Answer to Question #246881 in Management for Danu

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Answer to Question #246881 in Management for Danu

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Question #246881

CAT1

1.Discuss using any five relevant EXAMPLES how purchasing may be used as competitive edge by an organization

2.Global purchasing has made e-commerce to operate like a village.Discuss the statement using any five examples

3.Explain using examples why organisations are moving from quality control management to Total quality control management

CAT 11

1. Discuss any five main challenges of global sourcing and their respective management

2.Discuss the effects of effective supplier appraisal on organizational performance

3.Discuss the effects of modern contract management in regard to procurement performance

Expert's answer

number one

Competition in business is no exception, and it can make or break your organization. While it's often uncomfortable and scary to witness another business profit from your company's weaknesses, competition can also push your business to evolve into a better version of itself

Product Attribute Differentiation

One way to gain an advantage over competitors is by differentiating your product from theirs. Ask yourself: What makes my offering unique? Why would consumers want to purchase my product instead of my competitors’?

Countless attributes can set your product apart. Here are some to consider:

Better customer service

More variety

Faster or cheaper shipping

Location

Color and aesthetics

Brand identity

Atmosphere of brick-and-mortar locations

Source of goods

Whole Foods Market is one example of a company that differentiates its products using brand identity, atmosphere, and sourcing. Whole Foods’ competitors are other natural food chains, such as Trader Joe’s and Sprouts Farmers Market, along with big names in the grocery space, including Stop & Shop and Wegman’s.

Whole Foods stands out in the crowded natural foods market as the first and only certified organic national grocery store in the United States. Its brand identity centers on the integrity of its natural and organically sourced foods. It also cultivates an in-store atmosphere that makes grocery shopping feel purposeful and is a step up from some of its competitors' traditional grab-and-go shopping experience.

Like Whole Foods, find the attributes that differentiate your product from others and make them central to your brand’s identity.

Customers’ Willingness to Pay

The way you price your products or services can set you apart from your competitors. When doing so, it’s vital to understand your customers’ willingness to pay.

Willingness to pay (WTP) is the maximum price a customer is willing to pay for a product or service. It can be a specific dollar amount or a price range.

By determining your customers’ WTP, you can ensure you’re maximizing profit without turning away customers.

In the context of competition, it’s important to view willingness to pay as a strategic tool. If your customers are willing to pay the same amount for your and your competitors’ products, consider what can be shifted to increase their willingness to pay for yours.

For example, business support system company CSG reports <span class="pdf-append">(pdf)</span> that 47 percent of consumers are willing to pay more for products that are sustainably sourced. Among those consumers, five percent are willing to pay double the price for a sustainable product over a non-sustainable one.

With the knowledge that certain factors could cause your customers’ willingness to pay to increase, you can strategically implement changes that give your business a competitive edge.

Alternatively, if your competitor provides a product at the very top of customers’ willingness to pay, you can gain a competitive advantage by offering a lower price. Tread cautiously, because doing so could start a price war in which you both continue to drop prices to win customers.

Price Discrimination

With an understanding of your customers’ willingness to pay, you may find that different types of customers are willing to pay different amounts for your products. In such cases, it can be useful to employ price discrimination, which can be a valuable tool for expanding your company’s reach when competing with others.

“Price discrimination is one of the most common and powerful price strategies for companies,” says Harvard Business School Professor Bharat Anand in the online course Economics for Managers.

In the course, Anand presents several examples of price discrimination, including reduced prices for students, seniors, and veterans. These “special case” prices present an opportunity for your company to earn customers whose willingness to pay may be lower than that of its typical customers.

It’s worth noting that a lower price doesn’t always win consumers over—selecting a strategic price is crucial, but it’s just one factor they consider when determining which product to buy.

Bundled Pricing

Another pricing strategy that can prove to be advantageous is bundled pricing.

Bundled pricing is the practice of selling two or more products together in a “bundle,” for which the cost is different than that of purchasing all of the items separately.

Cable companies often leverage bundling. Purchasing voice, video, and data services together often grants the customer a lower price than if they were to purchase the services individually.

