Professional Documents
Culture Documents
Organizations resort to reciprocal buying when they find it difficult to do business in highly
competitive environment. Reciprocal buying is buying form one’s own customers. If this is done
in conditions of competition, there should not be anything wrong about this. But, in this situation
one tries to take care of the other as each one keeps changing the role of customer & supplier.
This leads to over all deterioration of product quality and downfall of the pair.
Systems contract
Purchase order is used as a single document during the course of completing entire transaction.
Same document is used as delivery challan at the time of delivery. The document is updated at
every stage of the process. Reduction in number of documents and documents preparation is
major saving in administration expenses. This results in cost reduction to the value chain.
Importance of source
Source is the place from where we procure our inputs. These inputs may be in the form of raw
materials, out sourced components or semi finished items. Manufacturing companies out source
large number of items as they slim down processes.
As outsourcing is gaining importance in business, importance of source is becoming high.
Following reasons are considered to be making source an important element in materials
management.
1. Source of market intelligence: source is a window through which the buyer organization
looks at the world outside. Source provides access to the real time information about the
phenomenon. Information about current trends and industrial climate is obtained from the
sources.[market conditions, industrial climate, what is new?]
2. Crucial for product quality: buyer organizations depend on out sourced components for
producing the product which central to the objectives business. Reliance on capabilities of
supplier to meet tough quality standards is very high in current business environment.
3. Member in the value chain: supply source is an important element in the value chain. Any
cost added to the value chain reaches the end user as price. Hence effectiveness and
efficiency of the source becomes vital to business.
4. Import substitution, cost reduction, value improvement: as indigenization of sub
assemblies, components and spare parts is necessary to reduce the cost of product in
competition, buyer organizations turn to supply sources to develop these items. Several trials
and corrections may be required to finalize the substitute. In house capacity is generally not
available for this kind of trials. A resourceful supplier is very useful in this process. Same
logic holds good in other exercises for cost reduction and value improvement. It is quite
logical that entire process is not outsourced but isolated developmental activities are
invariably done. It is common knowledge that many small scale companies do not have full
fledged tool rooms but rely on sources for all tool room activities.