Introduction:
SYSCO Corporation is one of the American multinational corporation which is associated with the marketing and distribution of the various kind of food products to the restaurants, educational facilities, healthcare and the educational facilities hospital facilities such as the hostels and the inns and the wholesalers to other companies which are associated with providing of food services (sysco.com, 2019). The company has its headquarters situated in the Energy Corridor district of Houston, Texas. Drake, Lee, and Hussain, (2013) has been associated with presenting the purchasing model that is used for the purpose of determination of the purchasing strategy at the components level of a product which in turn is associated with providing support to the business strategy along with addressing the weaknesses of the Kraljic-type model which is to be used by the organization SYSCO corporation.
This report would mainly be discussing about the purchasing effectiveness in supporting the lead as well as the agile practices of the organization. Followed by this the procurement functions would be discussed along with its feasibility so as to align the purchasing strategy in order to support the business strategy.
After this an appropriate Matrix/Portfolio analysis procurement model is selected which would be best suited and lastly recommendations are provided for the changes or the improvements in the procurement management.
Discussion:Reflection on the Procurement Function of SYSCO Corporation:The overall role that is played by SYSCO Corporation upon the local food systems is seen to be fairly limited and this is mainly due to the existence of the conflation of the local as well as the regional, which are associated with having a huge influence upon the procurement activities that the SYSCO operating companies along with their perspectives upon the values that are associated with the local foods.
However there is a growing support for the procurement activities as well as to the perspectives that are related to the value chains in the regional networks (Gunasekaran, Subramanian and Rahman 2015). Due to the procurement of the local foods as well as the agricultural products by the foodservice establishments there has been seen an increased growth in the importance of the food system localization and has put forward the need of conducting a research which would be addressing the potential role that is played by the national foodservice distributors in the local food systems (Sumner and Stahlbrand 2019). For this reason SYSCO Corporation has recently been associated with the implementation of a new initiative known as the Buy Local, Sell Fresh for the purpose of encouraging he companies in procuring more foods from the local suppliers. The central goal of this initiative included providing response to the demands of the consumers for more local and sustainable produced foods by means of linking the farmers with the customers by means of modification in the existing procurement as well as in the distribution supply chains (Bohunicky, Desmarais and Entz 2019). But the extent till which the SYSCO companies have been associated with implementing this initiative is seen to be unclear at the beginning of the research.
Purchasing Strategy:The supply chain of SYSCO is mainly consisting of farmers, distributors and processors all across 40 countries which are provided by the SYSCO’s food products and this includes the meats, poultry, eggs, seafood’s, and other products along with non-food items like the equipment used in kitchens and small wares, disposals and many more (Cleveland, Carruth and Mazaroli 2015). The suppliers in turn are seen to be relying upon the own supply chains that the famers, processors, cooperatives and the distributors are having.
SYSCO is generally associated with expecting that all the suppliers are meeting the high standard set out the Supplier Code of Conduct which is associate with covering the human rights along with the health, environment and the safety standards. All the suppliers SYSCO Brand Fresh, Ready-to Eat are generally required to comply with the Good agricultural practices which is a voluntary program that is entirely administered by the FDA which is aimed at continuous improvements in the quality of food, safety and the traceability. The GPA requirements were further extended so as to include the fresh ready-to use produce that are distributed by the operating companies and this is done regardless of the brand or the label (Dunning, Bloom and Creamer 2015). Further enhancements were made in the GAP program of SYSCO so as to include the GMP or the Good Manufacturing process audits of all the packing sheds, the cooling facilities and the repacking houses which are responsible for the supply of the fresh products to the operating companies.
SYSCO is associated with dealing with the commodity goods and procuring the commodity goods is considered to be a very complex process due to numerous factors. Considering the buyers of the food commodity it is seen that they are not only associated with facing the risks of the inadequate supply but is also associated with facing the price risk that is generally inherited during the seasonal and the potentially volatile commodity markets. Commodity procurement is considered to be one of the main areas that requires an extra focus so as to improve the service, profit and quality and for withstanding the pressures related to lowering of the price.
