Unleashing the latent potential of procurement as an element of supply chain management.
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Date
2009
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Abstract
Procurement has been viewed as a Cinderella function, merely rendering service to
core functions such as operations/production, engineering, R&D and marketing. The
activities of procurement have been mundane and repetitive in nature. The importance
of procurement can be understood by looking at the cost of goods sold as reflected in
each company’s financial statement. In some companies this cost is more than 70% of
sales revenue. World class companies realised this and elevated the procurement
function to strategic levels. However, lagging companies still operate as if it is fifty
years ago. The aim of this study is to determine whether companies are adapting new
methods of procurement instead of pitting suppliers against each other in search of the
lowest purchase price.
A sample of 30 procurement managers was drawn from the 2006 Financial Mail 100
SA Best Companies. It comprised managers of companies stemming from different
industries ranging from petrochemicals and banking services to hospitality, etcetera.
These companies were chosen because they are the best in their class. Data was
collected using questionnaires developed by the researcher and e-mailed to
respondents. Regression analysis was conducted and it was established that there is a
positive relationship between information sharing and trust. There seems to be a
negative relationship between trust and communication.
It was noted with dismay that a large contingent of procurement personnel who are
supposed to uplift the status of procurement do not possess post-matriculation
qualifications. This poses a serious drawback since these procurement personnel are
supposed to transact with highly qualified sales representatives from the supplier
companies.
It is therefore recommended that companies be selective in their procurement
approaches, tendering for leverage items, negotiating for strategic items and using a
procurement card for shop items. Supplier performance measurement must be
conducted to improve performance and partnerships formed with high performing
suppliers. The skills levels of procurement officials need to be upgraded to enable
them to deal with new challenges.
Description
Thesis (MBA)-University of KwaZulu-Natal, Westville, 2009.
Keywords
Industrial procurement., Business logistics., Theses--Business administration.