Sustainable Supply Chain Operations for Marketing Initiatives and Relevance of Public Procurement

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Abstract

Need of the hour is to review how much of the total marketing budget is spent on production, management and distribution of the marketing content or in other words, marketing supply chain? The intent of supply chain management is for developing more efficient, customer-centric supply chains along with supporting the process through innovative ways to reduce costs and enable growth. In addition to above, supply chain assists in framing right estimation and also acts as a contingency planning tools for ensuring complete view and in getting real response to risks viz., suppliers moving out of business, political upheaval, and natural calamities affecting manufacturing and service sectors. Companies thus can modify its pricing and promotions strategies in shaping the demand, to move additional product quickly, to drive revenue growth, or further expand margins for the high-demand products within limited market supply.

According to Wikipedia, procurement is the acquisition of appropriate goods and/or services at the best possible ‘total cost of ownership’ to meet the needs of purchaser in terms of quality and quantity, time and location. Procurement has been one of the vital and crucial functions of any Governments around the world. India is no exception to this. Both the Central Government as well as state governments and PSUs have been spending a mammoth amount of taxpayers’ money into public procurement.

Introduction

Public Procurement
In spite of having stated significance and appeal of a sound procurement system, India is yet to have a flawless and established system of procurements. Detailed rules and instructions relating to procurement by the Union Government are contained in General Financial Rules (GFR), Delegation of Financial Powers (DFPR) and Manual on Policies and Procedures for Purchase of Goods. The basic guiding principles of the public procurement system are the followings:

  • To maximize the economy, efficiency and effectiveness in procurement meaning purchasing of goods/services of required specifications for the intended purpose in a required time frame at the most economical price.
  • To establish impartiality i.e. providing fair and equitable treatment to all prospective suppliers and bidders.
  • To instigate competition among the suppliers for supply of goods/services to be procured in order that efficiency can be rewarded and procurement can be made at the most economical price.
  • To facilitate in achieving transparency in the procedures relating to procurement.

Most importantly, some of the illustrative factors that highlight the academic importance of public procurement are:

  • Very large sum of money are involved.
  • Large size of contracts are involved specifically those relating to infrastructure and defence.
  • Huge stakes are involved wherein tax payers look for value for money, transparency and nondiscrimination and general public look for quality of goods / services along with responsiveness and efficiency.
  • It has significant impact on domestic industry due to development, construction work, purchases and overall buoyancy in the economy.
  • It also has significant impact on society due to applicable provision for labour laws, minimum wages and health and safety standards.
  • Impact on Governance wherein the image of any Government gets influenced by the quality of public procurement made.

Some of the primary objectives of public procurement are as below:

  • To receive the best value for money.
  • To make available access to all eligible bidders.
  • To encourage competition.
  • To confirm transparency and openness.
  • To shape in accountability.
  • To reduce scope for corruption and abuse.
  • To develop domestic economy.
  • To compliment other public policies.
  • To be a model purchaser and employer.

Supply chain and Marketing as a growing collaboration

The marketing supply chain is the sequence of suppliers that an organization trusts on to produce marketing materials (print, promotional products and point of sale) to market their products and services. Effective supply chain management requires sharing information between nodes of the chain. In consumer chains, this demand communication often results in a bullwhip effect as demand information becomes distorted back through the chain. Building on the work of Towill et al. and Towill and McCullen, this study evaluates the impact of consumer promotions and wholesale trade deals on the performance of a supply chain. Marketing actions alone are shown to have a significant impact on supply chains.
As compared to the supply chain team, marketing team has far greater tools and data available to them to support demand management. In general, and particularly in consumer goods companies, marketing should have final responsibility for the demand plan because pricing, promotion, channel, and placement decisions factor so heavily into demand planning. Also, because marketing is most comfortable doing planning at the product family level, forecasters from the supply chain organization (who can provide historical forecasts at the SKU level) should be co-located with sales and marketing. Further, while we on the supply chain side tend to talk about sales and marketing as if they are on the same team, the chasm between sales and marketing can be as wide as the gap between marketing/sales and operations.

Globally, Sales and Operations Planning (S&OP) is an established process for integrating the sales, marketing, and supply chain organizations. However, few companies have a strong S&OP process in place. In contrast, companies are in the early stages of better integrating merchandising and supply chain management processes. In the retail/consumer goods supply chain, large retailers are beginning to understand how rationalizing the number of SKUs they carry can lead to both less cluttered, more customer friendly stores, and to supply chain efficiencies, such as inventory reductions and gains in labor productivity. This will lead to improved supply chain synergies between retailers and many of their manufacturing suppliers.
Many manufacturers came to the realization that they could not predict accurately without more timely and rough data from retailers. Companies like WalMart and Target custom have built what are now called “Demand Signal Repositories (DSRs)” to provide suppliers with near-real-time basic data, viz., POS sales by SKU by store, which have made their historical forecast data less cumbersome.
At several retailers, in-store inventory accuracy was only about 65 percent. During study, it was revealed that due to poor in-store execution, it was creating a huge problem in achieving on-shelf availability, particularly for promotional items. Most likely inventory was present in the store, but not kept on the shelves or end-of-aisle displays. RFID system was supposed to solve this problem, but it failed to sort out due to various reasons. With technology advancement, it made possible for visible display at some prominent manufacturers which has paved the way towards better linkages between merchandising and supply chain operations.

