Reading 1



Procurement and supply environments AC1LEARNING OUTCOMES1.0 Understand the role and scope of procurement and supply in different economic sectors1.1 Summarise the functions of the private sector ? Definitions of organisations? The size and scope of the private sector in different economies? Functions of private sector organisations such as profit, growth, market share, share price,other financial measures, corporate and social responsibility1.2 Analyse the role and scope of procurement and supply in the private sector ? Sole trade, partnerships, registered companies, incorporated and unincorporated companies? Small and medium sized organisations (SMEs)? Multinational organisations? The roles of procurement and supply in the private sector1.3 Analyse the role and scope of procurement and supply in the public sector ? Defining the public sector? Central and local government ? The functions of public sector organisations? The roles of procurement and supply in the public sector? Commissioning and procurement? Achieving budget savings and other sources of added value 1.4 Explain the roles of the not for profit or third sector ? Defining the not for profit and third sector? Public accountability for the not for profit and third sector? The role of procurement and supply in the not for profit and third sectorKey Readings Section 1Reading 1Public & private sector procurement – what do you think of the differences? 2Jan Stentoft Arlbj?rn Per Vagn Freytag, (2012),"Public procurement vs private purchasing", See attached articleKey Extract“On the supply side, the purchase of public services can amount to a high value when compared to private counterparts (Telgen et al., 2007). Public procurement includes entries such as communication and IT, stationery, power, utilities, insurance, cleaning and maintenance, capital expenditures, and consultants. Public enterprises enter into many business relationships, both upstream and downstream. However, the objectives of the public sector, and thus also for public procurement, are wider than a single company’s profit (Murray, 1999; Larson, 2009). Such objectives include the effective delivery of a wide range of public services, including law and order, health, social services, education, defence, transport, and the environment. The scope of most public sector organizations is, therefore, much wider than the scope of private companies in terms of the diversity and needs of customers being served (Erridge, 2007)”.Reading 3Difference in Public Vs. Private Procurement by Alison Green, Demand Media GoogleProcurement is the process of obtaining goods and services to meet an organization’s internal and external needs. The private sector comprises privately run organizations, and the public sector comprises organizations owned by the government at the national, state or local level. Although private and public organizations have some procurement similarities, the differences often stand out.Funding ProcurementOrganizations need enough funds to finance procurement activities and meet operational goals. Public organizations rely on federal, state or local governments for funding. This means they have little control over the procurement cycle because they have to wait for the funding institutions to collect tax revenue and disburse funds. If the disbursement of funds is delayed, they have to suspend procurement activities or delay paying suppliers for delivered goods, leading to development of poor business relationships.Finding SuppliersPrivate organizations operate under institutional policies that are often tailored to meet their business goals. They can source suppliers at will and award direct contracts without a bidding process. For example, if a private hospital wants to purchase insulin pumps, it can contact various medical device manufacturers to inquire about product quality and pricing and negotiate a potential supply deal. If private organizations choose to invite vendors to submit bid proposals, they naturally focus on awarding contracts to suppliers with favourable terms and conditions. 4 Why is procurement important? last updated: 21st January 2015Many decisions taken by departments have a procurement implication that can impact on the overall cost of carrying out the decision. Here cost includes the total cost of the good or service and not simply the price that is paid.In the private sector, procurement is viewed as a strategic function working to improve the organisation's profitability. Procurement is seen as helping to streamline processes, reduce raw material prices and costs, and identifying better sources of supply. In essence, helping to reduce the ‘bottom line’. Indeed, in many organisations the importance of procurement is recognised by having their head of procurement placed at an Executive Board level.In the public sector, the concept of a 'bottom line' is less well defined - there are no shareholders' dividends to be paid out or publicly declared profit (or loss) announcements. There is however a need to maximise the output, in terms of teaching and research, within the available funds. These funds come, substantially, from public funding in the form of grants, student fees etc. We are the sector's shareholders as tax payers, students and/or staff. This, therefore, places an inherent requirement that the funds provided are managed in a manner that is accountable and demonstrates both probity and value for money.At higher levels of expenditure, this need for openness, transparency and non-discriminatory action is required by legislation. The European Procurement legislation, implemented in the UK, means that all requirements for supplies/services (>?172,000 approximately) and works (> ?4.3 million approximately) are advertised and tendered in accordance with published rules.Within an institution, its expenditure is made up of two distinct elements - pay (salaries and wages) and non-pay (all other expenditure). Procurement is concerned with the management of a significant proportion of the non-pay expenditure and ensuring that the best possible value for money is obtained when committing this expenditure. Non-pay spend includes the day-to-day running costs of the institution as well as its capital expenditure. This expenditure can be further divided into that which is used to obtain goods and services from suppliers and other expenditure such as payments made to other educational establishments or to HM Revenue and Customs. The procurement function is concerned with obtaining the required goods and services from appropriate suppliers to enable the institution to meet its strategic objectives in an economic, efficient and effective manner.Research has shown that within an institution, its non-pay expenditure is usually between 30 - 40% of its total expenditure.Source: