4.10 Choosing appropriate suppliers Flashcards
what is a procurement?
the process of researching and selecting suppliers, establishing payment terms, negotiating contracts and the purchasing of resources that are vital for maintaining the production of the business’s good or service
why is choosing the right suppliers critical for a business’s success and reputation?
Failing to find the right suppliers can cripple the ability of the business to provide goods and services to its customers. Furthermore, if a supplier fails to act in a socially responsible manner, it can damage the reputation of the business as well as the integrity and culture within the business. Although different businesses will have different supplier needs, they all need to consider certain aspects when choosing suppliers.
Why is it important for businesses to keep costs low, and how does the cost of raw materials or goods from suppliers influence decision-making, especially for businesses that compete on price?
For a business to remain profitable it must keep costs low where possible. While the price of the raw materials or goods offered by the supplier should not be the only consideration, it will often be the deciding factor for a business that competes on price.
How does the quality of goods and materials from suppliers impact the final product and the business’s reputation, and what are the potential consequences of not complying with quality and safety standards, especially for international suppliers?
The quality of the goods and materials provided by suppliers will generally determine the quality of the final product offered by the business. If a business wishes to develop the reputation of offering quality goods and service to its customers, it needs to source quality inputs from its suppliers. Businesses also need to ensure that the goods they purchase from international suppliers are in compliance with Australian quality and safety standards. Failing to do so can have serious legal consequences for the business owner.
Why is timely delivery from suppliers crucial for businesses with a fast turnover of stock, and what are the potential impacts on a business if it fails to receive the necessary goods on time?
Businesses that have a fast turnover of stock often rely on quick and timely delivery from their suppliers. If a business doesn’t receive the goods that are needed to continue its operations, it may not only lose sales but also its reputation may suffer as a result of not being able to deliver to its customers.
What are the advantages of sourcing supplies locally, and how does proximity to suppliers impact time, cost, and environmental responsibility for a business?
Being in close proximity to suppliers can save the business time and money. A shorter distance means less travel time before goods arrive and can also reduce the cost of transporting the goods. Sourcing supplies locally is not only more environmentally friendly but also helps to support the local economy — this is considered socially responsible.
What is sustainable procurement?
It is vital that the business’s suppliers meet the corporate social responsibility objectives of the business. Today, many businesses practise sustainable procurement. Sustainable procurement decisions consider the environmental and social impacts from purchased materials as well as the cost, or economic impact.
why is it important for businesses to ensure that their suppliers align with corporate social responsibility objectives?
a business practising sustainable procurement might assess the cost of acquiring a certain resource as well as the costs involved at the end of the resource’s life cycle, such as the disposal of any waste. Once these considerations are met, a business would also avoid materials produced by socially irresponsible suppliers, such as producers that are not environmentally friendly or those that exploit labour.
How can a business assess and manage the environmental, social, and economic impacts of its procurement decisions?
Sustainable procurement will involve a high degree of collaboration between the business and suppliers. It is the duty of a business to take reasonable care when selecting a supplier to ensure that its own business is not tainted by the poor practices of a supplier. If a business relies heavily on a given supplier it should enquire about and, if possible, inspect the operations of that supplier prior to making any long-term commitments.
What are some of the factors that need to be considered when choosing suppliers that meet the corporate social responsibility?
- financial
- social
- environmental
what are the financial/economical impacts?
- the savings gained from more efficient resources used
- the costs involved in maintaining the procurement of socially responsible material
-the costs involved in sourcing suppliers which meet the corporate social responsibility objectives of the business
What are the social impacts?
- the labour conditions involved in the manufacture, use and disposal of materials.
- the labour conditions involved in delivery of material
what are the environmental impacts?
- how resources such as energy and water are used in the manufacturer, use and disposal of material, as well as the delivery of material
- whether or not pollution and waste are produced from the manufacturer, use and disposal of material, as well as the delivery of materials
- how the removal or alteration of natural resources will affect flora and fauna.
what are the benefits of using suppliers which meet the corporate social responsibility objectives of the business?
- May reduce business costs – savings are achieved through ‘green’ initiatives such as reducing the use of energy.
- Improves the reputation of the business — members of the community, including consumers, are likely to perceive that the business is meeting wider community expectations.
- Customers who are aware that the business is using socially responsible suppliers may be more likely to purchase from the business – this is likely to result in the business becoming more competitive and financially successful.
- Investors who are aware that a business is using socially responsible suppliers are more likely to invest in the business.
what are the limitations of using suppliers which meet the corporate social responsibility objectives of the business?
- Increased costs associated with sourcing socially responsible suppliers – socially responsible suppliers are likely to pass increased costs of production on to the business.
- Maintaining a supply chain that sources sustainable materials will be expensive and time-consuming – checking and maintaining checks on all suppliers claiming to be socially responsible is likely to take time, and result in financial costs.
- If changing to socially responsible suppliers, the business will need to work with suppliers to ensure that quality is on par with competitors, if not superior.
