The success of procurement executives in a firm depends on their ability to develop effective purchasing operations and execute them timely without bloating the firm’s expenditure. Procurement managers have to optimize the firm’s profitability and enhance the firm’s long-term survival. Therefore, procurement managers have to strike an optimal balance between the firm’s desired level of customer service and satisfaction, and the accompanying costs as Rink and Fox (2011) postulate.
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The task of procurement executives is to gather information on potential suppliers and evaluate them, conduct value analysis, and then expedite shipments to consumers. Following herein is an exposition of General Electric Company’s procurement and acquisition practices touching on the coordination and acquisition with actual product demand, procurement services inventory management, and the scheduling of production supply chain management.
General Electric Company (GE) is currently producing on a lean Six Sigma product development process. While quoting a GE’s investor update in 2017, Patrick (2017) maintained that GE planned to streamline operations and its supply chain via a myriad of changes meant to increase profits and lower costs. Currently, GE deals in a wide a range of products and services spanning from aircraft engines and parts, medical imaging, financing and power generation to industrial products, and oil and gas production (Reuters, 2019) implying that the firm uses a wide range of products for that. According to Ku (2012), GE uses about three billion pounds of material annually spending about 50% of its annual cost on the acquisition of raw materials.
According to Ku, GE uses up to 70 of the first 83 elements of the periodic table in addition to about nine rare earth elements such as yttrium, cerium, terbium, lanthanum, europium, neodymium, dysprosium, lutetium, and gadolinium. 97% of the rare earth materials used by GE come from China. Additionally, GE uses recycled end-of-life parts via SOS Metals Company which the Precision Castparts Corp. casts for GE (Ku, 2012). As The Strategic Sourceror (2015) posits, GE is also in pursuit of mergers and acquisitions with its long-term suppliers as exemplified by the acquisition of Metern Corp. of New Jersey – a supplier for GE since 1970.
GE has had to outsource its manufacturing plants to developing nations, establish research and development centers outside US borders, shifting company divisions and head offices to foreign lands, as well as focusing more on exports (Mullock, 2016). This implies that GE averts incurring heavy transport and logistics costs by moving its production plants close to the source of raw materials and cheap labor. Offshoring and outsourcing have a significant impact on GE’s quality and supply chain. GE has seeming performed well with the diversification strategy. GE is a highly innovative and a diversified conglomerate and is both a make-to-order and an engineer-to-order type of a producer.
The factors outlined above coupled with the desire of GE to reduce inventory, cut costs through “rigorous” supply chain management, and “revamping” the supply chain so that it is “aligned directly to the CEO (Patrick, 2017) the Minimum Stock Levels (MSL) is the best inventory management model for GE. Nonetheless, the MaterialRequirementsPlanning(MRP) inventory management model can also work for GE. MRP streamlines business processes, controls order processing, and is ideal for manufacturers and fabricators (Fontaine, Martilla & Russell, n.d.). The only detriment with MRP is that it does not keep inventory levels low.
Given the vast variety of GE’s products and administrations, coupled with the broad geographic scattering of its production plants, GE utilizes various suppliers and sources for the wide assortment of raw materials, structures, segments and parts required for its activities. A portion of these suppliers or their sub-providers is constrained-source or sole-source providers, while some are third-party suppliers and others are contract manufacturers and service providers(CSIMarket.com, 2019).
An interruption in conveyances from GE’s outsider providers, contract producers or service givers, capacity limits, disruption of production, cost increments, or diminished accessibility of raw materials or items, could adversely affect GE’s capacity to meet its duties to clients or, even worse, increase GE’s operations costs(CSIMarket.com, 2019). Quality and sourcing issues experienced by outsider suppliers can likewise unfavorably influence the quality and viability of GE’s items and administrations and result in obligation and reputational loss/injury to the firm.
CSIMarket.com. (2019). General Electric Co’s (GE) suppliers by company, division and industry – CSIMarket. Web.
Fontaine, D., Martilla, K., & Russell, L. (n.d.). GE Aviation inventory management(pp. 1-45). Lynn, MA: Worcester Polytechnic Institute. Web.
Ku, A. (2012). Materials Sustainability at General Electric [PDF] (pp. 1-10). Boston, MA: General Electric Company. Web.
Mullock, H. (2016). Impact of globalization on General Electric (GE) policies. Web.
Patrick, K. (2017). GE aims to reduce inventory, manage supply chain ‘rigorously’. Web.
Reuters. (2019). Company profile: General Electric Co. (GE.N). Web.
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Rink, D. R., & Fox, H. W. (2011). Coordination of procurement activities with demand: An expanded conceptual model. Innovative Marketing, 7(1), 78-87. Web.
The Strategic Sourceror. (2015). General Electric Co. restructuring supply chain operations to increase profit margins. Web.