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Identify and analyse the major procurement related problems outlined in the case study

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Introduction

Identify and analyse the major procurement related problems outlined in the case study I have identified a number of problems in Mercury's current business operation, that I believe if not addressed will affect both their profit capability and the efficiency of the business. - Currently all three partners are involved in buying, each using different suppliers for different reasons. This has lead to problems as Suppliers do not give priority to them as they are unsure whether they will get repeat business, if this continues this will have serious implications on business activities. The potential loss of any discount that would be given by the supplier for prompt payment is lost, in turn forging a good relationship with suppliers is essential to any business as it lower costs with increased co-operation. - Lack of communication between partners has meant that stock is at times ordered twice or at other times not at all, this is simply unacceptable as they are likely to lose custom when stock isn't available that consumers want and they are wasting money on goods which they already have in stock. Excess stock can be very damaging for the liquidity of the business as too much money is tied up in stock, which otherwise could be used to pay suppliers or invest the business. ...read more.

Middle

An example of a possible organisational structure that the mercury could try to implement can be seen on source 1 in appendix. This structure identifies the main departments, from which responsibilities and positions could be identified to help improve the current communication problems that are being experienced. The mercury should only use a few main suppliers that will allow them to negotiate better deals on a longer contract basis. This will enable the mercury to spend time on other areas of the business, as currently lots of time is spent on low value goods. Negotiating long-term contracts with suppliers will inevitably mean discounted rates and the business will be given priority over others, as the level of trust will have increased. The mercury should consider installing EPOS, as this would help correct many of the problems it is experiencing in its current operation. "EPOS is an example of electronic data interchange (EDI) this is the transfer of structured data agreed message standards from computer to computer by electronic means, as goods are sold, information is transferred directly to major suppliers". (Baily. P: p271) See appendix for a schematic representation of an EDI system. Below I mentioned the benefits to the mercury from using EPOS: - No need for huge amounts of paper documentation, and savings are considerable. ...read more.

Conclusion

therefore less promoting may be needed. This will attract more consumers who have enjoyed their experiences in the other chains. Purchasing costs can be reduced as they will have more purchasing power as they will be purchasing as a group of 15 rather than one therefore suppliers will be far more inclined to offer favourable terms this should provide a competitive advantage over smaller rivals. The business will become more diversified, e.g. the opportunity to enter a different segment of the market and thereby spread the risks to some extent. therefore increasing its chances significantly of surviving through a recession in the economy. - Their organisational structure will benefit the mercury in its business procedure e.g. benefit from the experience has gained and its methods of operating in the market. The competitive position will also be improved, as other smaller rivals will not be able to compete on price with a larger chain such as Allied Dominic. - The business will have a specified infrastructure in place to deal with all aspects of the business i.e. stock control & training. Areas in which Mercury has had several problems, as there has been no clear structured process in place. Improvements in these areas will reduce mistakes and improve efficiency leading to a better competitive position in the market. Appendix Source 1 Source 2 2) Baily. P. ...read more.

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