“How you think about the logic of pricing should depend on willingness to pay,” Anand says in Economics for Managers. He presents the example of bundling childcare and theater tickets.

“Put two products together that, when consumed jointly, increase consumers’ willingness to pay,” he says. “You might be able to increase the price for both just because it has so much more value for consumers.”

The way you price your products should be strategic, purposeful, and give your business a leg up over its competitors.

Human Capital

A company is only as strong as its people. As such, hiring, training, and retaining a team of skilled employees is a competitive advantage for any business.

Putting in the time and care to select outstanding candidates for open positions, train current employees, offer professional development opportunities, and create a culture wherein people feel supported and challenged can pay off.

Gallup reports that business units with highly engaged employees see a 21 percent increase in profit over their less-engaged counterparts.

Employee engagement has been especially important during the coronavirus (COVID-19) pandemic, as many businesses have closed physical offices and transitioned to remote work. By finding ways to effectively engage your team in a virtual setting, you can make them feel supported and empowered from afar.

number two

Many customers believe that pricing is better online. For example, an Accenture survey showed that 52% of customers in the US and UK believed that prices online were cheaper than in store.⁷ For the most part, this is true. Lower overhead, lower taxes, and disintermediation have all played roles in driving down prices online.

Online-only vendors have much less overhead, and ecommerce around the world is led by pure play vendors—online-only vendors whose business model is to not operate out of physical stores. For example, Macy’s, a retailer with a physical and online presence, is investing $400 million in the renovation of its flagship store in New York.⁸ With even the largest ecommerce implementations costing less than $100 million, the return on investment is much higher than $400 million spent on one physical store. The fixed costs are so high in traditional retail that some retail chains are seen by investors as real estate investment firms first and retailers second. The lower overhead of pure play ecommerce vendors often translates to lower prices.

Taxes are another downward driver on prices. Taxes on goods purchased in a physical retail store in most developed markets can exceed 20%.⁹ The regulations that apply to physical retailers often don’t apply to ecommerce vendors, especially those across borders. Many jurisdictions charge taxes only when the retailer physically has a presence in that jurisdiction. For cross-border shipping, especially of expensive electronics and luxury goods, this is often not the case. The cost savings can be substantial.

Disintermediation continues to play a big role in pushing down prices, as manufacturers set up direct-to-consumer ecommerce platforms and sell on marketplace-like exchanges. Prior to ecommerce, manufacturers had to sell to wholesalers who then sold to retailers. Now it’s fairly easy, at least technically, to set up a direct-to-consumer business and keep those margins.

Online prices are not always lower, though. An advantage ecommerce offers is the ability to price discriminate based on anything—from previous purchasing history, to geographic location, to demographic information like gender and income. For example, an Australian retailer was recently found to be imposing a 6.8% surcharge on all Internet Explorer 7 users.¹⁰ Prices can be set however and whenever the vendor pleases. Outside of not causing public relations headaches or running afoul of local laws, there are no rules or restrictions online. In physical stores, it’s a logistical nightmare to change prices, and it’s often impossible to charge people different prices for the same goods. Coupons and targeted promotions can help, but the sticker prices are exceedingly hard to change.

Convenience

The costs to customers of shopping in a traditional retail store can be substantial. Quantifiable costs include the following:

Time away from home or work

Transportation costs, including fuel for your car or public transportation costs

Often higher costs due to an inability to comparison shop

Unquantifiable costs include listening to your toddler scream for candy at checkout, among others.

The costs of online shopping are virtually nothing. It takes seconds to purchase a product from a vendor that you’ve done business with in the past and it can even be done from the convenience of a smartphone. Even when shopping with new retailers, it takes no longer than a few minutes to find and buy the product you’re looking for. Return-friendly policies make it easy to return products that may not fit properly, like shoes or clothing. And the maturity of ecommerce, as we’ll discuss shortly, makes it easy to quickly find exactly what you’re looking for.

