Supply Chain Management (SCM)

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Purchasing Management

Purchasing has two main objectives, one is to purchase for resale, and the other one is to purchase for consumption or for transformation (Dobler, Burt & Lee, 1990; cited in Quayle & Quayle, 2000). Purchasing function starts as subordinate to the more important functions of marketing, finance and operations (Bloomberg et al., 2002). Firms give more attention to purchasing when the costs of purchased items increase. Reengineering the supply chain strategy concerns not only coordination of the various activities in the supply chain but also deciding what to produce in-house and what to outsource (Simchi-Levi et al., 2004). With the strong trend towards more outsourcing over the last decade, presently purchasing has evolved as an important strategic area of management. Grittner (1996) suggests a 4C purchasing strategy which is to choose a competitive supplier, establish a commitment to the supplier, and analyze the complete production process with a cost-analysis mind-set, and co-ordinate with the supplier early and frequently to maximize cost efficiency (cited in Quayle, 2000).

Supplier relationship management

The most important purchasing activity is to select and keep close relationships with several reliable and high-quality suppliers, in order to reduce product costs, maintain good product quality and customer services (Aissaoui et al., 2007). Relations between suppliers and buyers in industrial markets have been found to be long term and characterized by stability (Gadde & Mattsson, 1987). Partnership should be established because if the buyer is to be best served, then the parties to a deal must work together for the win-win situation and both parties have an interest in each other’s success (Quayle, 2000). Figure 2.8 shows that a company is better off remaining in transactional relationships if it is not ready to develop relationships properly. Poor partnership is, instead, more costly than staying in a transactional relationship with suppliers (Goldsby et al., 2005). But it also shows in case of trust existence, good partnership is less costly than a transactional relationship.

ERP Information System in Organizations

Enterprise Resource Planning (ERP) is a system that attempts to do planning according to supply and demand information taken across the entire network (Toomey, 2000). ERP traditionally covers manufacturing, human resources, and financials but now has become the backbone of most IT infrastructures (Simchi-Levi et al., 2004). Originally, ERP information system is for integrating internal operations like billing, payroll, cost analysis, sales analysis, and etc. ERP can produce great benefits, mostly in the form of more efficient business processes (Davenport, 2000). With the new development of ERP II, such information system is expanding to include new functionality, is providing Web-based access and services and becoming more open to external integration (Simchi-Levi et al., 2004). Due to the integration, inventory control system becomes better and inventory management also gets improved.

Characteristics, Strengths and Weaknesses of SMEs

Form the definition problem of SME, we can know the most important characteristic of such enterprises is diversity. In spite of the diversity of SME, three core elements can be identified (Gils, 2000): (1) Small scale: it is a characteristic of the firm. (2) Personality: it indicates a pervasive intertwining of private and business affairs- in house, income, labor, management, internal and external contacts, motives. (3) Independence: it indicates relative freedom from the discipline of capital markets, allowing for more distinct goals and conduct. As Table 2.2 shows, each of these characteristics is the cause of some strong or weak aspects of the SMEs. The identified strengths and weaknesses suggest appropriate core strategies (Gils, 2000).

Generating the Research Topic

The authors decided to make the thesis a research project based on practical work, and a specific company needed to be accessed to collect empirical data for the research project. Somehow the authors managed to find a company that showed their initial interest in supporting the business management research project. However, the authors did not come up with any particular topic when we made the first visit to HEM-SOL Corporation in midSeptember, 2007. It is during the interview with the general manager, also the owner of the company that he gave out an inventory problem – overstock, which has recently emerged and become a management bottleneck for the company. After the authors got an overview of the company business activities, we thought the inventory control in a SME management context would be a good topic to do our thesis project. On the other hand, the research project, given this topic, is particularly of practical relevance for the company.

Table of content :

  • Acknowledgement
  • 1 Introduction
    • 1.1 Background
    • 1.2 Problem Discussion
    • 1.3 Research Questions
    • 1.4 Purpose
    • 1.5 Delimitation
    • 1.6 Disposition
  • 2 Theoretical Framework
    • 2.1 Supply Chain Management (SCM)
      • 2.1.1 Inventory Management
      • 2.1.1.1 Challenge of Inventory Management
      • 2.1.1.2 Demand Management
      • Demand Forecast
      • Stock-out
      • Safety Stock
      • 2.1.1.3 Inventory Turns
      • 2.1.1.4 Tradeoffs of Inventory
      • 2.1.1.5 Inventory Carrying Costs
      • 2.1.1.6 Classification of Inventory
      • 2.1.1.7 Inventory Control Systems
      • ABC Analysis
      • When to Order?
      • How much to order?
      • 2.1.1.8 Warehousing
      • Three Basic Functions of Warehouse
      • Types of Warehouse
      • Warehouse Layout
      • Warehouse Management System (WMS)
      • 2.1.2 Purchasing Management
      • 2.1.2.1 The major purchasing decision processes
      • 2.1.2.2 Supplier relationship management
      • 2.1.3 IT Application in SCM
      • 2.1.3.1 The Role of IT in SCM
      • 2.1.3.2 IT goals in SCM
      • 2.1.3.3 Integrating Supply Chain IT
      • 2.1.3.4 ERP Information System in Organizations
      • 2.2 Small Business and SCM
      • 2.2.1 Definitions
      • 2.2.2 Characteristics, Strengths and Weaknesses of SMEs
      • 2.2.3 Small Business Embracing SCM:Pros and Cons
  • 3 Methodology
    • 3.1 Generating the Research Topic
    • 3.2 Deciding the Research Approach
    • 3.3 Choosing the Appropriate Research Strategies
      • 3.3.1 Case Study Strategy
      • 3.3.2 Cross-Sectional Studies
      • 3.3.3 Exploratory, Descriptive and Explanatory Studies
    • 3.4 Qualitative or Quantitative Research
    • 3.5 Data Collection Methods
    • 3.6 Analyzing Qualitative Data
    • 3.7 Credibility/ Reliability
  • 4 Empirical findings
    • 4.1 Company Profile
    • 4.2 Organizational structure
    • 4.3 Supplier
    • 4.4 Business Operation Process
      • 4.4.1 In-house business operations
      • 4.4.2 Outsourced business functions
      • 4.4.2.1 Inbound Logistics
      • 4.4.2.2 Out-bound logistics
    • 4.5 Information System
    • 4.6 Perceived Problems
  • 5 Analysis
  • 6 Conclusion
    • 6.1 Theoretical Conclusions
    • 6.2 Practical Conclusions
    • 6.3 Criticism to the Study
  • 7 Reference

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IMPROVING INVENTORY MANAGEMENT IN SMALL BUSINESS

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