Questions On Strategic Purchasing And Supply Management

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1. Introduction According to Strategic Purchasing and Supply Management (SP&SM) lecture in week 1, the first step of the procurement process for an organization is the development of product or service specification for outsourcing. Because the process of outsourcing usually involves suppliers and buyers, the specification consists of learning about the inner structure as well as the outside environment, which forms the foundation for further supplier choice and contract development. As shown from SP&SM lecture in week 3, organization buying behavior refers to the management of the purchasing process. The question above states that firms should seek to get their own house in order before trying to manage their suppliers. In other words,…show more content…
In this way, the organization may have to deal with extra costs and thus decrease value for money. Value for money means the tradeoff between functionality and cost. If cost is much higher than expected, the operation will benefit less. Fragmentation of spends means that the organization divides the budget into small parts when suppliers are in large numbers. And this kind of demand management problems may affect the way suppliers react to buyers, which may jeopardize the relationship between suppliers and buyers. Also, fragmentation of spend may cause missed opportunities to restructure the way of purchasing. And what’s more, too many suppliers may deprive the organization of long-term and value-added collaborative relationship with any suppliers because none of the suppliers will sufficiently value its business (SP&SM, Week 3). Fragmentation of spends may be caused by the different preferences of internal clients. They may favor different suppliers, which did not reach a consensus and thus increase unnecessary procure costs causes a large number of suppliers’ tasks may be overlapped. In the political model (Lonsdale. C and Watson. G, 2003), demand management problems may be attributed to the following reasons: The first one is the bounded and limited rationality (March, 1994). It seems to be evitable because each individual
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