Despite of the fact many of the SYSCO’s broad-line companies are having a considerable autonomy over the decisions related to where the food needs to be procured, the agricultural sustainability which has been incorporated into the philosophy as well as the objectives of the parent company that is the SYSCO Corporation (Beckie, Hedberg and Radies 2019). Whereas at the corporate level the organization SYSCO is associated with promoting the programs and the initiatives which are aimed at advancing the corporate social responsibility goals. Along with this promoting the agricultural sustainability is also a relatively new objective under the concept of social responsibility and this has initially lead to the development of four primary initiatives. The initiatives includes the Integrated Pest Control, Business Coalition so as to have more Sustainable food, Ag-In the Middle Procurement and lastly Buy Local, Sell Fresh. There is seen to be some time of overlap that exists between the Ag-in-the Middle and Buy Local, Sell Fresh.
Matrix/Portfolio analysis procurement modelThe portfolio purchasing model that is to be used is by SYSCO Corporation is the Peter Kraljic Purchasing model. This particular model has been selected for the purpose of analyzing the purchasing portfolio of the organization (Sarker 2016). This particular matrix would be associated with helping the organization in gaining of insights of the time on various products (Barlett 2017). Besides this, the model is also selected because this is associated with making a clear of the articles which can be subcontracted and for this reason they need not to be ordered again along with the article that is associated with involving particular risks.
This model is generally based upon two dimensions which can be used by the organization SYSCO for the purpose of classifying the purchased materials and the products and the profit impact is generally defined from the low to high (Sarker 2016). The model also highlights strategic importance of the certain materials that is to be purchased and what are the added value that they deliver in the entire line of production and how the cost of this materials are associated with affecting the profitability of the organization.
The risk related to supply is also defined from high to low along with describing the extent of complexity of the supply. This model also depicts any kind of abundance or the scarcity in the supply chain (Campbell and Thompson 2018). This model also makes sure of updating the materials along with making sure that during any kind of risk the latest technology is being used along with the best substitution material. Besides this the monopoly or the oligopoly conditions along with the logistics cost can also be determined easily by usage of this model.
Strategic Items
- High Profit Impact
- High supply risk
- Strategic Items
- High Profit Impact
- High supply risk
Leverage Items
- High Profit Impact
- Low Supply Risk
- Leverage Items
- High Profit Impact
- Low Supply Risk
FINANCIAL IMPACT
- Bottleneck Items
- Low Profit Impact
- High Supply Risk
- Bottleneck Items
- Low Profit Impact
- High Supply Risk
Non-Critical items
- Low Profit Impact
- Low Supply Risk
- Non-Critical items
- Low Profit Impact
- Low Supply Risk
According to Drake, Lee, and Hussain, (2013), the Leagile supply would only be used for those items which would be high impact upon the flexibility as well as upon time, along with the quality and cost, and for this reason it is best suited for the lean and agile supply of SYSCO. This model is associated with distinguishing the four type of product categories into the two dimensions and this includes the following:
Strategic Items: This includes the products which are generally purchased from one suppliers. Besides this there might also be existing a power balance between the organization SYSCO and the supplier but in case when the supplier is associated with ceasing the process of delivery the purchase generally stagnates. Besides this in general the raw materials belongs to this type of category. The raw materials is associated with helping a lot in the determination of the value of the cost price of the finished products.
Bottleneck Items: This mainly includes those items which are not associated with representing the high values however all this acts as a vulnerable factor in the entire supply chain, this products are generally considered to be those essential items that are needed by the production process, which are generally difficult to obtain (Sheu and Taragin 2017). There also exists an imbalance in the power that exists between the company and the supplier where the supplier generally acts as the dominating factor. SYSCO can create buffer stocks of the scarce items along with the selecting alternative suppliers so as to undermine this type of condition.
Leverage Items: This generally includes the products which can easily be purchased from various suppliers and is associated with helping in the determination of the value of the cost price up to a large extent which the finished products are having. The cost price would be greatly affected by any kind of minor changes in the price or changes in quality (Oelze et al. 2016). In this type of situation the balance of power that exists between the company and the supplier, where the company acts as the dominating factor. By concluding of a framework agreement as well as drawing of the targeted pricing which is good, SYSCO would be capable of maintaining a harmony in the relationship that exists between the company and the supplier.
Non-Critical Items: These are the products that generally cause the least problems with respect to the purchasing of performance and this products generally represents the low value and this products can be purchased from different varieties as well as from different suppliers. This category mainly includes most of the raw materials and the substances (Weir 2018). SYSCO would be saving more money by increasing the standardization of the products.
