Supply chains are very important in any business organization since they play a very vital role in the operations of the business organization. The ERP Company from the analysis of the company’s situation seems to lack a properly organized supply chain and for that reason, it seems to face challenges in its purchasing and procurement operations. There are vital things that should be present in any supply chain for it to be effective in its operations. They include efficient information flow as well as consistency in decision making, when these two important factors are lack in any business organization’s supply chain it means that there are things that are not done in the right way. This is what lacked in the ERP Company and because of this, some inconsistencies were realized in the operations of the company. To avoid any more inconsistencies in the operations of the company there should be proper supply chain operations in the company that enhances the efficient flow of information and decisions involving all the units.
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The supply chain is made up of several factors this is because it involves the movement of raw materials and transformation of the raw materials to finished products and distribution to the final consumer. “Supply chain is the system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer”. The supply chain is very important in the survival of any business organization in the competitive marketing environment. (Nagurney, 2006)
ERP software just like any other business organization has its supply chain but as the supply chain is usually well established for ERP it does not seem to be well established. Because of this several issues come up in regards to the supply chain in the company.
Purchasing and Procurement decision-making criteria
As it is evident in the ERP scenario the making of purchasing and procurement decisions in the company is not very well clear. These are not decisions that are made by a person especially in regards to purchasing and procurement they involve several people in different departments since it is something that affects all the operations within the business organization and if not clearly looked at they may have negative impacts on the entire operations of the business organization. In the case of ERP, the decisions seem to be left to only one individual something that is not appropriate since many issues should be consulted first before coming up with the decision. (Nagurney, 2006)
Several steps follow up the purchasing and procurement decision-making criteria. In the first place, the need for the item to be purchased should be first identified after which ways of meeting the need are identified from a variety of options. This involves committees that discuss the necessity of the item to be purchased and the sources of the item. This is not something that is done by a single individual it involves several people in various departments. This is because there are finances that are needed to meet the requirement meaning the finance department has to be involved (Nagurney, 2006).
This is a decision of the entire business organization the only thing the department does is to take the action of sourcing the material and purchasing it and ensuring that it reaches the intended department.
Information flow and decision making flow coordination
In a supply chain information is very vital since the supply chain constitutes a very important part in running operations in the business organization. The following illustration shows an internal supply chain, from suppliers of the materials to the final consumer of the product. For such a chain to succeed information is very important and how it flows. The success of the supply chain is based upon the efficiency of information flow in the supply chain. This is because everything is based on the transfer of information from one department to the other and the efficiency of the transfer of the information determines the success of operations in the business organization as well as in the supply chain (Martin’s, 2008).
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The supply chain is a process from one point to the other, for instance, customers need a product that is not sufficient in the market. It is through proper information flow that the company will be aware and that actions will need to be taken based on the information delivered. When there is proper information flow from the customers to the distributors it will mean that distributors will communicate to the production department based on the available information concerning the production of the needed products by the customers (Martin’s, 2008).
From the production department, the information will be communicated to the purchasing department to know the exact requirement of the products since purchasing decisions will be based on this. Purchasing department then will conduct the supplier to supply the required materials for the production of the products to meet the needs of the customers. The efficiency in information flow is very important in the supply chain because all that is carried out is based on information from different departments within the business organization (RCG University, 2008).
Information flows and decision-making flows usually go hand in hand within the supply chain. Referring to the ERP scenario there was no much information that was collected hence decisions to sell were carried out by a person. This in any way is not right since the supply chain consists of many departments and all of them should be involved in decision making which is arrived at after proper flow of information within the business organization. Decisions that are usually made are based on the information that is gathered (RCG University, 2008).
This is different in the ERP business organization since the decisions to sell the company’s software are based on one individual who is the project manager. This should not be the case instead the company should be having purchasing and procurement board that deals with issues of purchasing and selling of the company’s property. An individual’s decision in most cases is usually biased and follows only one direction as compared to the decision that is subjected to many minds that reason together (RCG University, 2008).
Information flow within the supply chain puts all the participants together such that they are all informed of what is going on within the company and they also have an opportunity to participate in vital decision-making processes within the company (Bobbin, 2000).
Real-time and accurate purchasing and procurement information
Information as has been discussed earlier is very vital in any business organization and especially in a supply chain. Not only is information very vital but real-time information is more important, this is because if the information is not real-time it will mean that certain delays will be faced. Real-time information means that it has to be delivered at the right time without delays, and not only at the right time but also very accurate information. This is because supply chain decisions are mainly based on real-time information as well as accurate information. If this two are not present it will mean that the decisions that are going to be carried out will not be viable. (Bobbin, 2000)
Since purchasing and procurement decisions do not originate from the department there is a very important need of having correct and accurate information regarding the various products and materials that should be purchased from the other departments. Delays in production and in meeting customer’s needs in most cases originate from lack of proper information that is lack of accurate information or delay in delivering of the necessary information may cause disruptions in the supply chain process within the business organization (E-commerce supply chains, 2003).
