PURCHASING MANAGEMENT

            Introduction

            Purchasing is considered as the traditional action and over the past decades it has had its long history. However, in the present times there has been a widespread identification among businesses on the significance of efficient purchasing. Earlier on the activity of purchasing was viewed as a clerical function s well as a service function that is basically meant to spend on finances but over time this idea has faded away as businesses and multi corporations are widely accepting the procurement process thus increasing awareness on the essence of supply activity as an element of corporate activity. Therefore the purchasing operation is greatly gaining attention as it contributes towards success of the organization. In this is case, this paper will deeply explain the purchasing process, supply selection criterion and purchasing cost analysis as they are great influencers of the organizations performance.

            PETRONAS (Petroliam National Berhad) is a national oil firm based in Malaysia. The company was established in the year 1974. The organization is under the government ownership and it aims at adding value to the resources that it deals with. The company’s headquarters are found in, Kuala Lumpur, Malaysia at the PETRONAS towers. The organization produces products such as petrochemicals, petroleum and natural gas (Plunkett et al 2006). According to a research that was carried out in 2013, the company was ranked as in position seventy five worldwide. It is not only the largest and most profitable business in Asia but also in the world it stands as the twelfth most profitable business. Over the years it has extremely grown into being incorporated global oil and natural gas industry and has expanded its business interest to thirty five nations and they all together form the PETRONAS group.

This group is involved with petroleum activities such as production of petroleum products, marketing and supplying of these products (Plunkett et al 2006).

            Supplier Selection Criteria and issues

            The main objective of this organization is to safeguard state-run control over the oil and natural gas reserves, to strategize on the present and the future state need for the petroleum products, to fully participate in marketing and distribution of both the petrochemicals and petroleum products at reasonable prices and to promote and spread the profit of the petroleum industry all over Malaysia (Malaysia 2015). In order to meet these goals the company must understand the significance of not only the purchasing power but also the essence of supply selection (WANG et al 2005). This process is the most important and critical process in the organization and supply decision is an important element of decision making process in the company. The company’s success heavily relies on the suppliers’ performance thus supply selection is as important as any other purchasing process. However the suppliers should be able to understand and effectively meet the needs of the customers so as to ensure that they perform well (Gon&aeacute et al 2004). Selection process is a complex and easier said than done thus the procurement department in the PETRONAS should ensure that they offer materials as well as the services needed so as to effectively evaluate and select suppliers. There are numerous criterions that can be applied in the selection of the most appropriate supplier amongst the pool of other potential suppliers. The company may decide to consider the price of the product, quality of the products reliability as well as the after sales services so as to enhance the project manager to clearly make the best decision.

 Other considerations while selecting a supplier may be the technical capability, the reputation and position of the industry on the business, the attitude of the supplier, the suppliers’ geographical location, communication systems and the management and organization of the supplier retail business.

            In this case, I would recommend the linear weight model since it allows both the tangible and intangible criterion of evaluating and selecting the best suppliers. For the purchasing manager to be able to come up with the right decision using this model I should first establish a threshold. This is later followed by the determination of the criteria with the maximum threshold and the one with the minimum threshold. Later, the weights are assigned to each and every attribute in agreement with the relative weight of the measure among the others. Comparisons are made and this enables the purchasing manager to come up with the most appropriate and wise decision on the selected supplier (WANG et al 2005). The highest score is yielded by the best supplier while the second supplier is regarded as the most appropriate supplier who can be able to meet the requirements (Dominic et al 2010). Therefore in making decision, the company may decide to choose on the suppliers who have the desire in that line of business with the same goal of increasing profit. These suppliers once selected, they ensures that they supply goods to all parts of the nation and they ensure that the supplied goods maintain their original quality and with no much price difference that might scare customers off (Gon&aeacute et al 2004). The suppliers also ought to ensure that they are reliable to their customers and that they meet the needs of customers thus generally increasing the company’s sales.

            ICT for Purchasing Operations

            The company is working hard to unlock the energy of the present day and the future and they are working responsibly top see that the Malaysia citizens and their environment will flourish in the days to come.

Therefore the company has applied high standardized principles and technologies so as to ensure that the company’s operations expand their resource base and that they offer essential energy which will support the economic, communal and the environmental development (Jehngir et al 2011).

With the growing energy demands, the company is inspired and strengthened to steadily drive for new solutions and pushes borders towards a sustainable energy production for the future. Innovative approaches to technology have been implemented ion the company so as to ensure that the energy sources are unlocked from the all over even the most inaccessible and difficult environments. The company’s fully incorporated value chain covers from discovery to marketing, logistics to technical infrastructure, with purchasing process all the world. As the company has been developing over the years, with its expansion in networking and steady development in trajectory, it has constantly and effectively put into operation different social, environmental as well as communal programs that are guided by the company’s large corporate sustainability structure. These implementations have helped out in carrying out the big business in a collectively responsible and holistic way with an aim of benefiting the present and the future generation to come.

