons In Education), 41(8), 143-157.
Bryan, J & Matthew, S. T. (2015). Developing Interpersonal Influence in Retail Purchasing Networks: An Exploratory Analysis of Tie Quantity, Tie Strength, and Tie Type.  International Journal of Marketing Studies, 7(1), 89-96.
Ghosh, A. (2015). Role of Responsiveness and Process Integration in Supply Chain Coordination.  Advances in Management, 8(2), 87-90.
Huong, H.Y. (2015). Effects of Reference Pricing on Customer Purchasing Intention.  International Review of Management and Business Research, 4(4), 54-67.
Joanna, P. (2015). Group Purchasing Organization (Gpo) as a Means of Business Costs Savings.  Journal of Positive Management, 6(1), 56-78.
Joanna, P. (2015). Group Purchasing Organization (Gpo) as a Means of Business Costs Savings.  Journal of Positive Management, 6(1), 54-78.
Matiaz, I. (2010).  Qualitative Elements of Relational Exchanges and Their Impact on the Implementation of Purchasing Marketing Strategies-Case of Slovenia.  Indian Journal of Economics and Business, 9(2), 23-45.
Melody, G. (2015). Spatial Injustice, Texas-Style: Why ‘Bigmama Didn’t Shop at Woolworth’s.’  The Western Journal of Black Studies, 39(2), 76-89.
Mike, T. (2010).  CATEGORY MANAGEMENT IN PURCHASING: A Strategic Approach to Maximize Business Profitability.  Manager, 132-143.
Myers, A. C. (2014).  We Shall Not Be Moved: The Jackson Woolworth’s Sit-In and the Movement It Inspired.  The Journal of Southern History, 80(3), 67-89.
Patrick, L. (2014). Coordinating Pricing and Inventory Purchasing Decisions of a Supply Chain for an E-Tailer in Face of Quantity Discounts.  Academy of Information and Management Sciences Journal, 17(2), 173-189.
Robert, O. (2014). Supply Chain Alignment: A Thematic Bibliography.  The Journal of New Business Ideas & Trends, 12(1), 80-98.
Santamu, M. (2016). An Empirical Competence-Capability Model of Supply Chain Innovation.  Business: Theory and Practice, 17(2), 45-57.
Teller, A & Korbrin, R (2015). Purchasing Power: The Economics of Modern Jewish History.  Philadelphia: University of Pennsylvania Press
Xuan, T. N. (2016). Review Paper: Design an Ideal Supply Chain Strategy.  Advances in Management, 9(4), 434-487.

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