Based on the illustration of the supply it is clear that it involves many departments and connection between the departments is based on the accuracy and delivery of the information in an appropriate manner. If correct information about the needs of the customers is not communicated at the right time to the right departments it will mean that there will be delays in the rest of departments including the production department hence delay in the whole process of supply chain (In Depth, 2005).
Consistency in decision making across multiple supply chain units
Decision making is very important in the supply chain, this is because all the activities that take place in the supply chain process involve decision making. As the decision making process is very important also consistency in making of the decisions is very important. The decisions that are made in the supply chain should be decisions that can be relied on since failure in decision making will mean that the whole process will fail as a result of wrong decisions that are made. To avoid many problems that are incurred in supply chain process the decisions that are usually made should be well analyzed and their impacts weighed before they are implemented. (In Depth, 2005)
The decisions that are made in the different supply chain units should be consistent such that they all have common target. This is because if uniformity lacks in the process of decision making in the different units within the supply chain it will mean that there is no common goal or target that will be arrived hence making decisions that are not viable. Decisions that are made in the distribution departments should also be reflected in the production department. This is because if the decisions are not consistency it will mean that the final product may not meet the main need of the customer (Siliconfareast, 2008).
Procurement evaluation procedures by the client team
The team that deals with clients is very vital in the supply chain; this is because the main or the major needs of the clients they are well understood by this particular group. Because of their interaction with the clients they should be given a good opportunity to evaluate the procedures of the procurement, this is because through this they will have an opportunity of expressing better the needs of the customers to the procurement team. This will ensure that the decisions that procurement team will make will have the interests of the clients at heart, this will mean that whatever they are going to purchase will be mainly focused on the needs of the clients (FMI, 2003).
In the case of ERP Company this did not take place; this is because the client’s needs were not first considered since the project manager was after making the sell that determined his job in the company. There is no where evaluation of the client has been done if anything the most important thing in this case was to make the sale but not to satisfy the client. This should not be the case since the issues and needs of the clients should be at the heart in the supply chain hence evaluation of clients needs. This is an important part in the supply chain that is not there in the company hence need for putting up such a unit within the supply chain (R. Michael Donovan and Co., 2008).
Sustaining an ethical supply chain practice
Ethics is very important in any supply chain and for that reason should be sustained in the company. Ethical standards ensure that there is clarity and transparency in the supply chain such that every thing that is usually done in the supply chain is transparent in every unit within the supply chain. In the case of ERP ethics does not seem to be highly practiced this is because certain amounts are not reflected in the original amounts that are needed in implementation and training cost. This shows that there is no enough transparency in the operations of the company since this should be clear and put up together with the original amounts (R. Michael Donovan and Co., 2008).
To sustain an ethical supply chain practice transparency and proper communication of information should be encouraged in the company. This is because if ethical standards are not maintained it will mean that the company will have many problems that may affect the operations of the supply chain in the company (Kadefors, 2001).
Based on the case of ERP projects procurement and purchasing practices seem to have the highest inconsistencies. Some of the inconsistencies that have been realized in the company’s supply chain include non-conformance and lack of proper ethical standards in the operations of the company. The problems that have been realized in the company are all because of lack of proper information flow and decision making within the company. When these two factors lack in company’s supply chain problems have to rise about supply chain (iienet.org, 1999).
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Supply chain is very vital in the success of any business organization and because of this organizations should be careful in the way they operate their supply chains. Efficient and sufficient information flow is very vital in any supply chain and because of this all the information should be allowed to flow efficiently and sufficiently within the company. In the case of ERP the major problem was information flow and decision making processes in the supply chain hence many inconsistencies. The company should adopt a well organized supply chain where every department plays a role and ensure that the information flows efficiently in the company.
List of references
- Bobbin, 2000, The components of SCM- Supply chain management, Miller Freeman, Inc E-commerce supply chains, 2003, Web.
- FMI, 2003, Efficient Consumer Response.
- iienet.org, 1999, Shared supply chain info leads to efficiencies.
- In Depth, 2005, Supply chain management: The science of better, faster, cheaper.
- Martin’s, 2008, Logistics/ Supply chain. Web.
- Nagurney A, 2006, Supply Chain Network Economics: Dynamics of Prices, Flows, and Profits, Edward Elgar Publishing.
- Kadefors, A, 2001, Trust and Distrust in client-contractor relations – a discussion of problems and possibilities.
- R. Michael Donovan and Co., 2008, Supply chain management transformation.
- RCG University, 2008, Supply chain management.
- Siliconfareast, 2008, Supply chain management (SCM).