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In the name of ALLAH, The Most Gracious and The Most Merciful,
Assalamualaikum. For the third post, we would like to discuss about the purchasing challenges.
Do you know anything related to the challenges in purchasing?
There are five purchasing challenges as shown below :
1. Increase in Transportation Cost
2. Increase in Material Cost
3. Economy and Political Environment Change
4. Globalization
5. Environmental Issues
First of all, the increasement in the transportation cost.
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| Transportation modes! |
Transportation can be defined as the facilitation of raw materials and component parts from supplier through the firm's manufacturing process to the ultimate customers.
Transportation is often the most costly and time-consuming component of purchasing management. Thus, we need to handle the transportation cost in order to meet the manufacturing and customer delivery schedulling requirements.
The cost is constantly increasing due to the increasement of the diesel and gasoline price, highway toll fees, road taxes and other contributing factor such as the distance, the size of the products and the mode of transportation choosen to deliver the finished goods to customer.
There are 5 transportation modes such as motor, rail, air, water and pipeline. Air transportation mode is higher in cost compared to the other 4 modes.
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| Air transportation |
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| Rail transportation |
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| Pipelines |
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| Water transportation |
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| Road transportation |
Second, the increasement in material cost.
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| Increasement in price of oil |
The natural resources in the earth mostly are non-renewable. We are actually running out of of these natural resources such as timber, coal, ore and oil. Thus, the cost to consume this raw material are slightly higher nowadays compared to past.
It might be even higher in the next 5 years as the natural resources are getting lower while the demand are high in number.
Third, the economy and political environment change.
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| Custom clearance |
As the purchasing manager, we'll need to get involved in the import and export activities. The activities are related to the laws and customs of the country you are. There might be differences in the law and regulations on certain items.
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| Laws and regulation at each country are different |
The documentation and certificates needed by the country also might be differ from each other as each country has their own laws and regulation.
Fourth, the globalization.
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| Globalization can bring good and disaster |
The globalization can be define as the growth to the worldwide scale or going international in market and sources. Most of the time the company who aspired to expand their business and establish sub-company outside the origin country are referred to go global.
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| The best company will win the battle! |
To go global, those company need to make research from the trusted source in order to enable them to make the best strategy while expanding their business there.
Fifth, the environmental issues.
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| Go green! |
Nowadays, the company are focusing on the environmental issues sensitivity and awareness.
Thus, the purchasing management need to come out with their strategy to become an eco-friendly products and services supplier as the customer are more eco-friendly-oriented.
In a nutshell, the purchasing management are important to the organization in order to maintain their existence in the field of business.
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