The procurement department
Procurement is an essential department in every organization. It encompasses the purchase of materials, including office equipment, raw materials, and even an organization’s furniture. This is a relevant department that does not need any disruption. However, with the unpredictable contemporary world, various disasters can cause the breakdown of the entire supply chain, thus halting the procurement department. For instance, the Australian fire that raged throughout the summer halted the supply chain system causing serious procurement problems. For example, due to this fire, a local tourist accommodation center in south Wales was unable to receive supplies; food, water, and other essentials from its suppliers since the bushfire rendered roads impassable.
The procurement department, therefore, faces various challenges like in the case study, issues maintaining steady supply, issues with the suppliers, and issues with the entire procurement department. In this direction, therefore, it is good to solve this issues following proper strategies. Some of these strategies include the adoption of e-procurement, the adoption of the center-led model, and hiring a competitive human resource to leverage digital technology in giving the company a competitive edge.
Introduction
Every organization acquires raw materials, products, or services through the procurement department. Procurement simply encompasses a series of activities and processes that are necessary for an organization to acquire essential products, raw material, and services from the best suppliers at the best price to increase the company’s production and productivity. The procurement department, therefore, purchases raw materials, office equipment, furniture, technical equipment, telecommunication equipment, supplies, and other essential facilities as well as services for the company. Procurement is therefore viewed as the part of the organization that works towards improving the organization’s profitability by streamlining processes; reduce the cost of buying raw materials, identifying better suppliers thus maximizing output with minimum cost (Mekonnen, 2016 p.19)
The Australian fire that ravaged parts of Australia over the summer had horrific impacts on business, the economy, and business procurement at large (Strahan & Whittaker, 2019 p.146). Various companies’ source of raw material was affected by Australian fire. The Australian fire dried the plants. This has a substantial negative implication for the Australian economy; tourism and commercial companies have been threatened, transport vehicles that transport raw materials cannot access the source. Companies’ product supply consequently went down due to this issue. A local accommodation for Tourist Company that is very popular during the summer holiday was adversely affected by the bushfire and now the Coronavirus. Travelling was hindered due to road damaged caused by the fire. Therefore the local company has lacked food, water, grocery, and other material supply. Besides road damages, the Coronavirus pandemic has led to travel restrictions, whereas there are still many tourists occupying the premise.
However, the fact that the company has come to a sudden lack of food supply due to the reasons mentioned above, these issues can be directly attributed to the local company’s procurement department’s incompetency. A competent procurement system needs to have strategies in place to ensure the constituent supply of raw materials even during disasters (Kakwezi & Nyeko, 2019 p.6). Therefore, the local accommodation for tourists company’s procurement department is facing various issues including poor communication network between the suppliers and the company, poor procurement channels that do not ensure continuity of the procurement process despite the disruption and incompetent procurement officers that fail to emulate proper procurement model, call for appropriate procurement contracts with the suppliers and fails to follow the project process (Koria, 2017 p.412). These issues led the company to a sudden cut in supplies and production.
Potential solution
The accommodation venues in Australia faced difficulty in maintaining the supply of raw materials during the summer bushfire. This was due to the damage to roadways with fallen trees that blocked paths and roads, thus making cutting the supply of food and other raw materials to the tourists. However, the procurement department should be able to offer solutions during such hard times to ensure a consistent supply of materials and business continuity. As a business owner, many measures can be put in place, including the establishment of a proper communication network with the supply and the procurement team channels to ensure that the supply chain and the entire company’s procurement process continue to operate normally in case of any disruption. Moreover, companies need to adopt the use of an effective procurement system. Therefore, there are numerous solutions and strategies that the procurement department can adopt to ensure stable supply during disasters like the bushfire.
i.) E-procurement strategy
E-procurement is the modern technology in a business where businesses the sale of supplies, services, and work is done through the internet (Brandon-Jones & Kauppi, 2018 p.134). The e-procurement offers digitalized solutions to businesses, including e-informing, e-auctioning, e-tendering, vendor management, e-invoicing, contact management, and e-payment, among other value chain solutions—E-infirming in the procurement department aids in the purchasing process. With e-informing, gathering, and distributing the purchasing information to external and internal parties, using internet technology is done efficiently. The sharing of information within a company and its suppliers is very critical in maintaining the supply chain and making it more efficient. Besides information sharing, e-informing is essential in preserving information quality; this includes information accuracy, adequacy, timeliness, and credibility of the information exchanged (Sánchez-Rodríguez & Martínez-Lorente, 2019 p.41).
On the other hand, e-tendering enhances the process of tendering, which is key to a successful procurement process. E-tendering is important in specialized works and consultation services. Finally, e-procurement offers e-auctioning services; this is the process of conducting an auction to sell a company’s products, natural resources, or any other goods through the online competitive bidding platform. E-purchasing is also another service; it involves the purchasing of low-value goods and services while re-ordering is the process of creating and approving purchasing requisition.
