1

Case Study Analysis: BAL's Current Procurement Processes

Student’s Name:

Course:

Instructor:

Date:
 2

Outline

Introduction of the Project.............................................................................................3

Objective Advantage and Disadvantages in regards BAL’sCurrent Procurement

Process.........................................................................................................................3

Short-Term Improvement..............................................................................................4

Rationalisation and Management of Suppliers.........................................................5

Introduction of Credit Card Purchasing.....................................................................6

Formation of Materials Management Process Council.............................................6

Recommendations........................................................................................................7

E-Procurement Strategies.........................................................................................9

Conclusion....................................................................................................................9

Reference list..............................................................................................................11
 3

Case Study Analysis: BAL's Current Procurement Processes

Introduction of the Project

Based in the United States, Boeing Australia Limited (BAL) is a worldwide

subsidiary of the Boeing Company whose main activities are establishment,

upgrading, and general maintenance of military aeroplanes, apparatus, and space

communication. The company has met multifarious challenges during procurement

processes since its establishment in 1996. This situation has resulted in customer

dissatisfaction since the current procurement processes have failed to satisfy the

company’s clients. Still, more challenges have emerged during deliberation on

whether the company should add on features on the existing procurement system or

conduct an overhaul of the entire system. Although some procurement managers

advocate for temporary enhancements on the present procurement system, the

company has insufficient funds to finance purchase temporary upgrades and pay off

the maintenance personnel. The main areas of the procurement system that need

adjustment include supplier amalgamation, two-way feedback, and internal

management. This project seeks to examine the limitations of BAL’s current

procurement processes with a view of highlighting effective ways of managing

customers, suppliers, and internal organizational systems by using e-procurement

platforms.

Objective Advantage and Disadvantages with regards to BAL’s Current

Procurement Process

One of the advantages of BAL’s current procurement system is its ability to

support one-step single human interface that reduces manual data transactions.The

current procurement system suits the size of the company since it does not restrain

its budgetary allocations for procurement. However, its suitability is only for short-
 4

term goals and is unbecoming for a technologically evolved world. The current

limitations exhibited by the current procurement system outweigh its advantages.

The current procurement process at BAL poses impending managerial, financial,

technical, and market risks and uncertainties to the company. This state of affairs

can lead to decline of the company’s reputation and competitive advantage. In

addition, BAL’s procurement approach has lagged the company behind procurement

technology. As a result, the company has faced operational redundancies that have

in turn resulted in deteriorated productivity and wastage of time. The company has

attempted to match the standards of modern procurement through introduction of

short-term improvement plans. This choice has become very costly for the company

as it involve scrupulous decision-making processes that necessitate additional

operational and development costs (Xu 2011).

Short-Term Improvement

BAL has faced many challenges to upgrade and maintain its procurement

processes that have compelled the company to initiate short-term procurement

strategies to meet consumer demands. Russell Menere, who joined the company in

1999 as the new procurement manager was charged with the responsibility of finding

new means to improve the procurement system. The procurement manager had to

ensure improved productivity whilst minimising operational costs. As a result, he

initiated short-term procurement plans that include rationalisation and management

of suppliers, implementation of credit card purchasing system, and introduction of

electronic order processes (Sen, Sen, & Basligil 2010). Moreover, Russell formed

BAL’s materials management council to facilitate the company’s procurement

process. However, these short-term improvements have had various advantages

and disadvantages for the company. Noticeably, the greatest advantage of the short-
 5

term procurement improvements is that the company has by any means managed to

satisfy the demands of its vast client base. However, integrating short-term

improvements with BAL’s current legacy system has disadvantaged the company

due to emergence of operational inefficiencies that have retarded its accomplishment

of set goals. Lastly, short-term changed owing to spontaneous improvements has led

to reshuffling of employees to fill in new positions depending on their expertise.

According Henry, Garbarino, & Voola (2013), short-term improvements have

increased resistance to change as employees fear losing jobs in case BAL’s

management decides undertake an overhaul of the procurement system.

Rationalisation and Management of Suppliers

Through its short-term improvement strategies, Boeing Australia Limited

(BAL) has maintained considerable rationalisation and management of suppliers to

gain competitive advantage. Successive procurement managers have strived to

rationalise the prevailing supplier networks with a view of improving BAL’s business

operations. To achieve this objective, the present procurement manager has

maintained various delivery modes to BAL’s consumers. This strategy has upheld a

high reputation for the company. BAL has a vast range of suppliers both in Australia

and in other parts of the world. The expansion of the company since its

establishment has realized a proportional increase in the number of suppliers.

