Introduction of the Project
Based in the United States, Boeing Australia Limited (BAL) is a worldwide subsidiary of the Boeing Company whose main activities are establishment, upgrading, and general maintenance of military aeroplanes, apparatus, and space communication. The company has met multifarious challenges during procurement processes since its establishment in 1996. This situation has resulted in customer dissatisfaction since the current procurement processes have failed to satisfy the company’s clients. More challenges have emerged during deliberation on whether the company should add on features on the existing procurement system or conduct an overhaul of the entire system.
Although some procurement managers advocate for temporary enhancements on the present procurement system, the company has insufficient funds to finance purchase temporary upgrades and pay off the maintenance personnel. The main areas of the procurement system that need adjustment include supplier amalgamation, two-way feedback, and internal management. This project seeks to examine the limitations of BAL’s current procurement processes with a view of highlighting effective ways of managing customers, suppliers, and internal organisational systems by using e-procurement platforms.
Objective Advantage and Disadvantages in regards BAL’s Current Procurement Process
One of the advantages of BAL’s current procurement system is its ability to support one-step single human interface that reduces manual data transactions. The current procurement system suits the size of the company since it does not restrain its budgetary allocations for procurement. However, its suitability is only for short-term goals and is unbecoming for a technologically evolved world. The current limitations exhibited by the current procurement system outweigh its advantages. The current procurement process at BAL poses impending managerial, financial, technical, and market risks and uncertainties to the company.
This state of affairs can lead to decline of the company’s reputation and competitive advantage. In addition, BAL’s procurement approach has lagged the company behind procurement technology. As a result, the company has faced operational redundancies that have in turn resulted in deteriorated productivity and wastage of time. The company has attempted to match the standards of modern procurement through introduction of short-term improvement plans. This choice has become very costly for the company as it involve scrupulous decision-making processes that necessitate additional operational and development costs (Xu 2011).
Short-Term Improvement
BAL has faced many challenges in the process of upgrading and maintaining its procurement processes that have compelled it to initiate short-term procurement strategies to meet consumer demands. Russell Menere who joined the company in 1999 as the new procurement manager was charged with the responsibility of finding new means to improve the procurement system. The procurement manager had to ensure improved productivity whilst minimising operational costs.
As a result, he initiated short-term procurement plans that include rationalisation and management of suppliers, implementation of credit card purchasing system, and introduction of electronic order processes (Sen, Sen, & Basligil 2010). Moreover, Russell formed BAL’s materials management council to facilitate the company’s procurement process. However, these short-term improvements have had various advantages and disadvantages for the company. Noticeably, the greatest advantage of the short-term procurement improvements is that the company has by any means managed to satisfy the demands of its vast client base.
However, integrating short-term improvements with BAL’s current legacy system has disadvantaged the company due to emergence of operational inefficiencies that have retarded its accomplishment of set goals. Lastly, short-term changed owing to spontaneous improvements has led to reshuffling of employees to fill new positions depending on their expertise. According to Henry, Garbarino, and Voola (2013), short-term improvements have increased resistance to change as employees fear losing jobs in case BAL’s management decides undertake an overhaul of the procurement system.
Rationalisation and Management of Suppliers
Through its short-term improvement strategies, Boeing Australia Limited (BAL) has maintained considerable rationalisation and management of suppliers to gain competitive advantage. Successive procurement managers have strived to rationalise the prevailing supplier networks with a view of improving BAL’s business operations. To achieve this objective, the present procurement manager has maintained various delivery modes to BAL’s consumers.
This strategy has upheld a high reputation for the company. According to NSW Aerospace Directory (n.d), BAL has a vast range of suppliers both in Australia and in other parts of the world. The expansion of the company since its establishment has realised a proportional increase in the number of suppliers. Therefore, rationalisation of the supplier base has greatly leveraged spending trends within the organisation (Johnsen, Miemczyk, & Howard 2014).
The company has also upheld high-end supplier relationship management to enhance its supply chain. A critical aspect of rationalisation of client base is that it ensures that suppliers have the appropriate competence to meet the needs of the company. However, rationalisation and management of suppliers at BAL is a short-term strategy to fulfil immediate client demands. This situation has led to poor visibility of impending supplier pools and expenditure profiles. According to Kalwani and Narayandas (1995), a sound visibility plan is a crucial instrument for managing highly differentiated businesses such as BAL. This situation necessitates the company to initiate organisational change with reference to its existing procurement strategies.
Introduction of Credit Card Purchasing
The introduction of credit card purchasing has improved the procurement processes significantly. The use of credit card purchasing has enhanced BAL’s management of its financial accounts as the company conserves cash whilst ensuring constant supply of production materials and workforce to sustain the business operations. Credit card purchasing has enabled both suppliers and consumers to track expenditure trends (Henry, Garbarino, & Voola 2013).
Consequently, suppliers have gained substantial purchasing power to maintain constant availability of production materials. In addition, the introduction of credit card purchasing has enabled BAL to gain control over employee spending. This characteristic of credit cards a created a framework that sets expenditure limits. Generally, the credit card trend has led to development of reputable financial management practices in the company.