Understand market forces that impact on procurement and supply 2.1 Explain the implications of different types of competitive markets on procurement and supply ? Defining markets? Perfect competition, imperfect, oligopolistic, duopolistic and monopolistic markets? The impact of market competition on the procurement of supplies and services2.2 Analyse the principles of market demand and supply and how these impact on mprocurement and supply ? Defining micro economics? Demand and supply curves? Shifts in demand and supply? Elasticity of demand and supply2.3 Explain the impact that market factors can have on organisations ? Market change ? The impact of demand and supply on pricing and availability? The impact of product life cycles on demandEconomicsVideosMarket StructuresMarket Structure PowerPoint: Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly 5m 1s video on the four different market structures. Looking at the characteristics of each market structure.11m 21s . monopoly. oligopoly. perfect competition. monopolistic competition. hustlin. 2m 28 life Cycle 5m ReadingsDemand and SupplyFactors affecting demand affecting supply equilibrium occurs where supply = demand. At this point, there is no tendency for prices to change. We say the market clearing price has been achieved. StructuresStructures are classified in term of the presence or absence of competition. When competition is absent, the market is said to be concentrated. There is a spectrum, from perfect competition to pure monopoly. structure is best defined as the organisational and other characteristics of a market. We focus on those characteristics which affect the nature of competition and pricing – but it is important not to place too much emphasis simply on the market share of the existing firms in an industry. Five ForcesAssessing the Balance of Power in a Business Situation + video's Model of Industry Rivalry (Five Forces) Life Cycle + Video Understand the external environment and its impact on procurement and supply 3.1 Use analytical tools to explain the impact of the external environment on procurement and supply ? The use of environmental scanning? The use of PEST (political, economic, social and technological) criteria or STEEPLE (social, technological, economic, environmental, political, legislation and ethical) criteria that impacts on organisations’ external environment? The five forces model3.2 Explain the implications of economic criteria that impact on procurement and supply ? Macro economic criteria such as interest rates, inflation, exchange rates, level of economic activity (GDP/ GNP) that impacts on organisations ? Micro economic criteria such as demand and supply that impacts on organisations3.3 Explain the implications of political and legislative criteria that impact on procurement and supply ? Political criteria such as stability and instability that impacts on organisations, different economic sectors and on countries? Legislation that impacts on organisations such as on standards, health and safety, environmental standards and employment law 3.4 Explain the implications of environmental and ethical criteria that impact on procurementand supply ? Environmental criteria such as natural risks, waste emissions, pollution and energy efficiency that impact on organisations? Ethical and social criteria such as employment rights, community benefits, working conditions and standards that impact on organisations3.5 Explain the implications of social criteria that impact on procurement and supply ? Changing societal preferences, tastes and fashions, demographics, labour and fair-trade standards and how these can impact on organisationsVideosEnvironmental Scanning 4 mins 20s analysis 5m 46seconds analysis 3m 30 secondsChanges in your business environment can create great opportunities for your organization -- and cause significant threats.For example, opportunities can come from new technologies that help you reach new customers, from new funding streams that allow you to invest in better equipment, and from changed government policies that open up new markets.Threats can include deregulation that exposes you to intensified competition; a shrinking market; or increases to interest rates, which can cause problems if your company is burdened by debt. PEST Analysis is a simple and widely used tool that helps you analyze the Political, Economic, Socio-Cultural, and Technological changes in your business environment. This helps you understand the "big picture" forces of change that you're exposed to, and, from this, take advantage of the opportunities that they present.In this video, we'll look at how you can use PEST Analysis to understand and adapt to your future business environment.You can also find out more about PEST Analysis at Forces ModelBeeBusinessBee looks at the concept of Michel Porter and his 5 Forces model. Each part of the model is investigated in some detail before looking at how you can use this model in your Business Studies exams, such as BUSS4. 6 m25s's Five Forces Model - Example: Mobile Phone Industry 1m 58s Briefing - Porter's Five Forces Model of Industry Competition 21minutes Five ForcesAssessing the Balance of Power in a Business Situation + video's Model of Industry Rivalry (Five Forces) Trading Initiative- video 2m 26s does Corporate Social Responsibility and Green Business mean and are they relevant to small businesses? 2m 29s basics with Declan Curry: What is GDP? 120: Two-Minute Economic Lessons (Indicators)"Economic Indicators" explains how numbers about jobs, wages, and gross domestic product can be used to describe the "health" of the economy. Filled with anecdotes and real-world examples, each "lesson" lasts about two minutes, or 120 seconds—thus, "Econ Indicators 4m 22s ReadingsMAIN MACROECONOMIC INDICATORS Base CodeThe ETI Base Code is founded on the conventions of the International Labour Organisation (ILO) and is an internationally recognised code of labour practice. sheet : International Standards and Codes of Conduct:sites/default/files/resources/Labour_standards_%26_codes.pdfWhat are 'Demographics'Demographics are the study of a population based on factors such as age, race, sex, economic status, level of education, income level and employment, among others. Demographics are used by governments, corporations and non-government organizations to learn more about a population's characteristics for many purposes, including policy development and economic market research. Demographic trends are also important, as the size of different demographic groups will change over time as a result of economic, cultural and political circumstances. and Analysis- (Environmental and PEST) Scanning - Internal & External Analysis of Environment analysis ................
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