Large Product Assortment

Most physical retail stores are small—between 3,000–10,000 square feet, usually selling a few hundred products in one category of merchandise. For example, it would be very difficult to find this book and car parts in the same physical store. Even larger-format hypermarkets, which can be as large as 260,000 square feet,¹¹ sell only a few thousand products. Their assortment tends to be wide but not very deep. It’s hard to sell a wide range of products in physical stores because retailers have to procure and take physical possession of products, get the products to each physical store, continually stock the shelves, and so on. This is all very capital and labor-intensive, resulting in low margins.

Large ecommerce vendors sometimes don’t even take physical possession of the goods they sell, using arrangements such as drop shipping, whereby the manufacturer or wholesaler ships directly to the end customer. Many ecommerce vendors are using marketplaces where the sellers are clearly identified as being a third party, usually the manufacturer or a small wholesaler. Both drop shipping and marketplaces have eliminated a lot of inventory, risk, capital, and labor associated with carrying that inventory.

To further add to the benefits of ecommerce, products can be shipped from a few centrally located warehouses, with the vendors having to worry about keeping only a few warehouses stocked, as opposed to thousands of physical stores. Amazon.com ships its products out of over 80 physical warehouses around the world, with many over one million square feet.¹² It can still be profitable for an ecommerce vendor to sell 100 units of a given product, whereas it would never be profitable for a physical retailer. This has revolutionized entire industries, like book selling and auto parts distribution, as people want to buy niche products that aren’t economically feasible to stock in physical retail stores.

Technological Advances

Closer Tie-in with the Physical World

Because of its nature, ecommerce has some distinct advantages and disadvantages over traditional retail. We discussed many of the advantages earlier, including price, convenience, and assortment. The main disadvantages, also discussed earlier, include the inability to see and/or try on goods, and shipping. This is where ecommerce vendors with physical stores can have an edge over pure play ecommerce vendors. They can leverage their physical stores to bridge the gap between the virtual and physical worlds.

Let’s start with the inability to see and try on goods. Many retail stores, whether belonging to the ecommerce vendor where the purchase is ultimately made or not, have become virtual showrooms. Showrooming refers to the trend of customers viewing and trying on the products in physical stores but then buying online. Traditional retailers without a strong ecommerce offering abhor this behavior and have even hidden barcodes in a feeble attempt to stop it. Retailers with a strong ecommerce offering have even begun to encourage the practice by offering free in-store WiFi, advertising wider assortments that are available online, encouraging customers to view product reviews online, and offering detailed content that’s featured only online. The thought behind this is that it’s better to cannibalize revenue from your physical stores with your ecommerce offering as opposed to someone else’s ecommerce offering. Having a strong physical and ecommerce presence is what’s required to succeed in today’s increasingly digital world.

Many ecommerce vendors with physical stores now offer in-store pickup and in-store return of goods purchased online. A few offer fulfillment from physical stores, meaning any item from any physical store can be picked off the shelves and delivered to customers. This makes all of the inventory from a retailer’s entire network available to anybody in the world. Certain types of ecommerce vendors, like grocers, have always featured in-store fulfillment as well as delivery from the local store. In the UK, this is a $10 billion/year business, with physical retail stores both fulfilling and shipping (via delivery vans) the goods to individuals.¹³ Other categories of goods that have traditionally been fulfilled from local retail stores include large electronics, furniture, and other items that are too big to ship or require custom installation.

To compensate for the advantage that retailers with physical stores have, leading-edge online-only ecommerce vendors are experimenting with same-day delivery and offering customers the ability to pick up goods from drop boxes, which are simply automated kiosks containing your goods that you unlock with a code. Often these drop boxes are scattered throughout metropolitan areas in places like convenience stores. This makes it faster for customers to receive and return goods while lowering shipping costs.

Customer-friendly policies

By its nature, ecommerce is at a distinct disadvantage over traditional retailers because of the physical distance between the products and the customers. In a purely physical retail world, this isn’t an issue. You pay for the products at a point-of-sale terminal and walk out the door with your products in hand. Specific problems with ecommerce and shipping include the following:

Cost of outbound shipping (sending goods from vendor to customer)

Cost of inbound shipping (sending returned goods from customer back to vendor)

Time it takes to receive goods

Delays and taxes incurred at border crossings

Cost/time to return

Number three

Total Quality Management vs Quality Control

Introduction

There are many aspects of Quality. These can be at different levels (Product, Organization, etc). Different organizations adhere to quality standards based on their requirements. Let me introduce and define the meaning of Quality, Quality Control, and Total Quality management. We shall understand what each means and how they differ from each other.

