Procurement Planning: Amazon's E-Procurement Strategy and Supply Chain Tactics

Procurement Planning Assignment Study

Introduction: Procurement Planning Assignment

Native Assignment Help provides assignment help to assist students in the research, writing and proofreading process.

In general procurement planning can be defined as the technique of recognizing as well as combining needs in addition to measuring the time period for the procurement with the main objective of having them at the time they are needed. Based on the type of company and its functioning procurement planning follows a number of various steps. So, one of the main purposes behind conducting this study is to recognize as well as evaluate the various procurement planning and techniques which is used by the selected company Amazon, and how they impacts the supply chain tactics of the company.

Brief about the chosen company and its ISIC categorization

Amazon is one of the biggest American MNC which is centred on e-commerce, cloud computing, website promotion, digital streaming as well as the AI.  The company is identified to be as one of the most powerful financial as well as societal forces all across the globe. The company was founded by Jeff Bezos in the year 1994.  The company is mostly recognised for its fast delivery which happens because of its competitive procurement and supply chain process. 

Considering the ISIC categorisation of Amazon, it can be seen that manufacturing units get orders and execute the deal of service and items created by various means, for example, by phone, fax, TV or over the Web. Numerous nations have decided to portray as web-based business any deal that moves the responsibility for products or administration through the Web or by electronic means. There are three phases in the exchange of the possession of a product or administration in case of e-commerce companies like Amazon which are:

1. The order placing request 
2. Making the pay 
3. The supply of the products administration

Internet business exchanges might be characterized to incorporate circumstances where just the first stage, just the first and second stages, or each of the three phases are led by means of the Web or by other electronic means.

Procurement approach of the selected company 

The Global Procurement Excellence (GPE) team is responsible for delivering and maintaining Amazon's core procurement capabilities while executing best-in-class S2P policies, processes, and digital solutions. This is the procurement approach used by Amazon through which they buy products and services that require those who are managing work from home. Further, electronic procurement is the process used by Amazon as it covers the activities of requisitioning, ordering along with purchasing goods and services (Wang, Liang, and Urgaonkar, 2018). A registered user can only access e-procurement through a supplier's closed system, unlike e-commerce. The company can choose between multiple offers from competing sellers at the most comprehensive online store for business purchases. With a few simple steps, the business can add new things with some simple steps. Easily manage budgets, fulfill orders, and replenish inventory with intuitive tools from Amazon Business. Technology is at the heart of e-procurement. Process and due diligence issues can arise if the technology fails. In order to minimize risks, choose a platform with a reputation for security and stability across the globe. It also drives efficiencies and uncovers insights faster by integrating your purchasing processes. Furthermore, businesses like Amazon can use decentralization and self-service to improve procurement workflow, consolidate suppliers and connect with external supply chains while monitoring their purchasing behaviour (Olmsted, 2018). With online procurement, Amazon has the flexibility to include what they wish as well as to restrict access as they wish. E-procurement software allows Amazon to limit a host of issues including the accepted prices of vendors, the ordered items, the selected vendors, and the type of purchases. In order to minimize rogue spending, it is necessary to tightly control these important elements. Furthermore, the existing systems of Amazon will be integrated smoothly to boost efficiency with online procurement software.

Amazon Business can also handle a diverse variety of suppliers, in addition, to managing distributed purchasing (MCKEEN, 2019). The planning process for the buyer and receipts, document sharing, process flows, cost cutting, managed to steer looking to buy, and replenish are all instances of how acquiring integration can assist organizations to gain productivity gains across organizations, not just procurement. The business is expanding in response to changes in the requirements in addition to the process of actions, which are followed by the tier of reassurance in the bank's actions. Despite wage growth, supplier interruptions, and the economic slump, business owners continue investing in good business purchasing. While analysis shows that slashing expenses and increasing productivity are the two most important areas for real benefit, 3 of their top four sourcing national priorities revolve around improving job CSR goals, such as adopting sustainability, diversity, and local businesses (Nikolova, Tabassum, and Nayak, 2022). It alters the level of activities and principles regarded as one of the most critical parts of the acquisition process. 