Therefore, rationalisation of the supplier base has greatly leveraged spending trends

within the organisation (Johnsen, Miemczyk, &Howard 2014). The company has also

upheld high-end supplier relationship management to enhance its supply chain. A

critical aspect of rationalisation of client base is that it ensures that suppliers have

the appropriate competence to meet the needs of the company. However,

rationalisation and management of suppliers at BAL is a short-term strategy to fulfil

 6

immediate client demands. This situation has led to poor visibility of impending

supplier pools and expenditure profiles. According to Kalwani & Narayandas (1995),

a sound visibility plan is a crucial instrument for managing highly differentiated

businesses such as BAL. This situation necessitates the company to initiate

organisational change with reference to its existing procurement strategies.

Introduction of Credit Card Purchasing

The introduction of credit card purchasing has improved the procurement

processes significantly. The use of credit card purchasing has enhanced BAL’s

management of its financial accounts as the company conserves cash whilst

ensuring constant supply of production materials and workforce to sustain the

business operations. Credit card purchasing has enabled both suppliers and

consumers to track expenditure trends (Henry, Garbarino, & Voola 2013).

Consequently, suppliers have gained substantial purchasing power to maintain

constant availability of production materials. In addition, the introduction of credit

card purchasing has enabled BAL to gain control over employee spending. This

characteristic of credit cards a created a framework that sets expenditure limits.

Generally, the credit card trend has led to development of reputable financial

management practices in the company. With the increased efficiency and availability

of low value goods owing to the use of credit cards, BAL should integrate a robust

software solution to supplement the electronic card systems. Although this strategy is

a short-term improvement at BAL, automation of payments to the suppliers has

eased the procurement process for the company. Nonetheless, there is a need to

integrate this payment system with improved procurement software to make the

system more efficient (Henry, Garbarino, & Voola 2013).

Formation of Materials Management Process Council

 7

The formation of a materials management process council as a short-term

improvement strategy has enabled the company to procure materials at reasonable

market prices. This council conducts logistic functions within an organisation to

maintain quality control and reputable inventory management. Being a large

corporation, BAL requires a materials management process council to monitor

business logistics of both physical products and intangible services. Material

management will enable the company to track the companies merchandise within its

various parts of operation. Through the jurisdiction of the materials management

council, BAL has gained the power to deliver high quality products. The council has

also ensured standardisation of materials to ensure constant supply of value

products. Nonetheless, the materials management process is part and parcel of the

procurement processes. At BAL, holistic materials management requires the

execution of modernised procurement processes to substantiate the overall

operational efficiency of the company (Simon, Smith, & West 2010). The authors

reveal that materials management has a vital function of improving productivity. Loss

of production materials can result in tremendous losses at BAL. Therefore, the

council should ensure integration of materials management processes with the e-

procurement platform to enhance storage and monitoring of materials.

Recommendations

I recommend BAL to execute an e-procurement system to facilitate

operational effectiveness. The e-procurement system has the capability to interface

with BAL’s current legacy system (Jaffeux, Perret, & Wieser 2013). According to the

authors, information technology is crucial for the management of the company’s

production processes and distribution channels. The expansion of the company has

led to increased client base as different consumers come from around the world to
 8

seek BAL’s services. Therefore, it is time for the company to integrate more versatile

and holistic procurement systems with its legacy system to improve efficiency and

enhance consumer and supplier satisfaction. In addition, there is a need to prepare

BAL’s employees for the change process. The company has experienced

technological resistance, especially proposals for implementation of e-procurement

system, because of insufficient leadership over its years of development. According

to Simon, Smith, and West (2010), BAL’s management should conduct regular

training and initiate incentive programs for the workforce to improve the relationship

between the management and the other employees. Training is a crucial stage of

preparing a company’s workforce for organizational change.

Furthermore, BAL should focus on a long-term strategy that would fulfil the

company’s goals and objectives. Since the company has a reputable legacy system

that covers all its four main divisions and twelve functional sites, the company has a

rich background to establish robust procurement systems to maintain autonomous

functionalities across all its areas of operation. This strategy ensures that BAL’s

identification and execution of functions without the prior presence of a manager or

even an immediate supervisor. However, the workability of an autonomous system

demands for an e-procurement platform that will ensure spontaneous monitoring and

measurement of performance (Paun 2014). Therefore, the only way for the

company’s success is implementation of a robust e-procurement system to enhance

operational effectiveness. BAL should place more emphasis on management control.

Management control subsystems that are integrated in the e-procurement system

automatically gather, scrutinize, and present results that provide reliable information

for decision makers. Consequently, long-term strategies would reduce both

operational and developmental costs because of increased overall efficiency.

