Purchasing management essay: Procurement Process of Nestle

Question

Write a purchasing management essayanalyzing the purchasing management and ICT and purchasing costs of Nestle.

Answer

Introduction
According to the research on purchasing management essay, logistics are referred to as the section of supply chain processes that control, plan, and implement the effective and efficient reversed and forward storage and flow of services and goods. The flow and storage are promoted between the area of production and the region of demand. The sourcing of commodities is known to be the procurement process and the procurement logistics aims to monitor the supply chain to target the necessity of the operational process (Song, Yu & Zhang, 2017). On a similar note, the main purposes of the purchasing management essayinclude the analysis of purchasing management and analyzing ICT (Information & Communication Technologies), purchasing costs, and criteria for selecting suppliers.

Herein purchasing management essay, one of the globe's largest beverage and food companies is considered. The company has its presence in more than 189 nations spread worldwide and 200 brands operate under the main brand of the company (Nestle.com.au, 2020). They successfully serve the global market and one of the favorite entities in the local market. The main purpose is to provide a healthy and good living helping about 50 million children lead a healthier life. They believe in good planets, good living, and good communities. They have been successful in maintaining the legacy of the founder Henri Nestle who discovered the life-saving cereal for the infant around 150 years ago(Nestle.com.au, 2020). The product line is huge starting from baby foods, cereals, chocolates, coffee, and culinary food, and others. The main goal of the entity is to define three overarching wishes for 2030. This strategy illustrated in the purchasing management essay had direct implications for meeting environmental sustainability. Some of the eminent suppliers of the company include Nespresso, Nestle Waters, Cereal-partners worldwide, and otters.

Supplier selection issues and criteria
The company works with around 695,000 farmers and 165,000 direct suppliers worldwide. This illustrates that the company has a consistent purchasing goal. The purchasing goal is majorly focused on the values, policies, and compliance requirements (Hong, Lee& Zhang, 2018). In this context ofpurchasing management essay, the procurement chain at Nestle ensures the good quality of the raw materials and the related goals make sure that they stay focused on organizational values. The procurement team ensures sustainable growth for the company. The selection of suppliers is done in a manner to ensure a sustainable supply of services and materials to the company. The entity has led non-negotiable policies and demands for their suppliers to be consistent and adhere to the set of business policies. For maintaining sustainability, as stated in the purchasing management essay the company has revised its previous policies of Nestle Supplier Code, Nestle commitment for the Responsible Use of Agricultural Raw materials, and Nestle Responsible sourcing Guide in 2018. The maintenance of standard procurement is valued by the entity for supply contracts and purchasing orders. The policies of sourcing let the company deal with the competition. This further makes the company competitive. There is no compromise regarding the selection of purchasing goals and the selection of suppliers. The key procurement goal of the venture is to maintain sustainability and restore organizational values and policies. Besides, the company maintains transparency by letting the stakeholders know the various information and data related to raw material sourcing. It is integral poetry of their Responsible Sourcing commitment.

Figure 1: Monnier’s Innovation Matrix
(Source:Batragaet al. 2018)

Table 1: Visualization of risk parameters
(Source: Created by author)

However, the company must maintain innovation and maintain consistency in the selection of suppliers. In this context of purchasing management essay, the strategic tool of MIM (Monnier's Innovation Matrix) can be used. It helps the business to analyze the extent of innovation for the supplier based on volume, risk parameter, customer application, maturity level, and volume. The initial level of the matrix is MIM level 1 where both demand and value offer of the product is low (Batragaet al. 2018). The company must conduct the research based on demand and offer of the product at the time of supplier selection. Compared to MIM 1, MIM level 6 is considerably high since the demand for the product is higher than the value offered. The main criteria to select suppliers are quality and safety, social responsibility, risk, agility, demand, and value (Nicoletti, 2018). Thus, the readings provided in this section of purchasing management essay claims that it is the best innovative tool, which will let the company assess the risks. However, the core issues of concern while selecting suppliers is the risk parameter for the company.

As per the risk matrix shown in the purchasing management essay, the company must ensure that the supplier for a practical raw material such as cocoa must occupy the ‘leverage’ position. This will further make sure that the importance is high as the risk is low. This will lower the risk of non-supply for the considered raw material. The company must avoid the position of bottleneck where the value is low and the risk is high to ensure the consistency of raw material sourcing.