In this particular case study, local companies need e-procurement as a solution to the various procurement issues they are facing. E-procurement strategy leverages the internet and digital platforms to make the procurement process convenient and more comfortable (Bahaddad & Drew, S., Houghtoni, 2018 p.856). E-procurement is advantageous since it reduces procurement costs and encourages volume buying. It saves the company money by preventing duplicate spending and saving the cost associated with paper-based systems. Therefore, the system saves the company money and encourages volume buying; this is a preparedness strategy in case of any disaster that can delay supply. E-procurement improves transparency in spending. Conducting the procurement processes electronically makes it easier to write and analyze procurement reports; this means that the company will better understand its supply stock, level of supply, thus correctly budgeting for the future.
E-procurement increase transaction speed; this is both time-saving and efficient (Choi & Park, 2016 p.644). In e-procurement, all tasks are handled through the internet and computer software. Consequently, the purchasing processes, transaction speed, and the entire procurement process are simplified and speedy (Vaidya & Campbell, 2016 p.333). This improves the relationship between the company and its consumers. E-procurement eliminates unnecessary activities to allow the department to focus on more valuable tasks. E-procurement reduces or rather eliminates procurement errors. Electronic paperwork is better and more comfortable to check for errors; besides, e-procurement improves standard buying. In essence, e-procurement is the solution to procurement issues, including disasters like the Australian bushfires that hindered the supply chain. E-procurement improves efficiency, information transparency, and the entire procurement process, thus maintaining a steady supply in the procurement process.
ii.) Center Led Procurement (CLP)
Center led procurement (CLP) is essential in all organizations of all sizes. This is a procurement strategy where all procurement processes are coordinated centrally while other transactional work is done in a decentralized fashion. This strategy is common in large enterprises, but its workability in the small enterprise is also excellent. In this strategy, all purchases in a company are conducted from a single dedicated organization. This procurement strategy is fundamental in numerous ways. First, CLP allows a company to leverage total corporate spending and drive a standardized sourcing process in the entire organization. The resulting economy of scale enables an organization to brandish their full power of spend, this, in turn, enhances operational efficiency, improve best-practices and knowledge sharing.
Center led procurement empowers the business in different ways. The enterprises are empowered in the sense that they are given the power to control their processes and design decisions. In this manner, the business is given the power to decide the best practices to emulate. Besides, CLD improves a business’ overall satisfaction with procurement. One of the essential benefits of CLD procurement is that it speeds up issue resolution. Since all the procurement processes are under one roof, problem identification and resolution is faster and speedy. Therefore, this is an essential strategy that local tourists’ accommodation centers should emulate to solve issues like those posed during the bushfire disaster speedily.
When all the procurement processes are operated centrally, the organization enjoys a high utilization of skills. People who are the best fit in the procurement department get to work together, thus pooling ideas together to make the procurement department successful. On the same note, the center led procurement leads to better supervision of available materials, proper record keeping, and better control unnecessary purchasing of materials since all the records are kept in one place, thus maximizing the use of records in making new purchases. Among other benefits, Center Led Procurement minimizes financial wastage, ensures specialized and expert purchasing, better storage of materials, and proper record keeping. In the third sense, the center led procurement simplifies the entire procurement department for easy understanding that promotes faster and efficient decision making in case of any disaster. Besides, due to natural and proper knowledge as well as improved communication courtesy of CLP, the company can easily project about the future or secure the future better through adequate planning opportunities that the strategy gives an organization.
Evaluation of the proposed solutions
With the Australian bushfire hitting Western Wales, Australia saw the supply chain coming to a halt. Tourists locked up in the local accommodation venue in Western Wales were unable to leave the place since roads become impassible due to the raging fire. The supply chain suddenly halted; the company becomes unable to continue receiving foods, water, and grocery, among other basic needs for the tourists from its suppliers. In times of such disasters, companies are affected not only by the shortage but also by un-managed relief following the disaster. Without proper procurement strategies in place, such disasters can completely break the entire market supply chain, thus affecting businesses and causing detrimental economic impacts.
The adoption of e-procurement in an organization can have significant relevance in times of disasters and other hardships (Ibem & Aduwo, 2018, p.823). It is worth understanding that proper means of communication within an organization, and proper record keeping, as well as easy access to inventory records, positions an organization in a better position to fight disasters. E-procurement in this note helps an organization to store, purchase, and do all the procurement functions through the internet and other digital means. This means that e-procurement gives companies the visibility to properly control all the procurement processes ranging from strategic and financial planning to procure-to-pay (P2P) cycle and chain supply management. E-procurement and its software provide a centralized cloud-based environment that connects stakeholders, applicants, and other suppliers together for optimal communication, collaboration, and efficiency.
It is important to adopt e-procurement in the area affected by the fire in Australia. This is because, with e-procurement, proper communication with the stakeholders is done in a timely manner using the digital means, thus making earlier decisions regarding suppliers and the reception of raw materials before a disaster or before the disaster intensity outsmarts supply (Ferreira & Amaral, 2016 p.7). Moreover, e-procurement opens a company further to enjoy another exceptional technologic advancement. To improve the competitive advantage of the procurement industry, e-procurement improves access to information and information sharing among key stakeholders in an organization and between key enterprises as well as suppliers. This proper access to information puts the company ahead in the supply chain, thus strengthening the management of the business as well as improving the preparedness to face challenges like the bushfire in Australia.
Besides, e-procurement improves purchasing efficiency. This improves the relationship between the organization and the suppliers. On the same note, e-procurement uses the internet and other technological opportunities to get the best suppliers in the market, choose the best commodities, and shorten the procurement time. This means that the company can procure the best products or materials from the best suppliers in the world and get them in the shortest time; this can be helpful during disaster times. Saving money during disasters like the bushfire in Australia is every company wants. Using the e-procurement platforms, a company can save up to 12% through increased transparency in transactions; this saved cash can be used to prepare the company in disaster management.
During the bushfire disaster, the local tourist accommodation company failed to deliver food, water, and grocery to its customers since impassible roads halted the supply chain due to the raging fire. However, with e-procurement, the supply chain cannot be halted easily due to impassable roads or fire in the neighborhood. Therefore, e-procurement is a good solution to consider. First, it is not easy for the inventory stock, including all the basic materials needed in a company to go below a certain threshold, e-procurement can automatically order stock when it reaches a certain level, thus improving the disaster preparedness in an organization.
The use of Unmanned Aerial Vehicle has become a common choice in procuring materials to risky places. The use of technology and the incorporation of technology in e-procurement attract the use of the uncrewed aerial vehicle in the procurement department. Unmanned aerial vehicles can deliver foodstuff and other necessary material to risky areas like places affected by the fire. The use of drones in procurement does not depend on the road. Either does delivery consider the state of the road. Therefore, there is a way e-procurement can facilitate the delivery of food, water, and grocery to the fire affected place without jeopardizing the lives of others or injuring the delivery persons. Unmanned deliver and automatic ordering two important e-procurement processes that, if properly leveraged, a company can be fully prepared to face disasters.
E-procurement is very advantageous, and it can offer solutions to procurement issues in the case study. With e-procurement’s ability to improve communication within the organization and the suppliers, improve service deriver and transparency, organizations can adopt this system as a step towards improving the entire procurement process (Mohd Nawi & Deraman, 2017 p.211). With technological advancement, e-procurement works hand in hand with other services, including unmanned delivery and automatic ordering, as aforementioned, thus offering several procurement issues. According to the resource-based theory, the company should use its resources to implement the e-procurement strategy that can later give the organization a competitive advantage.
Center led model (CLP) is also a critical procurement strategy that can have excellent benefits when fully leveraged.
Decentralized and centralized procurement models have both advantages and disadvantages. The Center model brings the advantages of centralized and decentralized procurement models together to enable a company to gain a competitive advantage. With a centralized model, an organization improves its access to inventory records, its record-keeping, access to information, and nearness to essential stakeholders as well as easy access to information (Bryson, 2018 p.13). All these improve communication with the fundamental stakeholders in crisis time, thus finding a faster solution to problems. This procurement strategy needs to be implemented to help solve issues relating to disasters like fire.
Recommendation and action plan
There are various recommendations for the business to enable it to overcome the procurement issues identified.
- First, the business needs to hire a few competent procurement officers then install the e-procurement strategy in their operation. As discussed, the use of e-procurement will make the running of all procurement processes easy and more transparent to enable the company to fight risks, avoid the buying of unnecessary material, prioritize and improve overall efficiency (Awadallah & Saad, 2018 p.69).
- Delivering automated data analysis works well with e-procurement. The main procurement challenge the business faces is its inability to look beyond the present time and visualize day insight. With proper data analysis, the business will look beyond Excel and use digital tools to visualize and gain greater data insight.
- Controlling CapEx, the cross-functional team, transparency of data, and early involvement in projects help in managing high-spending. By establishing proper capEx controls, the business will gain more value and become recognized as a trusted entity, thus attracting more talents and better suppliers.
- Recruiting future talents; all the above strategies will not work without a proper team. The company will not benefit from e-procurement human resources behind it does not understand how to leverage the benefits. Hiring competitive talents is essential, they will adopt the strategies recommended readily, come up with solutions to problems and embrace creativity in the business, thus improving the overall procurement process (Fan & Chen, 2018 p.11).