Risks and Benefits of the current procurement approach 

There are certain risks and benefits of the current procurement approach which is the electronic procurement approach which is used by Amazon and its business. It gives an idea about the risks and benefits involved in the business of Amazon with a procurement approach.

Risks: The main factor is the quality of information supplied by suppliers, which may be inaccurate or incomplete. In addition to this, it is important to consider the risks associated with financial and human resources used in implementing an electronic procurement system (Brandon-Jones, and Kauppi, 2018). The risk is that a supplier will not be able to meet the deadline as it would take time for them to update their systems. Also, they may not have enough resources to handle such a large volume of orders. This could result in delays and losses which are not acceptable in any case. The risks associated with electronic procurement include the following: supplier performance, technology, data security, legal, and financial. Mismatches between purchases and invoices are a major problem in procurement. Due to businesses' tendency to focus on main tasks, this reconciliation issue is often pushed to the background. Moreover, a manual system does not allow for the generation of procurement reports or the gathering of historical approval data. A customizable reporting feature offered by e-procurement software can help resolve this issue (Srai, and Lorentz, 2019).

Benefits: The primary benefit of this method is that it decreases the likelihood of bribery, fraud, and stealing by removing considerations from Amazon transactions. It also aids in the reduction of paper forms, which saves time including all groups involved in a transaction. The benefits of this method include cheaper costs for handling and transportation of goods from one location to the other and improved goal setting for the organization. E-procurement also makes it possible to keep more accurate records in order to ensure compliance with regulatory requirements (Adjei-Bamfo, Maloreh-Nyamekye, and Ahenkan, 2019). The advantages are that it reduces costs by eliminating paper handling and storage costs; it also allows for more efficient management of inventory levels because an organization can better control its supply chain; it improves customer service by reducing errors in data entry or transmission, and it provides a measure of security against theft or loss. It is highly beneficial for Amazon and its services to procure in the process of getting things done. The benefits of electronic contracting extend to the client as well as to the supplier. The ability to save money in both cases is one of the major advantages that drive firms to make changes in their contracting processes and to adopt e-Procurement solutions. One of the most important benefits of public administration is transparency. There are usually no hidden fees or user licensing charges with reliable vendors' pricing packages. Moreover, this software can save the employees’ time so it can be spent on important tasks. Thus, the benefits are considered a major aspect of considering changes in the businesses and developing a certain understanding of the process (Bienhaus, and Haddud, 2018).  

How risk affects the supply chain strategy and operation 

Procurement is the process of obtaining services or goods as part of a firm's operations. Since many businesses rely on purchasing to feature, purchasing and procurements necessitate a substantial investment in management information. The risks involved in the procurement process like electronic procurement affect the supply chain strategy as well as the operation of Amazon. In the supply chain, increased risk leads to lower performance metrics such as inventory costs, lead times, flexibility, and responsiveness (Ivanov, and Dolgui, 2021). As previously stated, purchasing is only one of the numerous steps in the supply chain. Inventory control of Amazon oversees the transition from purchasing to component manufacturers to consumers in some supply chain operations. On-time sourcing of essential assistance, product lines, or raw material aids in business operations. When the risk is high, it can consume a large portion of the financial operations. As a result, with the correct risk assessment procedure in place, organizations implement metrics without having to incur huge costs. Instituting an efficient procurement process seems to be critical to the stockpile brand's ultimate effectiveness (Benton Jr, 2020). The risk related to the electronic procurement approach is affecting the supply chain strategy of Amazon as it is required to manage the process of supply in a better manner (Rosa, Sassanelli, and Terzi, 2019).