Quality

What is quality?

Project Management is the art and science of managing projects. There is an emphasis on quality, cost, and time. Quality is one of the factors of the “triple constraint” that govern the art of project management. Quality is defined as the degree to which the project meets the requirements (PMBOK, 2009).

Dr. Edward Deming is the Father of quality management. In 1950, he defined quality as something which fits for the purpose. Quality is interpreted as the non-inferiority or superiority of something. This is especially true for business, engineering, and manufacturing. It is also defined as being suitable for its intended purpose. Fitness for purpose, while satisfying customer expectations. Quality is understood differently by different people. It is a perceptual, conditional, and somewhat subjective attribute.

Let us take an example of a tube light manufacturer - We will use this example at various places. So, it will act as a relative reference. Now the manufacturer may mention that it is 40 Watts tube light and will run for 10000 hours. Now the definition of quality says that it should be suitable for its intended purpose. So, from the customer perspective, it is said to have good quality if:

It emits light which a 40 Watts tube light should give

Should run for 10000 hours

Should always run whenever you switch it on

The lesser heat it generates the better

Should not break down in between

Consumers may focus on the specification quality of a product/service. They would compare it to competitors in the marketplace. Producers might measure the conformance quality or degree to which the product/service was produced correctly. Support personnel may measure quality in terms that a product is reliable, maintainable, or sustainable.

For software, quality means, the functionality and features of a software product. Its ability to satisfy stated or implied needs of users. For technical coders, the lesser the defects the better is the quality.

Hopefully, now you can relate to what quality means!! It is considered as an important concept for every organization. It can be expressed as a measurement that is used to estimate the standards of a particular product or service. Now let us understand Quality Control.

You may also like: An Introduction to Quality Control And Quality Assurance

Quality Control

What is quality control?

Quality control is also known as QC in short. This is a process by which entities review the quality of all factors involved in the production. QC focuses on ensuring that a product meets the prescribed technical standard of quality. It should also meet the customer's requirements. It involves the physical checking of activities at each specified stage of production. This covers cycles from receiving materials and manufacturing to testing, packing, and shipping. So, quality control is product-oriented and focuses on defect identification.

Let us go back to our example of a tube light. What is Quality control here? On the manufacturer's side it could be something like, someone testing to see:

Tubelight works when switched on

Tubelight emits light usually a 40 W tube light should emit

Does not get too heated

Packaging is proper

The manufacturer will decide what sample size he would like to take. There could be many such checks. The point to note here is that they are testing to identify defective products. What about quality control in software? They can have defect reviews to check defects in codes, functionality not working as intended, etc. This is identified during testing.

There is an additional concept of quality assurance. This involves processes to prevent defects. Quality assurance is process-oriented and focuses on defect prevention. It focuses on making operations more efficient and reliable. Now, when we move further ahead, we see Total Quality Management (TQM). Let us now do a deep dive in this area.

Total Quality Management (TQM)

The exact origin of the term "Total Quality Management" is uncertain. It may be inspired by Armand V. Feigenbaum's multi-edition book Total Quality Control and Kaoru Ishikawa's What Is Total Quality Control? The Japanese Way. It may have been first coined in the United Kingdom. Their Department of Trade and Industry had used it during its 1983 "National Quality Campaign". Or it may have been first coined in the United States by the Naval Air Systems Command to describe its quality-improvement efforts in 1985.

How does TQM help in organizations

TQM is at an organizational level. It is infusing quality aspects across the organization. It can also be extended to suppliers to ensure good quality inputs. The benefits of these are seen across the organization. It includes its products, processes, internal operations, and all other departments. TQM is a comprehensive and structured approach to organizational management. It seeks to improve the quality of products and services. It involves continued feedback and refinements for improvement.

