The Concept Of Competitive Advantage

Published Date: 02 Nov 2017

Using the case study, relevant B203A course materials, and E-library sources, discuss the importance of sustainable purchasing and supply for organizations in gaining competitive advantage.

The phrase "sustainable purchasing and supply for organizations" is becoming more and more important for the organization to gain competitive advantage. Below the concept of sustainable purchasing and supply is going to be discussed along with some related issues.

the concept of procurement,

Procurements mean purchasing and supply. The procurement process is a vital role of every organization. That is even if the organization is manufacturing or service oriented, profit making or non profit.

Procurement is a type of contract that happens between buyer and supplier. The advantages and disadvantages the procurement contracts are as follows.

Advantages to buyer:

The buyer gets the raw material or goods at steady pace.

There is no need to fix price every time the order is placed to the supplier.

Price variations does not occur which helps in continuing with the present rate of production.

Disadvantage to buyer:

A buyer will have to buy the product and the particular amount at the prefixed prices mentioned in the deal.

The buyer will have to continue the purchase until the contract ends, even if the cost of product or its demand falls.

Advantage to the Seller:

A seller has the customer ready to consume the manufactured products.

A seller gets way for selling the products throughout the contract period.

A seller gets the negotiated amount as per deal even if the price falls.

Disadvantage to the Seller:

A seller has to continue selling the product until the period of contract is over.

A seller cannot bring variations in prices of the product during the period of contract which prefixes the price of the commodity.

Thus the main motive of procurement is to focus on sourcing, pricing and finally buying. The additional feature that is to be added in the procurement process involves the followings.

The right buy: It means the right product needs to be bought as per the quality and quantity required.

The right price: The price of the product that is procured should be highly competitive and should bring down costs of production.

The right place: The procurement should be done from the right place, from where the transportation of the product is done safely and does not adds to the costs.

The right time: The product should be brought at the right time when its quality, pricing and all other factors are available in abundance and at competitive levels.

2) the benefits that effective purchasing and supply brings to a business,

Effective purchases are one that is made at the right time, keeping in mind the price prevailing in the industry and the time of buy. While the Effective supply is one which is done keeping in mind the availability of the stock throughout the contract period of procurement at the same price fixed in the deal. The benefits that effective purchasing and supply brings to a business are discussed below.

The effective purchasing helps in getting the right product, at the right time, in the right quantity, at the right price and the right place. Thus all this added benefits helps in reducing costs of production, getting quality products and keeping prices under control.

The effective supply helps in keeping a constant demand for the product throughout the term of contract of procurement.

The cost of production remains constant.

The economic efficiencies are achieved.

The price fixation at the time of contract helps in constant flow of raw material and products without worrying for the price change in the market.

The constant flow of raw material is observed in such contracts of procurements.

The supplier can estimate the stocks that he requires to fulfill the demand of the customer, well in advance.

Cost effectiveness is achieved.

Constant rate of returns is reaped.

The products are bought from fresh arrivals.

Lesser loss in transit is observed.

3) The importance of a good purchaser and supplier relationship,

Good purchaser always makes the purchase at the right time, in right quantity and the right place. While the good supplier is one who can estimate correctly the strength of the supplier which he can deliver throughout the period of deal of procurement. The importance of a good purchase and supplier relationship helps in the following ways.

A good purchase and supplier relationship will help in building trust in future. Thus a long term healthy buyer and seller relationship exist between the two businesses which results in benefit of both the parties.

A good purchase and supplier relationship helps in making newer deals easier, which might depend on supply of goods or materials or finished goods keeping in view the various features of contract of procurement which includes same price, steady supply, similar standard product supply etc.

A good supplier and purchaser relationship helps in bringing supplier with more of orders from the same party and even from the new parties.

A good supplier and purchase relationship brings a good brand name to both the parties. This way trust is built among the others who follow the performances of both the parties. Therefore these two parties gets more of business from others in the industry.

Lesser differences are observed in such cases, which bring more time for concentration on growth and expansions and lesser time is spent on settlement of disputes.

4) the concept of competitive advantage

The competitive advantage concept is based on the right kind of procurement. That is, if the products are bought by making deals on the amount, quality and pricing well in advance than it would results in various economies of scale and other benefits which are as follows.

The buyer will be able to get the steady availability of product from the supplier even when the industry faces shortages.

The buyer will get the products at constant rates, even when there are widespread price variations seen in the industry.

The buyer will be able to maintain the quality of the products with the deal enforcing the supplier to send the same quality raw material.

The supplier will be benefitted in getting orders and payments from the customers when the whole industry faces slump in orders and lack of payments.

The supplier will not have worry about the stocks as he would have an estimate about how much of the material is already been sold, as compared to other supplier and stockiest in the industry.

The supplier and buyer both would achieve economies of scale which would result in reducing the cost of production and increasing output.

how the selection of a reliable supplier is such an important issue in creating competitive advantage. Support your answers with examples.

Reliable supplier is one who can trust for a regular supply of the product throughout the procurement deal period. Thus he is the one entrusted to supply the products at the same price, prefixed in the contract, in the same quantity specified earlier and the same amount during the contract period. The selection of a reliable supplier is such an important issue in creating competitive advantage. This can be proved with the following examples.

The oil spillage in Gulf of Mexico in year 2010 was followed by the supply chain of emergency goods in the Deepwater horizon oil spills. Thus from meal worm to feeding the wounded birds were all depended on the supplier. A good supply of such small goods at that time helped the company aid the sufferers. Later on the requirement for booms and its delivery on time by the supplier helped to prevent the oil spreading further helped. Thus a trust worthy supplier who could reach overseas is an important issue which helps the companies to overcome the bad experiences.

The reliability of the supplier such as BP also helps in creating competitive advantage such that the company uses latest technology tools for exploration along with the following of all the safety requirements. This way the company is not only saving the money by using latest techniques, it is making the business much safer to handle.

The restrictions and implications imposed by BP again worked as important for competitive advantage through which the quality of product is transferred avoiding wastages that may occur during the transit.

The challenge to find large quantities of stock at controlled prices helps in bringing competitive advantage to the companies. For example in case of McDonalds the supplementary requirements for the restaurants are being received and the company get cost effective products to be kept and used in their stores which helps them delivering quality to their customers.

Reduced wastage and increased efficiency results in profitability of the companies. In case of BP, no wastage of oil results in saving money and along with that using latest technology helps in controlling costs of production.

A company brand name is achieved which is trusted by many people. For instance no body today can question the quality achieved and maintained by the multinationals such McDonalds, British Petroleum etc.

There is improvement in cash flow which results in securing favorable prices of the products which are purchases on time and also in right quantity.

The business competitiveness is achieved.

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