Strategies of Supply Chain in marketing

In the fast economy at present, most of the organizations are organizing for recovery while reacting to the conditions of the new objectives: reduced labor pool, analytics-based demand perceptions, inflation and deflation, concerns surrounding energy and sustainability, and flourishing Omni channel marketplace. In order to achieve these objectives, organizations need to have the foresight to influence opportunities and lessen challenging events, if any, so that business not only survives but also succeeds. With the advent and development of cloud supply chain technologies, businesses now have the capability to realize the status of their inventory in real time from the store shelf back to the manufacturer. An agile demand-driven supply chain needs end-to-e Effective approaches combined with a well-defined strategy and right tools for assisting supply chain professionals in alleviating fulfillment pressures along with preparing managers for market fluctuations in the future.

Establishments need to arrange dynamic planning capabilities and continually fine-tune their operations for ensuring receptive agility in meeting changing demands. The new model as discussed will calls for more incessant and dynamic supply chain modifications for rapidly responding to the market changes. This will curtail or even eliminate shocks across the supply chain network resulting in better visibility; improved collaboration across the value chain, including reliable and foreseeable sourcing and supply, manufacturing, transportation, warehousing, distribution; and accelerated decision-making process with better analytics and support. Market response has never been easier to achieve than it is today with cloud technology and right people, process and technology competencies.

Innovation is vital for being one step ahead of the competition which does not exist in a vacuum. In order to be effective, products must be manufactured at the right cost, place, and time. Decisions that are made in the early cycles of product development can make or break the product and must be augmented for supply, manufacturability, and supply chain operations.

While sales and operations planning processes provide coordination among sales, manufacturing, and distribution, there are disconnects and gaps among finance, strategy, and operations in many establishments. Ways to bridge these gaps are with the implementation of integrated business planning which involves people, process, and technology elements of the business. The process incorporates systems like financial strategic budgeting and forecasting with operations planning to enable smart trade-off decisions for the business.

In absence of reliable supply to customer-facing stakeholders in meeting agreed-upon service levels, a manufacturer will incline to hold inventory buffers for ensuring meeting customer service levels. This process costs the business with wrong products are at the wrong place at the wrong time, resulting in supply shortfalls. Organization needs to work on continuous improvement and operational excellence strategies which are the foundation for successful end-to-end supply chain operations.

Public procurement and competitive concerns

Public procurement process is carried out through competitive bidding or tendering process for achieving maximum economic efficiency through competitive process. Involvement of anticompetitive practices in a procurement process viz., collusion, bid-rigging, fraud and corruption could lead to artificially raise prices or compromise on the parameters which consequently impact public expenditure and the precious national resources. Hence, ensuring effective functioning of public procurement markets is part of the good governance which necessitates two distinct but inter-related challenges:

  • To ensure integrity in the procurement process.
  • To promote effective competition among suppliers and preventing collusion among potential bidders.

Numerous public contract rules are not in agreement with each other resulting in misperception thereby breeding corruption. Also, rules like the GFR are obligatory only on government procuring authorities and not on suppliers due to which it fails to ensure a level playing field. Considering the flaws, organizations sense the need for an efficient single, overarching public procurement legislation to clear the confusion affecting public procurement process in India.

This resulted in the government issuing Public Procurement (Preference to Make in India), Order 2017 on 15th June 2017 as part of the policy of the Government of India to encourage ‘Make in India’ and also to promote manufacturing, production of goods and services in India with a view to enhance income and employment. Subject to the provisions of this Order and to any specific instructions issued by the Nodal Ministry or in pursuance of this Order, purchase preference shall be given to local suppliers in all procurements undertaken by procuring entities in the manner specified . As per the order the minimum local content shall ordinarily be 50%.

Public Procurement Policy 2012

The Bill was introduced in the Parliament of India for the Legislature’s approval and derives its essence from the UNCITRAL Model Law of July 2011. It strives for regulating public procurement by:

• ensuring transparency, accountability and probity in the process;
• ensuring the fair and equitable treatment of bidders;
• promoting competition;
• enhancing efficiency and economy;
• maintaining the integrity and public confidence in the public procurement process.

The Bill covers procurements for goods, services, works, procurements by PPPs, special purpose vehicles (SPVs) for execution of contracts awarded through the procurement process, and others as notified by the Central Government.

Salient features Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012

• Every Central Ministry /Department / PSUs shall set an annual target for 20% procurement from MSE Sector.
• A sub-target of 4% out of 20% target of annual procurement earmarked for procurement from MSEs owned by SC/ST entrepreneurs.
• Overall procurement goal of minimum 20% has become mandatory from 1st April 2015.
• Tender sets free of cost and exemption from payment of earnest money to registered MSEs.
• MSEs quoting price within price band L-1 + 15%, when L1 is from someone other than MSE, shall be allowed to supply at least 20% of tendered value at L-1 subject to lowering of price by MSEs to L-1.
• 358 items are reserved for exclusive procurement from MSEs.
• Ministry /Department/CPSUs shall prepare their annual procurement plan to be uploaded on their official website.
• For enhancing participation of MSEs in government procurement, Ministry
/Department/CPSUs shall conduct Vendor Development Programmes or Buyer-Seller Meets for MSEs especially for SC/ST entrepreneurs.

Conclusion

Finally, it should be clear and loud by now that successful supply chain collaboration is neither quick nor simple. One of the major avenues which could contribute to meeting this challenge is a more efficient and effective public procurement system embedded in modern legislation. India’s public sector agencies involved in various kinds of procurements realize that there are multiple financial irregularities in the procurement systems. Hence, in past few years, many of these agencies, both at the union and state levels, have been trying to establish efficient procurement systems to counter these irregularities. Government agencies have started conducting online price bidding or e-reverse auction or e-tendering as measures to effectively monitor the flow of funds and resource allocation.

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