Recommendations: Usage of the Kraljic portfolio Purchasing model, SYSCO would become capable of professionalization align with improving its purchasing performance which might be associated with gaining a considerable amount of savings in the cost. Any kind of unnecessary risks can be avoided easily by means of distributing goods all across the four quadrants of the matrix. One of the pre-condition which needs to be considered is that each of the products or the products group can be placed easily into the matrix.
It is preferred to place a product only in one of the quadrants and whenever an agreement is seen to have reached about the position of the products within the Kraljic portfolio purchasing model then it would become possible determine the actions that are required for achieving a better position.
By usage of this model SYSCO would also become capable of preparing the purchasing strategy for the Kraljic Portfolio purchasing model. In a subsequent way it is also possible to conclude that weather the product present in the right quadrant or whether it would be better in moving the product to some other quadrant. In such case the decisions must be considering the supplier as well as the new supply terms and conditions which must be necessarily drawn up.
The Peter Kraljic Model which is to be used would be helping the organization SYSCO a lot in managing its procurement process. Some of the recommendations have been listed below:
Preparation of a portfolio analysis
- Determining the criterions related to the impacts upon the profit and the risks related to the supply.
- Determination of the level of details in the portfolio analysis.
- Filling of the entire matrix in a proper way
- Proper analysis and discussion of the results
- Determination of the proper purchasing portfolio strategy as well as the improvements actions as per the quadrant of the framework
- Implementation and monitoring of the strategy.
- The above listed steps if implemented step by step would be making it very easy in controlling the procurement process of the organization SYSCO. All this steps would be helping a lot in saving the cost as well.
References:
Barlett, P.F., 2017. Campus alternative food projects and food service realities: Alternative strategies. Human Organization, 76(3), p.189.
Beckie, M.A., Hedberg, L. and Radies, J., 2019. Creating a local food procurement community of practice: The Alberta Flavour Learning Lab. Canadian Food Studies/La Revue canadienne des ?tudes sur l’alimentation, 6(1), pp.155-169.
Bohunicky, M., Desmarais, A.A. and Entz, M., 2019. Self-operated vs. corporate contract: A study of food procurement at two universities in Manitoba. Canadian Food Studies/La Revue canadienne des ?tudes sur l’alimentation, 6(1), pp.43-74.
Campbell, V. and Thompson, J.M., 2018. Factors Influencing Value of Agribusiness Firms Marketing Animal Proteins (No. 2015-2018-114).
Cleveland, D.A., Carruth, A. and Mazaroli, D.N., 2015. Operationalizing local food: goals, actions, and indicators for alternative food systems. Agriculture and Human Values, 32(2), pp.281-297.
Drake, P.R., Myung Lee, D. and Hussain, M., 2013. The lean and agile purchasing portfolio model. Supply Chain Management: An International Journal, 18(1), pp.3-20.
Dunning, R., Bloom, J.D. and Creamer, N., 2015. The local food movement, public-private partnerships, and food system resiliency. Journal of Environmental Studies and Sciences, 5(4), pp.661-670.
Gunasekaran, A., Subramanian, N. and Rahman, S., 2015. Green supply chain collaboration and incentives: Current trends and future directions.
Oelze, N., Hoejmose, S.U., Habisch, A. and Millington, A., 2016. Sustainable development in supply chain management: The role of organizational learning for policy implementation. Business Strategy and the Environment, 25(4), pp.241-260.
Sarker, S., 2016. Supplier segmentation in global organizations: Beyond models. SAGE Publications: SAGE Business Cases Originals.
Sheu, G. and Taragin, C., 2017. Simulating mergers in a vertical supply chain with bargaining. Economic Analysis Group Discussion Paper,(17-3).
Sumner, J. and Stahlbrand, L., 2019. Introduction to the special issue on food procurement. Canadian Food Studies/La Revue canadienne des ‘tudes sur l’alimentation, 6(1), pp.1-7.
sysco.com (2019). Sysco. [online] Sysco.com. Available at: [Accessed 7 Mar. 2019].
Weir, J.Z., 2018. The Impacts & Distribution of State Incentives on Farm to School Programs: A Probability Model.
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