Supplier selection criteria and issues

Describe about the Purchasing Management for Robotics and Computer.

This report has been developed as purchasing manager, in order to analyze the importance of purchasing management system for the company Nestle. There are three major issues related to the purchasing management have been discussed in this study. They are such as purchasing management, supplier selection criteria and related matters for the company Nestlé. These issues may occur from various internal and external sources. It can be internal or external as well. There are various other issues such as purchasing cost and the use of information and communication technology (ICT) for purchasing operation and management have also been discussed in this section.

It has been found that the marketing objectives of the company Nestle are compatible with the overall marketing objective of the organization. The primary aims of the organization are like:

• To become consistent with the voluntary international standards on the environmental management system
• To develop mutual trust with government authorities, customers and different business partners
• To measure the benefits and costs of the business activities of the organization
• To establish benchmark for good business practices
• To conserve natural resources and minimize waste

There are various types of food products have been developed by the company Nestle such as baby foods, bottled water, chocolate and confectionery and ice cream products (Nestle, 2016). The company also produces dry food for dogs such as baneful, boost, Bakers complete. As Arikan(2013) mentioned that, the company Nestle has developed a relationship with more than 165,000 suppliers. The company has developed Nestle Supplier Code and related appendix that every supplier of the company must need to adhere while doing business with Nestle (Nestle, 2016). The top competitors of company Nestle are such as Keurig, Nigeria Breweries, Starbucks, Unilever, Amul, Wal-Mart, Cadbury and Heinz (Nestle, 2016). The specific product line of the companies like Hershey and Cadbury help them to give tough competition to the enterprise Nestle.

Purchasing goal and needs of the organization

The purchasing goal of a company includes the development of appropriate purchasing activities such as negotiation with vendors and suppliers. There are various strategies have been developed by the organization to obtain a discount from the vendors (Kannan et al., 2013). In order to develop effective purchasing strategy, it is required link it with business strategy and supply chain activity of the organization. The major purchasing goal of the organization has been given below:

Improve quality of products to improve customer loyalty

The organization has the goal to select best suppliers so that the quality of products can be improved. As Chai Liu and Ngai (2013) stated that, high quality service and products help a company to improve its brand image and customer loyalty. It is done by the company by hiring best professional with good negotiation skills, knowledge and better knowledge about business (Dursun & Karsak, 2013).

Recommended criteria to be considered while selecting suppliers

Reduce the inventory maintenance cost

The second major goal of the organization is to reduce the inventory maintenance cost of the organization. If the organization has hold of an enormous amount of inventory for a long period then the company might has to face spoilage cost (Bergman & Lundberg, 2013).

Maintaining inventory

Managing inventory is also another important part of the purchasing decision taken by the enterprise Nestle. The company always tries to make sure that all the orders given by the customers are delivered on time (Dursun & Karsak, 2013). In order to do that, the company needs to choose the best supplier, so that sufficient inventory is always available for the company. 

Developing productive relationship

 The company Nestle is always looking forward to developing effective relationship with its vendors so that better discounts and offers can be gained from them (Chai, Liu & Ngai, 2013).

Flow of material

Like all other organizations, Nestle also tries to develop an uninterrupted flow of goods so that it can deliver products in time. In order to do so, the company needs to select the best supplier for the market

There are eight major principles, which the company Nestle needs to consider while selecting the best supplier for its products. They are such as quality and safety, service, cost, delivery time, simplicity, social responsibility, agility, and risks. Depending on the situation, Nestle can use various combinations of these criteria. There are some major steps related to the selection process of suppliers, which the company nestles should follow. They are such as

1. Identification of the supplier (commitment, reliability and resources)
2. Measuring supply performance (audit and continuous monitoring)
3. Gaining feedback from the supplier (self-assessment questionnaire)
4. Gaining certification from the supplier
5. Developing effective relationship
6. Ensuing quality for the customers

Purchasing goal and need of the selected organization

The major purchasing goal of the company Nestle is to use ICT technology to improve supply chain performance of the organization. The major aim of the organization is to develop an e-purchasing system with the help of ICT so that business performance of the organization can be improved (Hinkka, Främling & Tätilä, 2013). The primary purchasing goals related to ICT procurement of the organization is given below:

• Development of superior business solution by incorporating ICT
• To improve Nestlé’s product delivery system with the help of ICT
• Using ICT tools to measure the performance of suppliers
• Implementation of ICT to analyze the quality of products

As Ross (2013) stated that there are three major areas of purchasing decision, in which information and communication technology (ICT) plays an important role. They are such as execution of the transaction, coordination and collaboration and supporting decisions. The company Nestle can gather some major benefits by using ICT in its purchasing decisions. They are such as:

• To gain information about availability and viability of goods
• To enable a single point to contact for information from suppliers
• To take decisions depending on the total supply chain information of the company
• To facilitate collaboration with different partners in the supply chain

The company can use ICT technologies such as JIT to reduce flow production time along with response time of production suppliers to end consumers. JIT is mainly a tool to eliminate waste from the manufacturing process. With the help of its waste elimination technology, the company Nestle will be able to reduce the cost of production (Schniederjans & Yadav, 2013). The company can implement GPS technology in all its vehicles, which are used for transporting goods from one place to another.  It will help the company to keep track of the product from anywhere and anytime as it is required.

