Assessment of different methods for managing material in engineering companies
The term procurement management refers to the systematic approach used for buying all the goods and services that required for an organization to maintain the growth and sustainability. The effective management of procurement function is helpful for an organization to value the business practices and improve the efficacy of the organization. The current report will provide an assessment of the different methods that used for managing the material in engineering companies. Moreover, the report will analyze the principles that used for procurement, management techniques and strategies that used by the engineering organizations for maximizing the purchasing power.
For engineering organizations, the process of managing material and equipment has the significant impact on the internal operation management functions to achieve the goals and craft improvement in the level of efficiency. Following are the methods that used by the engineering organization for handling the material:
Inventory valuation method:
According to this method of handling the material, the organizations are conducting the analysis of average prices of moving, handling, and warehousing of the goods and services. The proper consideration of prices and amount of inventory on the cost of goods sold, gross profit and net income can be helpful for management to decision making about the management of material. Moreover, this method is also useful for the analysis of vital, essential and desirable items. For example, the engineering organizations like automobile are classifying the material into these items and managing them as per the requirements. The vital material those that important for production, essential items involve goods and services that can cause the delay in production for few hours and desirable items are which their absence could stop the productions.
Logistic control:
This method is also used by engineering organizations for managing the material required for production and managing the demand. According to this method, the top management focuses on the cost of transportation and labor charges for the specific period of time in high demand and keeps the record of every purchase to make the decisions. This method is used by the small and medium-sized engineering organization for handling the material and buying the goods and services as per the needs at the optimum cost to keep their operations under control to meet the business objectives.
In order to manage the procurement functions and activities, the engineering organizations are considering the following principles by considering their ongoing requirements for production and management of materials according to demand.
Compliance: For engineering organizations, it is essential to maintain compliance with the international, national and local laws for trading and managing the procurement functions. For example, the engineering organization from construction segment makes concern over the ongoing operations and maintains the compliance with health and safety, labor law and supplier support.
Employee well being and development: According to this principle, the engineering organization needs to provide the flexible working hours for employees to maintain the work-life balance. Moreover, training and personal development of staff is the responsibility of the organization. This kind of approach is essential for managing the procurement functions and effective utilization of resources.
Procurement principles and consideration of ongoing requirements
For the evaluation of supplier for engineering organizations, the top management could use the following techniques.
The engineering organizations are considering the above factors for evaluation and appraise the supplier. According to this technique, the top management of engineering organization is having the analysis of prices and quality of the supplied goods and services of potential suppliers as per the requirements. The past relationship and market reputation of suppliers also consider for developing the contract. Moreover, the reliability and stability of the identified supplier help to make the evaluation. For example, the automobile organization from the engineering industry is majorly focusing on the prices, quality, and reliability of supplier for evaluation and making the contract for offering the goods and material. This kind of technique is helping engineering organizations to maintain the demand and supply curve and maintain the positive relationship with the supplier by evaluating the approach of them.
In order to maximize the purchase, the engineering organizations could use the following strategies:
Centralized purchase:
For engineering organizations, it is essential to develop and maintain the centralized purchase system. This system is helpful for identifying the needs, available material and market demand of the particular product and service. The proper consideration of inventory and warehousing capacity through the centralized system is helping to have better control over purchasing and increase the power by having good knowledge.
This approach is helpful engineering organization to overcome the cost of inventory and maintenance of the goods and services. The proper analysis of required material and just in time purchase will be beneficial for the organization to make the decisions. For example, the just in time buying process can be based on the Lean manufacturing which includes labor cost, raw material and operational functions that helps to overcome the customer lead time and support in increasing the purchasing power.
The engineering organizations have the high demand for goods and services for manufacturing and meeting the demand of customers. For procurement, the pricing of raw material plays a critical role in decision making of organizations. The strategies that engineering organization use are as follows:
Comparison of competitive bid:
This strategy is helpful for analyzing the valid prices of goods and services by asking more suppliers about the cost of the required goods and services. The comparison of prices of the different supplier is helpful for determining one for buying the goods. The consideration of the lowest bid and quality of the product will be helpful.
Comparison of prior quotation
This strategy is also used by organizations for buying goods. According to this, the top management makes the comparison of 24 hours quotation and purchases the goods. The critical solicitation of comparative quotes will help to make the decisions for buying the goods and services for production.
Conclusion:
From the above study, it has been carried out that procurement is an essential process for engineering organizations for managing the production and demand. The report has discussed different methods of purchasing and techniques for pricing comparison for improving the buying power.
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