ICT for purchasing operations
The company stresses the implementation of ICT for the supply and sourcing of raw materials. The system of ICT helps a business process to streamline its process of purchasing and help maintain communication with internal and external stakeholders (Skeja&Keskin, 2017). The procurement team of the company frequently audits considered suppliers. Besides, the raw materials are tested before the purchase to make sure that they meet the organizational compliance requirements. The main supplier of the company includes individual farmers and direct suppliers. Since they are focused on the quality of raw materials and ingredients, the matter of audit is at the core of the procurement policies. The company along with its customers implements EDI (Electronic Data Exchange) for the automated and seamless process. However, it is important and recommended to initiate the online procurement process for a better tracking process (de Boer, 2017). It is for the third-party procurement and purchasing that, the business operation can facilitate an environment-friendly and efficient supply chain. This information mentioned herein purchasing management essay depicts that the company must adopt the usage of third-party platforms for saving logistic time and reduces their operational costs. The other benefits of the implementation of the third online third party comprise the convenient shift to different markets (Haensel& Hofmann, 2018). With the use of online platform websites such as Bigcommerce, Amazon, and Volusion, the company will be able to use innovation and monitor its procurement services.

Basis the case scenario provided in the purchasing management essay, it is recommended that the company joinwith third party online site sites such as Alibaba, eBay as it will help the procurement team to conduct seamless tracking. Moreover, the data exchanging criteria are possible with the technologies of EDI. The two most common factors possible with the EDI are invoice and purchasing partners. The company implements the techniques of EDI for product movement, pricing, and inventory. Besides the use of EDI, the company must use the procurement service of third party services, which will help the equity to balance the tracing of expenses and costs. Moreover, the use of EDI has led the company to shorten the delivery and procurement schedules. The other benefits that the company will receive on the implementation of EDI include the automated flow of the pre-configured services. This way the company will receive innovation of each of the workflows from the suppliers making the procurement services more convenient. It is recommended to use Tradogramas the efficient E-purchasing software. With its use, the company will be able to have complete influence in the procurement process. Order processing without EDI makes the system more hassle and confusion while with EDI, it helps the team to implement innovation and make the process much faster, cost-saving operational efficiency, and helps maintain the environmental sustainability. The methods of e-procurement services are selected in the context of purchasing management essaybased on organizational requirements.

Analysis of purchasing cost
Procurement is an integral part of the business as it decides the profit margins. This requires that the procurement team must scrutinize while selecting costing methods. This influences how the company can maintain competitiveness. If Nestle wants to be competitive in the global market, they must focus on the cost analysis at the initial level. The management team has focused on cost-effectiveness to promote faster growth. Moreover, the company has leveraged calculated risk-taking, developed the decision-making process, and enhanced accountability. Both the use of automation and compensation is visibly implemented by the entity to increase operational efficiency. The company uses the principle of TCO (Total cost Ownership) since they are focused on improving capital efficiency by determining the indirect and direct cost of the system. The findings obtained in this segment of purchasing management essay illustrates that the knowledge of the total spending has helped the company to ensure consistent growth. They believe that it is better to focus on the entirety of spacing criteria rather than individual spending activities (Noorbakhsh, Boehl, & Brow, 2019). Since the company is stressed on promoting sustainability and integrated procurement processes, TCO has allowed the team to facilitate sustainable growth. With the effective means of cost, the entire team can maintain compensation and technological innovation. Thus, the entire picture of spending is possible with the use of TCO. However, it is also important to focus on individual spending and costs to maintain the convenient flow of budget. At times, accurate tracking and identifying costs can be challenging, letting the company overlook crucial spending. In this context of purchasing management essay, ABC (Activity Based Costing) and standard costing have significant benefits. The ABC method is more significant than the TCO since it determines the profit margin of the products more precisely andassesses wasted and unnecessary costs. Thus, it is recommended that the company must implement the ABC costing process. Despite using the standard costing, the company should implement the process of the ABC method since the workforce overlooks the matter of negative exceptions to hide the inefficiency. This can negatively impact the brand reputation of the company. Thus, the company must adopt the guidelines of the ABC method for better efficiency. The analysis of purchasing cost strengthens the base of the business operations. The usage of the ABC method will promote consistent growth of profits by eradicating inefficient processes (Cidavet al., 2020). In this similar context of purchasing management essay, the company will have a better possibility of undertaking a proper strategy for acquisition and managing the portfolio for procurement services. Though it is time consuming yet, leverages the management team with necessary information.