            The Malaysian government is strongly supporting the company in making technological advancements which are aimed at increasing and developing worldwide business attraction and the social economic growth (Ishak et al 2011). The rapid growth in information and technology has enhanced the company to push the business into a global competition and also allowing them to be competent amongst the other competitors in the world (Savita et al 2015). This has also ensured that the citizens of Malaysia are widely exposed to the social Medias and the media sources as they form a platform for the creation of awareness of the company and its products, prices and their stores.

 This has resulted to the increase in the number of sales as all people are aware of the PETRONAS products and their uniqueness. The introduction of the data base management system is important for the recording of the information or data collected on the procurement process. However, there should also be the integration of the statistical package for the social sciences (SPSS) which is an application that would help to efficiently and quickly analyze data so as to assist the purchasing manager to make conclusion from the results and be able to improve on the purchasing process as well as know whether to ask for more finances for a new purchasing strategy and implementation.  This will produce far better, efficient and quick results than the manual analysis by human resource personnel.

            Purchasing Cost Analysis

            Each and every single business can profit from implementation of an effective pricing strategy to their purchasing procedure. However as the price analysis is examining on the entire price cost analysis is involved with analyzing the individual cost component that includes the total planned price. Basing on the purchase these components vary but they generally compose of the labor costs, material expenses, logistics and indirect costs. This is a complex strategy that involves the examination of the direct and indirect costs thus resulting to the final price of the products (Weele 2010). The direct costs are directly traceable and thus it is important that the purchasing manager should first identify the direct costs which directly attribute to the final cost of the products in the PETRONAS Company (Mahlia et al 2010). Some of these direct costs are the expenses spent on payment and hiring of labor on the company, the materials needed such as the raw materials that is the crude oil and natural gas, packaging materials, the machines needed in the company and in general all the assets required in the business. The cost for insurance covers and freight also form part of the material costs.

The conversion costs are also part of the direct costs as they involve the expenses spent on the processing of the petroleum raw materials into finished products for instance the maintenance costs, utilities as well as the manufacturing cost. The logistics costs involve the cost that is undertaken by the company in distributing, transportation, taxation and warehousing costs (Weele 2010).  Overhead costs are also referred to as hidden costs which are not traceable but are indirectly profitable. In this case the company may purchase a business car which will be used by the employees to run the company’s related errands which are important to the business.  Indirect costs such as advertising costs, marketing costs, communication costs, office supply expenses and insurances, repairing costs. These costs are generally factored with profit which is significantly the difficulty of the task performed and the risk that is assumed during the performance of the work (Weele 2010). Therefore, the price of a product is basically defined by the addition of cost and profit. However, it is essential to determine whether the price of the products after the cost analysis are fair and reasonable as well so as to ensure that it has a competitive edge in the market.

            Conclusion

            PETRONAS Company is not only an important source of revenue to Malaysia but also to the entire world. It has proven to be the best in the industry and hence quite clear that it manufactures quality products. The company’s objective is to add value to the resources with more production of sustainable energy. This is an indication that the company is not only short visional but rather it’s having a long term vision to its customers. The continuous determination and hard work amongst the company’s management has seen the company throughout their development process.

 

            Supply chain is the most important component in any business company and the PETRONAS is not an exception. Therefore in implementing the right selection procedure of the suppliers and innovating new and better supply chains in the business such as extensive distribution chain will see the company through their success.

            Pricing is essential in the demand and supply of the company as the company focuses on delivering goods at affordable and reliable prices hence attracting more businesses into the business. It is thus important to note that the procurement department is quite effective in their responsibility in ensuring that the price strategy and cost analysis are well balanced and minimal costs are spent.

 

 

 

 

 

 

 

 

 

 

 

 

            References

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Gon&aeacute;lez, M. E., Quesada, G., & Mora Monge, C. A. (2004). Determining the      importance of the supplier selection process in manufacturing: a case study. International      Journal Of Physical Distribution & Logistics Management, 34(6), 492-504.         doi:10.1108/09600030410548550

Ishak, Noormaizatul Akmar, and Hartini Ahmad. "Emerging themes of the leadership and green innovation of the government-Linked companies." IBIMA Business Review (2011).

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Plunkett, J. W., & Plunkett Research, Ltd. (2006). Plunkett's energy industry almanac, 2007: The            only comprehensive guide to the energy & utlities industry. Houston, Tex: Plunkett       Research.

 

Savita, K. S., Dominic, P. D. D., & Ratnam, K. A. (2015). The Role of Green IT and IT for          Green Within Green Supply Chain Management: A Preliminary Finding from ISO14001             Companies in Malaysia. In Advanced Computer and Communication Engineering            Technology (pp. 883-894). Springer International Publishing.

WANG, D., TIAN, Y., & HU, Y. (2005). EMPIRICAL STUDY OF SUPPLIER SELECTION             PRACTICES IN SUPPLY CHAIN MANAGEMENT IN MANUFACTURING    COMPANIES. International Journal Of Innovation & Technology Management, 2(4),       391-409.

Weele, A. J. (2010). Purchasing & supply chain management: Analysis, strategy, planning and   practice. Andover: Cengage Learning.