Company Purchasing & Procuring: Key to Business Success - Research Paper

Introduction

A company's purchasing and procurement functions are very crucial to the success and viability of a business. Purchasing and procurement are terms used to denote the responsibility for and the function of procuring services, materials, and supplies. Many large companies have a dilemma in determining the type of procurement and purchasing structure because these organizations have numerous departments, each having its purchasing and procurement protocol. In some cases, decentralization may be an excellent choice with some advantages, but in other cases, it may not be the best cost-effective management alternative for such large businesses (McCue, & Pitzer, 2000). In such circumstances where local procurement is critical, the autonomous approach might be preferable. For large organizations, however, decentralized kind of procurement can be risky and inefficient. Centralization is needed to control budget constraints and provide resources needed by a company to operationalize. This paper examines the centralized procurement and purchasing organizational structure for Amazon Company.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Amazon is the largest multinational technology company in the United States dealing with artificial intelligence (AI), cloud computing, digital streaming, and e-commerce. It simplifies its purchasing and procurement process by offering a suite of purchasing and procurement services to every kind of organization and business (McCue & Pitzer, 2000). Since Amazon Company has many other subsidiaries in the United States, a centralized procurement system is key. In this case, all purchasing and procurement of services and materials go through a single central system in one department.

Analysis of a Centralized Procurement System

Vendor Sourcing

Vendor sourcing involves the process of selecting the best suppliers that can provide goods and services required for a company to function. Vendor sourcing is the central heart of purchasing and procurement in every organization in the sense that for the supply chain to prosper, this process needs to be chosen with a lot of care and meticulously (McCue, & Pitzer, 2000). Therefore, a centralized procurement system in sourcing right suppliers is the best approach for Amazon Business to take into consideration procedures in the supply chain process such as; testing for quality, establishing best standards, market research, negotiating for contracts, as well as the establishment of payment terms. This system allows Amazon Company to expect high-quality goods and services purchased from suppliers at a low cost and to arrive on time.

Supplier Cost Objectives

Through a centralized procurement system, Amazon Company can improve the business performance by aligning the cost objectives of suppliers in purchasing and procurement structure with the business strategies. This is because, in the strategic management level, purchasing and procurement decisions affect business growth and profitability of the business (McCue, & Pitzer, 2000). For a business to be effective, supplier cost objectives need to support the goals of procurement. A centralized procurement system allows purchasing and procurement decisions to be in line with the supplier and strategic management objectives; thus, the use of purchasing objectives helps to enhance Amazon Business.

Supply Chain Integration Objectives

The integration of the supply chain is a key performance approach in a centralized procurement system that provides a seamless relationship between the different functions, actors, and levels within a purchasing and procurement system to maximize customer service. With the use of a centralized approach, Amazon Company is assured of reducing redundancies and improving efficiency while at the same time increasing product availability (McCue, & Pitzer, 2000). Also, the objectives of the supply chain integration system strive to enhance and better collaborate demand and supply that can improve the procurement of goods or services and lower costs. Hence, a centralized procurement system strikes a deal between making tradeoffs and balance among competing priorities towards achieving the ultimate objectives of purchasing and procurement to serve the customers better.

Comply With Local, Regional, Global Regulations

Generally, a centralized procurement system complies with the core principles stated in the public procurement of goods or services. Some of these fundamentals and critical principles of public procurement and purchasing include fairness, economy, transparency, openness, accountability, and competition. When carrying out procurement of goods and services, Amazon Company is guided by the local and global guidelines stipulated by the relevant authorities in line with a centralized procurement system such as 'Competition in Contracting Act (CICA) of 1984' (McCue, & Pitzer, 2000). The move act as a foundation to reduce costs and foster competition for procurements.

Development of Overall Purchasing Competency

The top management level of Amazon Company is primarily responsible for implementing and creating purchasing competencies and criteria for their logistics persons to follow. These competencies include; expertise in procurement, technological skills, supplier-management relationship skills, analytical skills, financial skills, and excellent communication skills (McCue, & Pitzer, 2000). All these mentioned competencies make highly educated and skilled procurement personnel responsible for shaping competent professionals through a centralized organizational procurement system.

Material Forecasting and Scheduling

Since Amazon Company has a homogenous type of products, the resources needed for components of a single product can be utilized in numerous other products to allow for flexibility in material scheduling and forecasting (McCue, & Pitzer, 2000). This strategy allows the company for huge sales, basing their schedules on manufacturing programs and predictions on needed resources as well as the mechanism for transporting goods or materials.

Impact on Logistics Strategies

A centralized logistics approach has a critical impact on the number of people in the transportation sector (McCue & Pitzer, 2000). This strategy help enhance customer satisfaction and service delivery by lowering the cost on the customers' side, reducing the delivery times, making delivery of goods or services more reliable, as well as to improve relationships between suppliers and procurement agents and increased sales.

References

McCue, C. P., & Pitzer, J. T. (2000). Centralized vs. decentralized purchasing: Current trends in governmental procurement practices. Journal of Public Budgeting, Accounting & Financial Management, 12(3), 400.