ICT for purchasing operation

There are various other ICT tools can be used by the company Nestle to improve its supply chain performance. They are such as bar coding, radio frequency identification (RIFD), Enterprise resource planning (ERP), Materials resource planning and Distribution resource planning system.  RFID helps to enhance inventory management and replenishment practices. It contributes to reducing interrupted production and lost sales due to lack of stock (Ahmad & Cuenca, 2013).  ERP system contributes to developing effective collaboration between various departments of the organization. On the other hand, MRP system will help Nestle to keep track of the work-in-progress, supplies and output of the finished products to meet the sales order. Distribution Requirement Planning (DRP) is scheduling tool that can help the company to make effective inventory control and apply MRP principles in the distribution inventory of the organization (Teittinen, Pellinen & Järvenpää, 2013). The company also can use bar coding system to keep track of product-related information via computer. Bar-coding accelerates the flow of goods and information throughout the business. Nestle can gather various benefits by implementing a bar-coding system such as automatic counting of raw materials and finished products, package tracking, lot tracking and warehouse control.

Analyzing the purchasing goal and needs of the organizations

The major purchasing goal of the organization is to develop an effective monitoring system for the purchasing procedure. The company will try to develop a roadmap for the financial management system in order control cost of the inventory (Drury, 2013). In order to increase profitability, the company Nestle needs to cut down all the unnecessary expenses. The company needs to review the existing base of suppliers to revel the opportunities for reducing cost.  Reviewing the supplier will also reduce administrative expenses due to increase in payments and purchase orders (Pettersson & Segerstedt, 2013). In order to get better pricing, the company needs to negotiate with its current suppliers. The company also needs to look for alternative suppliers so that cost related to operational expenses can be reduced (Kaplan & Anderson, 2013).  Another major purchasing goal of the organization is to reduce the delivery time of finished goods. Sometimes Nestle has to pay a high amount of compensation due to the lay late delivery of products. Implementation of effective ICT such as GPS technology can be used by the organization to reduce the product delivery time of the organization. Sometimes it has been found that internal resources of the organization are not adequate to meet the demand of production. Hence, it has become mandatory for Nestle to make effective inventory analysis.

Purchasing analysis

As Taylor (2012) stated that, five major tools can help an organization to analyze complex purchasing costs. Nestle also can use these five strategies its purchasing cost. All these five analysis tools are described below.

Cost analysis

For a large company like Nestle, the actual cost is far more than the cost of goods. It includes factors such as distribution, handling, and storage of materials. The company also has to give advance payments to its suppliers. As the company is ordering a huge amount of materials, it also includes holding costs.

Delivery time analysis

For a renowned company like Nestle, it is crucial to take care of the delivery time of perishable goods. The company needs to use GPS technology so that it can keep track of the products all the time. It also requires large place and freezer to store a vast amount of goods.

Best use of supplier analysis

Depending on one supplier is not a good idea for business for a large organization like Nestle. The company must look for alternative providers and analyze the most suitable one for product delivery (Baily, 2013).

Inventory analysis

The company also needs to explain the cost of storing items and as well as the cost of not having required items available for manufacture or sale. Correct inventory analysis can tell the company about the requirement of space and freezer to store goods.

Maverick spending

It has been found that sometimes goods purchased from one supplier cost more than others, or it may be below the quality standard of products. This analysis helps the company to identify these maverick purchases that cost the company far more than it requires being.

Conclusion

In this report, an investigation has been done to analyze the importance of purchasing management for the company Nestle. There are three major issues related to purchasing management have been found from this study. They are such as appropriate supplier selection, implementation of ICT in purchasing and cost analysis. There are some major steps that Nestle needs to consider while selecting suppliers. They are such as identification of the supplier, measuring supply performance, gaining feedback from the supplier, gaining certification from the supplier, developing an effective relationship and ensure quality for the customers.

From this study, it has been found that major purchasing goal of the organization is related ICT implementation are such as gaining information about availability and viability of goods and to enable collaboration with different partners in the supply chain. There are various ICT tools can be used by Nestle to improve the business performance of the organization. They are such as GPS, JIT, MRP, DRP, and ERP. In order to increase profitability, the company Nestle needs to cut down all the unnecessary expenses. The company needs to review the existing base of suppliers to revel the opportunities for reducing cost. Various approaches the company Nestle can use to analyze the purchasing cost such as cost analysis, delivery time analysis, supplier analysis, inventory analysis and maverick spending.

Reference list

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