Conclusion
The discussion provided on this purchasing management essay underpins the concept of procurement management and the purchasing goal of the Nestle. It includes the selection criteria of the suppliers for the company using the innovation strategy of the MIM tool. The company has been focused on the identification of reliable suppliers. While making the purchasing goal, the company majorly focuses on the quality of the raw material as well as the matter of sustainability. The consideration of the risk matrix is also ensured to measure the risk parameters of the suppliers. The aspects of ICT are discussed with the recommendation of EDI techniques and E-procurement. The automated system of procurement has enabled the business operations to get much convenient. In this context of purchasing management essay, the implementation of Tradogram is recommended for a seamless procurement service. Further, the component of purchasing cost with ABC as a recommendation is evaluated within the discussion. Eventually, it has elaborated on the components of procurement activities.

List of reference
Batraga, A., Salkovska, J., Braslina, L., Legzdina, A., &Kalkis, H. (2018, July). New innovation identification approach development matrix.Purchasing management essay In International Conference on Applied Human Factors and Ergonomics (pp. 261-273). Springer, Cham. Retrieved from: https://link.springer.com/chapter/10.1007/978-3-319-94709-9_26

Cidav, Z., Mandell, D., Pyne, J., Beidas, R., Curran, G., & Marcus, S. (2020). A pragmatic method for costing implementation strategies using time-driven activity-based costing. Implementation Science, 15, 1-15. Retrieved from: https://link.springer.com/content/pdf/10.1186/s13012-020-00993-1.pdf

de Boer, L. (2017). Procedural rationality in supplier selection.Management Decision.Retrieved from: https://www.emerald.com/insight/content/doi/10.1108/MD-08-2015-0373/full/html Haensel, M., & Hofmann, E. (2018).An integrative approach for the purchasing and evaluation of business services from a buyer’s perspective.Journal of Business & Industrial Marketing. Retrieved from: https://www.emerald.com/insight/content/doi/10.1108/JBIM-05-2017-0112/full/html

Hong, Z., Lee, C. K. M., & Zhang, L. (2018). Procurement risk management under uncertainty: a review. Industrial Management & Data Systems. Retrieved from: https://www.emerald.com/insight/content/doi/10.1108/IMDS-10-2017-0469/full/html

Nestle.com.au (2020) Our Purpose Retrieved on: 30th May, 2020 Retrieved from: https://www.nestle.com.au/en

Nicoletti, B. (2018). The future: procurement 4.0. In Agile procurement (pp. 189-230). Palgrave Macmillan, Cham. Retrieved from: https://link.springer.com/chapter/10.1007/978-3-319-61085-6_8

Noorbakhsh, A., Boehl, C., & Brown, K. (2019). Assessing Total Cost of Ownership: Effective Asset Management Along the Supply Chain. In Asset Intelligence through Integration and Interoperability and Contemporary Vibration Engineering Technologies (pp. 433-440).Springer, Cham. Retrieved from: https://link.springer.com/chapter/10.1007/978-3-319-95711-1_43

Skeja, A., &Keskin, G. (2017). Corporate Sustainability Indexes: FTSE 4 Good Index Report on Nestle. Prizren Social Science Journal, 1(1), 30-46. Retrieved from: http://www.prizrenjournal.com/index.php/PSSJ/article/download/7/5

Song, H., Yu, K., & Zhang, S. (2017). Green procurement, stakeholder satisfaction and operational performance.The International Journal of Logistics Management.purchasing management essay Retrieved from: https://www.researchgate.net/profile/Hua_Song5/publication/320109143_Green_procurement_ stakeholder_satisfaction_operational_performance/links/5a82ffe50f7e9bda86a1d068/Green- procurement-stakeholder-satisfaction-operational-performance.pdf