TQM consists of organization-wide efforts. It installs and makes permanent a climate where employees continuously improve their ability. This helps to provide on-demand products and services that customers will find of particular value. "Total" emphasizes that departments are obligated to improve their operations. It includes all departments like sales and marketing, accounting and finance, engineering, and design. "Management" emphasizes that executives are obligated to actively manage quality. These could be through funding, training, staffing, and goal setting.

While there is no widely agreed-upon approach, TQM efforts typically draw heavily on the previously developed tools and techniques of quality control. Total Quality Management Definition can be - "A system of management based on the principle that every member of staff must be committed to maintaining high standards of work in every aspect of a company's operations"

cat 11

Number one

Working with international suppliers

The challenges of sourcing overseas

Guide

If you plan to source goods or materials overseas, you should be aware of the many unique problems that may arise. Typically, these may include difficulties with logistics, regulations, customs and language, cultural differences, time zones and currency fluctuations.

Problems associated with sourcing abroad

You shouldn't assume that the same rules will apply overseas as they do in the UK, particularly when dealing with a country outside the European Union.

Depending on the supplier's market, you may come across:

different technical or industrial standards, which may or may not meet UK requirements

varying import or export restrictions at either end of the transaction, such as tariffs and quotas

complicated documentation requirements for cross-border processes

fluctuation of currency exchange rate

unstable economic and political climate or local or regional environment

Frequently, local customs or court decisions - in addition to international treaties - apply in overseas countries. It is therefore critically important to establish the relevant law and jurisdiction in case of a disagreement.

Conflicts with overseas suppliers

Common causes of disputes with overseas suppliers include:

liability claims, in situations where a product causes harm or loss

infringement of intellectual property rights

provision of insurance at each stage of transit

A well-drafted, written supply contract will help establish expectations for responsibilities and indemnification, and avoid potential disputes. See more on overseas supplier contracts.

Other challenges with international purchasing

As well as legal and regulatory differences, other issues can come up when purchasing supplies abroad. For example:

Language differences, especially if you need to discuss complex technical issues or engage in detailed exchanges. Misunderstanding or misinterpretation can affect your requirements - eg your supplier can confuse order quantities or miss deadlines. Language barriers can also affect contract negotiations or cause communication delays, both of which can affect your bottom line.

Payment methods for international transactions can be complicated. Find out more about paying overseas suppliers.

Shipping procedures are also more complex, given the increased distances and the need to cross borders. See international transport and distribution.

Cultural differences can be a concern. Understanding the business and social practices of your supplier's country can help build trust and develop relationships. Read more about entering overseas markets.

Managing the supply chain can be challenging. Consider how many suppliers you need. Over-reliance on key suppliers can result in problems if one of them goes down. On the other hand, having too many supplier may be difficult to manage. See how to manage your suppliers.

Cashflow issues can crop up since payments usually take longer with overseas suppliers. You may need to send cash out earlier for advanced payments and have it tied up for longer, which can affect your liquidity and working capital.

Keep in mind that the origin of your goods can affect the level of duty you pay. Some goods attract a preferential rate of duty, so check the source of your supplier's raw materials. See rules of origin for imported and exported goods.

number two

There are many advantages to maintaining a robust supplier appraisal process. These advantages include:

Suppliers that are unlikely to perform as you wish, can be identified and avoided
Weaknesses in approved-supplier performance can be detected and addressed
The process supports and secures your organisation’s customer service performance
Buyer and supplier can work together to understand and leverage factors that influence the ongoing relationship

Many companies purport to exercise supplier appraisal, but all too frequently, the process is overly subjective and hence, ineffective.

Like any process in supply chain management, supplier appraisal needs a systematic approach if it is to deliver results. The characteristics of an effective supplier appraisal process include:

Measurements and targets that are easily understood by both suppliers and buyers
KPIs that are weighted according to your company’s strategic priorities
Discussion and agreement with suppliers over measurements to be applied
Graphical visualization of appraisal measurements and results
A system of recognition and reward for improved performance

Number three

10 key challenges that hinder contract management performance. These challenges are: