Supply Chain Management on the purchasing side

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Supply chain management covers a number of activities having a numerous interconnecting branches and distinct staging posts.One of the important activities of the supply chain management has been the purchasing side which has tremendously changed over the years beacause of the importance it has bought to the firm.'Strategic sourcing is a big business !(Lopez , 1993).Firm all around the globe have realised that managing supply strategically can save a tremendous amount of money and which has inturn lead to investment in this area of management.Purchasing is the acquisition of inputs into the firm.Strategic supply is the management of inputs and the transformation process,which includes the structuring of the supply activity of the firm (Jane F.Eastham, Liz Sharples and Stephen D.Ball , 2001).The purchasing function has transformed form a clerical fuction to a strategic process over the years.Now a days companies are becoming much more proactive rather than reactive in there purchasing fuction so as to respond to the consumers on a timely basis which is very much important for FMCG goods because of its nature.As mentioned in the first part of the literature review most of these Fast moving consumer goods are bought in my goceries and supermarket and there supply chain has to work in an efficient way in supplying the product at the right place at the right time with the right amount of quantity.These industries purchasing department will develop according to the criticality of materials and attitudes of top management towards purhasing(Syson , 1992).

As these products are of persishable nature there are lot of thinking put into the purchasing decision.Consumers have placed new demand on attributes of food such as integrity,quality,diversity, safety and associated information(services).There has also been so much concentration on the dydic linkage i.e the relationship between the buyer and the seller.This relationship was extended in the late 1980's and added increased complexity as it took into account the buyer,supplier and the final customer( (Jane F. Eastham, Liz Sharples, Stephen D.Ball, 2001). Each of these played an important role in the supply chain getting stronger and better.In both these industries colloboration between the buyer and sellers played an important role on supplying the products to the final customers.In the recent years farmers where taking notice of colloboration and trying to be more market oriented according to the changing trends.Colloboration as a starategy helped to reduce the risk and uncertainty for everyone in the industry ,as well as fostering the right environment to stimulate innovation and increase value creation (Palmer, 1996; Van der Vorst et al., 1998; Fearne, 1998; Katz and Boland, 2000) .There always existed a relationship between the grocery industry and the two industries fresh produce and Dairy because the amount of product that is bought into this sector is of huge quantity.The grocery industry manily involves buying and stocking of goods purchased from the suppliers for resale and these products are inturn sold to the customers.The grocery industry should make sure that the goods supplied from the suppliers are of good quality and the information regarding the replenishment of the product information reaches the supplier at the right time so that the process can start at the other end of the supply chain at an early stage.Over the last years the startegies adopted by supermarkets and grocery has changed dramatically.There has a lot of innovation that has taken place over these years to make the supply chain more efficent and responsive.The UK grocery mulitiples dominate the agri business controlled by the major supermarkets like tesco,sainsbury safeway,asda.It is believed that power of these firms runs bi-directionally take in both customers and suppliers(Andrew cox , Paul Ireland , Chris Lonsdale, Jale Sanderson and Gylan Watson , 2002).

Like any other agri business the dairy supply chain is complex one and there lot of competeition between so many varirety of food products to achieve consumer rand.The dairy supply chain begins with raw milk production at the end of the chain and ends with other proccesors,institutions,and consumer utilizes product that where created in the value chain(Analysis of selected food value chain)(Here the name of the author is not given only the articles name).Like any other product which is of pershiable nature the replenshiment information should be at faster rate by the grocers which would be helpful to solve the problem of responding to consumer demand.As customer demand for the product is not static the people in the supply chain process will have direct affect of the reaction and they have to change or adopt accordingly.The Demand for dairy product which are categoried as healthy products are of high concern in the uk market and the consumers are very much concern about the product that is sold is of right quality from the right means.In UK there are many independent farms and these farms sell the raw milk to seven major milk processors which in turn sell the products to grocers around uk. The Uk Dairy supply chain netwok has seen significant changes since deregulation in 1994,among them was the continuing reduction in the number of dairy producers(Susan Ambler-Edwards , 2008).There has a significant change in dairy industry especially in the type of milk that is sold to the consumers and it has been categorsied to organic ,skimmed and semi-skimmed.It is noticed that there a link between the farms,the milk processing unit and the grocery /supermarkets to supply the products to consumers.Each of these has its own purchasing starategy to supply the raw materials to each of its end consumers wether it is Farms supplying raw malk to the milk processing unit and then the finished product to the grocers which is then consumed by the customers in accordance with their taste and preferences.As the grocery sector being at the end of the supply chain and closer to the customers most of this sectors purchasing strategy has to be in align with the farming and Dairy processing unit.So the information passed to the milk processing should be at the right time accoding to the signal received from the customers and the information is then passed onto to the Farmers.

The Grocery sector being the largest consumers in Dairy products has to be very much timely with its replenishment of products from its shelf.These are goods that has the shortest shelf life.Grocery sector consists of lot of data which involves listening,understanding,observing the customers reaction of the product and analyzing these information sending it back to the milk processor which is further send back to the farmers which is helpful for the grocers in order to provide a base for the when the next procurement of the product should take place.This kind of activity is useful for the milk proceesing unit because it would not give them a chance to overestimate there milk production and the amount raw milk that's needs to purchased from the Farmers.Here it allows to have strategic purchasing on all the stages.If you take into account the fresh produce(Fruit and vegetable) and the grocery sector the relationship that exist between them are some what same and even the purchasing strategies used.The dairy industry does stratagic alliance between frims to stregthen there position in the market.By making use of strategic alliance it gives the both firm's the opportunity to utilize the production sites,distribution channels can be utilized effectively.One of the strategeic alliance that has taken place was between Arla Food's which third in the domestic market and the second largest milk dairy farm in the uk i.e Express Diaries(Sofia Hedberg, 2004).

Not only Grocery industry but also Dairy industry over the years are still making use of many techniques such as colloboration,Partnership ,Efficient consumer response ,cateogery management to improve there purchasing strategies.The implementation of ECR and catogery mangement in this industry has heralds the dawn of a new era in which value creation is a prirority.in which supermarkets and the manufacturers are working together to exploit the diverse opportunitues which exsit in the cosmpolitian marketpalce in which affluent diligent consumers are running out of time to purchase,prepare , cook and consume their food(Andrew Fearne and David huges , 2000). Efficient consumer response was introduced into the grocery industry as means to responding to consumer demand and to promote the removal of unnecessary costs from the supply chain. By means of ECR it allowed companies and firms to serve the customer at faster rate and to work with the trading partners at low cost. ECR objectives are accomplished through both supply side and demand side strategies (Kyle Dupre and Thomas W. Gruen, 2004 ). The reason for this kind of implementation was due to the distrust between the retailers and lack of strategic orientation. Here the supply side objective was to get the product to the end user quicker and cheaper and the demand side took to account strategies such as category management to determine which product should and should no reach on the retailers shelf.Grocery sector involved a lot of colloboration with the fresh produce and Dairy industry in supplying the products.These colloboration provided a surity that they would receive the product at the right time even if there are some issues that happens in there supply chain opeartion.In the fresh produce industry the increase and dominance of multiple retailers and the key strategic importance of own lable products has elevated the fresh produce to position where suppiers have a geninue opportunity to break out of the commodity trap (Andrew Fearne and David huges , 2000).In the Grocery industry the supermarkets are trying to reduce the cost in the supply chain by improving the supply chain integrity and having greater consistency.Now a days super markets are reducing there supplier base to few suppliers and they are taking every opportunity to outsoucing the major activitvies to the suppliers from procurement to distribution and providing the chosen supplier with large voume growth.The interaction between the buyer and the supplier provided them to deal with issues and problems on a daily basis.This kind of interaction between both these industries opened the door to cooperate with each other take necessary decision on the supply chain actvities.As for the grocery industry this provided a base to improve there purchasing startegy and reduce there cost.From the supplier side these suppliers have responded by organising themselves into either marketing co-operatives or agencies to increase the scale of operation,appointing an individial to interact with buyers on day-day basis(Shaw and Gibbs , 1996).

Another important development that was bought into this sector as mentioned above was the use of category management which tend to shift the relationship between retailers and suppliers to collaboration between each other and helpful to transfer information and data exchange.Category management is helpul in narrowing down their supplier base to one single supplier named as categoery captain and a lot of information would be transferred between the both.The main objective of the category management is to work closely with the management and grow the category.and was used as a means to establish trust and commitment between the manufacturer and the retailers.Manufacturers can influence the assortment plans of the retailers by providing retailers with knowledge such as market share,trends and brand expendiure.This in turn allows the manufacturers focus on the category more strategically with the retailers.The category management mix is based on systematic category reviews,and it results in a category that is differentiated from competitiors categories from the ''eye of the consumer' (Kyle Dupre and Thomas W. Gruen , 2004 ).

Both these industries has to work together to bring out the best from there purchasing department. Purchasing as function could bring out the business in them by seeing it as strategic function at the core of its business and in both the industries which is very helpful in cutting down the costs in the supply chain. The groceries has to make sure that continuous replenishment of the product take place at all times because of its perishable nature and also make sure that the information flow is done on a timely bases. The retailers have to respond to the customers signals at a faster rate so that the process could start at the other end of the supply chain at the correct time. This would help the suppliers to purchase the product according to the required quantity and quality.

Different possible structure in which the product can reach the grocery

Structure 1

Farmers Grocery

Structure 2

Farmers Processing unit /Packaging Grocery

Structure 3

Farmers Processing unit Packaging Grocery

Structure 4

Farmers Processing Unit Packaging Suppliers Grocery

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