 9

E-Procurement Strategies

E-procurement is inevitable for multinational companies such as Boeing

Australia Limited owing to the complex nature of their operations. The integration of

information technology in other systems of BAL has increased the need for e-

procurement system to monitor purchasing and measure performance of the other

systems of production (Tang & Zimmerman 2013). Generally, various barriers such

as poor leadership, resistance to change, lack of a universal procurement system,

and general complexity of the company’s organisational structures have hindered the

implementation of e-procurement strategies at BAL. However, overcoming these

challenges by preparing the employees for change will facilitate the implementation

of the e-procurement platform. According to McHugh (2011), e-procurement will

enhancelabour productivity at BAL. The system also comes with rewards such as

provision of better services to clients and suppliers, cost and time effectiveness, and

procurement transparency among other virtues. Therefore, the implementation of the

e-procurement system at BAL will improve the company’s organisational efficiency. A

survey conducted by Oh, Yang, and Kim (2014) to assess the influence of e-

procurement system deployed in similar companies revealed that the system

enables an organisation to reduce administrative costs. The authors concluded that

e-procurement ensures that businesses implement processes that are cost-effective.

Cost-effectiveness is brought about by the system’s ability to rationalize and

computerize purchasing processes. In addition, the implementation of an e-

procurement system at BAL will distribute the purchasing power amongst the

potential clients owing to standardisation of purchasing techniques.

Conclusion
 10

The business environment has increasingly become competitive in spheres of

operation from production to the end consumer. Unending advancement in

information technology has heightened business complexity. As a result, companies

have to find ways to solve complex business issues. However, traditional

procurement processes have failed to favour modern businesses since their

operations have become more differentiated. Therefore, there is a need for large

corporations such as BAL to implement procurement systems that are more robust to

leverage transaction costs. Research has indicated that companies that have

adopted e-procurement systems have a higher percentage of operational efficiency

as compared to those which have assumed long-established procurement

approaches. The success of the company will significantly depend on the integration

of a powerful e-procurement system with its outstanding legacy system. The

increasing use of credit card purchasing has improved procurement processes for

many companies. Suppliers have gained access to this easy mode of payment;

hence, on-demand delivery of materials has become the norm for many suppliers.

The strategy increases operational effectiveness that results in achievement of

organisational targets.
 11

Reference list

Henry, P, Garbarino, E, & Voola, R 2013, ‘Metacognitions About Consumer

Protection and Individual Responsibility in the Credit Card Domain’, Journal of Public

Policy & Marketing, vol. 32 no. 1, pp. 32-44.

Johnsen, E, Miemczyk, J, & Howard, M 2014, Purchasing & Supply Chain

Management : A Sustainability Perspective, Routledge, New York.

Jaffeux, C, Perret, L, & Wieser, P 2013, Essentials of Logistics and Management :

The Global Supply Chain, EPFL Press, Lausanne, Switzerland.

Kalwani, U, & Narayandas, N 1995, ‘Long-term manufacturer-supplier relationships:

Do they pay off for supplier firms?’, Journal of Marketing, vol. 59 no. 1, pp. 1.

McHugh, N 2011, ‘What is driving commercial purchasing card growth?’, Journal of

Corporate Treasury Management, vol. 4 no. 3, pp. 259-271.

Oh, S, Yang, H, & Kim, W 2014, ‘Managerial Capabilities of Information Technology

and Firm Performance: Role of e-procurement system type’, International Journal of

Production Research, vol. 52 no. 15, pp. 4488-4506.

Paun, O 2014, ‘Management of Procurement and Material Resources: A guarantee

for quality IV. Performance Management of the Process of procurement resources’,

Quality – Access to Success, vol. 15 no.141, pp. 57-61.

Sen, G, Sen, S, & Basligil, H 2010, ‘Pre-Selection of Suppliers through an integrated

fuzzy analytic hierarchy process and max-min methodology’, International Journal of

Production Research, vol. 48 no. 6, pp. 1603-1625.

Simon, J, Smith, K, & West, T 2010, ‘Incentives and Consumer Payment Behaviour’,

Journal of Banking and Finance, vol. 34 no. 8, pp. 1759-1772.

Tang, S, & Zimmerman, J 2013, ‘Information and communication technology for

managing supply chain risks’, Communications of the ACM, vol. 56 no. 7, pp. 27-29.
 12

Xu, D 2011, ‘Information Architecture for Supply Chain quality management’,

International Journal of Production Research, vol. 49 no. 1, pp. 183-198.