With the increased efficiency and availability of low value goods owing to the use of credit cards, BAL should integrate a robust software solution to supplement the electronic card systems. Although this strategy is a short-term improvement at BAL, automation of payments to the suppliers has eased the procurement process for the company. Nonetheless, there is a need to integrate this payment system with improved procurement software to make the system more efficient (Henry, Garbarino, & Voola 2013).
Formation of Materials Management Process Council
The formation of a materials management process council as a short-term improvement strategy has enabled the company to procure materials at reasonable market prices. This council conducts logistic functions within an organisation to maintain quality control and reputable inventory management.
Being a large corporation, BAL requires a materials management process council to monitor business logistics of both physical products and intangible services. Material management will enable the company to track the companies merchandise within its various parts of operation. Through the jurisdiction of the materials management council, BAL has gained the power to deliver high quality products. The council has also ensured standardisation of materials to ensure constant supply of value products.
Nonetheless, the materials management process is part of the procurement processes. At BAL, holistic materials management requires the execution of modernised procurement processes to substantiate the overall operational efficiency of the company (Simon, Smith, & West 2010). The authors reveal that materials management has a vital function of improving productivity. Loss of production materials can result in tremendous losses at BAL. Therefore, the council should ensure integration of materials management processes with the e-procurement platform to enhance storage and monitoring of materials.
Recommendations
I recommend BAL to execute an e-procurement system to facilitate operational effectiveness. The e-procurement system has the capability to interface with BAL’s current legacy system (Jaffeux, Perret, & Wieser 2013). According to the authors, information technology is crucial for the management of the company’s production processes and distribution channels. The expansion of the company has led to increased client base as different consumers come from around the world to seek BAL’s services. Therefore, it is time for the company to integrate more versatile and holistic procurement systems with its legacy system to improve efficiency and enhance consumer and supplier satisfaction.
In addition, there is a need to prepare BAL’s employees for the change process. The company has experienced technological resistance, especially proposals for implementation of e-procurement system, because of insufficient leadership over its years of development. According to Simon, Smith, and West (2010), BAL’s management should conduct regular training and initiate incentive programmes for the workforce to improve the relationship between the management and the other employees. Training is a crucial stage of preparing a company’s workforce for organisational change.
Furthermore, BAL should focus on a long-term strategy that can fulfil the company’s goals and objectives. Since the company has a reputable legacy system that covers all its four main divisions and twelve functional sites, the company has a rich background to establish robust procurement systems to maintain autonomous functionalities across all its areas of operation. This strategy ensures that BAL’s identification and execution of functions without the prior presence of a manager or even an immediate supervisor. However, the workability of an autonomous system demands for an e-procurement platform that will ensure spontaneous monitoring and measurement of performance (Paun 2014).
Therefore, the only way for the company’s success is implementation of a robust e-procurement system to enhance operational effectiveness. BAL should place more emphasis on management control. Management control subsystems that are integrated in the e-procurement system automatically gather, scrutinise, and present results that provide reliable information for decision makers. Consequently, long-term strategies will reduce both operational and developmental costs because of increased overall efficiency.
E-Procurement Strategies
E-procurement is inevitable for multinational companies such as Boeing Australia Limited owing to the complex nature of their operations. The integration of information technology in other systems of BAL has increased the need for e-procurement system to monitor purchasing and measure performance of the other systems of production (Tang & Zimmerman 2013). Generally, various barriers such as poor leadership, resistance to change, lack of a universal procurement system, and general complexity of the company’s organisational structures have hindered the implementation of e-procurement strategies at BAL.
However, overcoming these challenges by preparing the employees for change will facilitate the implementation of the e-procurement platform. According to McHugh (2011), e-procurement will enhance labour productivity at BAL. The system also comes with rewards such as provision of better services to clients and suppliers, cost and time effectiveness, and procurement transparency among other virtues. Therefore, the implementation of the e-procurement system at BAL will improve the company’s organisational efficiency. A survey conducted by Oh, Yang, and Kim (2014) to assess the influence of e-procurement system deployed in similar companies revealed that the system enables an organisation to reduce administrative costs.
The authors concluded that e-procurement ensures that businesses implement cost-effective processes. Cost-effectiveness is brought about by the system’s ability to rationalise and computerise purchasing processes. In addition, the implementation of an e-procurement system at BAL will distribute the purchasing power amongst the potential clients owing to standardisation of purchasing techniques.
Conclusion
The business environment has increasingly become competitive in spheres of operation from production to the end consumer. Unending advancement in information technology has heightened business complexity. As a result, companies have to find ways to solve complex business issues. However, traditional procurement processes have failed to favour modern businesses since their operations have become differentiated. Therefore, there is a need for large corporations such as BAL to implement procurement systems that are more robust to leverage transaction costs. Research has indicated that companies that have adopted e-procurement systems have a higher percentage of operational efficiency as compared to those, which have assumed long-established procurement approaches.
The success of the company will significantly depend on the integration of a powerful e-procurement system with its outstanding legacy system. The increasing use of credit card purchasing has improved procurement processes for many companies. Suppliers have gained access to this easy mode of payment; hence, on-demand delivery of materials has become the norm for many suppliers. The strategy increases operational effectiveness that results in achievement of organisational targets.
References
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NSW Aerospace Directory n.d, Boeing Australia Holdings Pty Ltd. Web.
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