In addition to this, the electronic procurement risks highly affect the supply chain strategy of Amazon in a positive as well as negative manner. It affects the capabilities of suppliers, their interests as well as competitiveness along with the financial viability that is underperformers. However, the supply activities affect the operations at the level of considering the changes in the business (Brown, and et.al., 2019). The supply chain network, inventory tracking policy, knowledge transfer, consumer demands, an application that analyzes, cycle times, and evaluation time frame duration are all important considerations. It required a lot of innovation in the process of procurement to reduce its impact on the supply chain strategy as well as operations and the need to make improvements in the communicating activities with the help of intelligence tools. The time-consuming approval chain due to the electronic procurement approach affects the operations as it affects the time management of Amazon and needs to make changes according to the requirement of the business. However, the risks of procurement affect the older vendors as they face issues in understanding software systems, and small businesses are affected due to the challenges in communication (Ivanov, Dolgui, and Sokolov, 2019). Consequently, selecting tech-savvy suppliers is crucial to maximizing e-procurement's benefits. Due to this, it would not be recommended to use it to negotiate large and expensive purchases. Further, it is important to reduce the level of risks in the process of procurement which helps to manage the supply chain strategy as well as business operations of Amazon. There is a risk of failure in the procurement process when it comes to purchasing services, products, or resources. Consequently, procurement operations can be disrupted or procurement costs can be directly affected by such risks. The bottom line is affected by procurement uncertainties in either case. However, it is important to consider the changes in activities of risks related to the process of procurement as it affects the supply chain strategy and operations. In addition to this, the risks positively affect the supply chain to deal with the technological changes and adoption of new techniques that are beneficial for the business. Thus, the procurement risks affecting the supply chain strategy as well as the operations of Amazon that needs to be considered as an important point for the discussion and making changes according to business. 

New plan to offer products and services from a vendor viewpoint

Main delivery chain executives (CSCOs), as well as the top management of store network technique, frequently battle to interpret dreams, objectives, and targets into reasonable, effectively conveyed coordinated need activities, because of the normal intricacy of inventory network and methodology. They need a straightforward method for systematizing and articulating their arrangements. In case of Amazon, it has been seen that most of their procurement and supply chain is done by online order receiving of product and service order. In that case supply chain and vendors plays a major role in timely delivery of the goods and services to customers door (Rosa, Sassanelli, and Terzi, 2019). So, based on the risk identified in the above segment there can be some new plan to offer product and service from the Amazon’s supplier point of view. In that case Amazon have to adopt the six-step process which are discussed in detail below:

1. Firstly, it will be important for the Amazon’s supply chain manager is to create a proper vendor assortment scorecard that which entails the entire of the vital components which is required in a good vendor.  The scorecard and the vendor selection will be done on the basis of:

• The characteristic of the vendor
• Vital tactical alignment aspects to the company value
• Usable business strategies

1. The second phase comes sensing the supply. Amazon require to identify what is conceivable within their supply chain. This skill comprises of techniques like supply chain designing, supply threat administration well as supply association administration.
2. The third step comes the supply response. The tasks in a production network that get things going inbound coordinated operations, fabricating, resource the board — fall into this class.
3. With its delivery as well as requirement sense skills, Amazon might arrange its start-to-finish supply chains as well as create productive vows for clients. Processes that empower these activities to incorporate control towers, item life cycle administration, and high-level deals and tasks arranging.
4. Another important plan that Amazon can take from vendors viewpoint is sensing the need of the product and services. This capacity includes identifying as well as checking what clients need. Request administration, determining, and request detecting are incorporated here.
5. The next phase comes demanding the response. Techniques like logistics, multichannel contentment as well as online business-like Amazon must facilitate the vendors to provide the detail information of the client so that they can do the timely delivery of goods and services (Ivanov, Dolgui, and Sokolov, 2019)

Conclusion 

From the above report, it can be concluded that Amazon uses an appropriate procurement approach which is an electronic procurement approach that helps businesses to buy and sell products in a better manner. The report mainly summarizes that there are some risks and benefits related to electronic procurement that are directly related to the business Amazon and the need to make changes according to the requirement of a business. Further, it helps to understand the new plans to offer different products and services from the point of view of the vendor. Thus, the aspect of understanding the procurement approach is considered one of the most beneficial points to consider the changes in business activities.

References

Adjei-Bamfo, P., Maloreh-Nyamekye, T. and Ahenkan, A., 2019. The role of e-government in sustainable public procurement in developing countries: A systematic literature review. Resources, Conservation and Recycling, 142, pp.189-203.

Benton Jr, W.C., 2020. Purchasing and supply chain management. Sage Publications.

Bienhaus, F. and Haddud, A., 2018. Procurement 4.0: factors influencing the digitisation of procurement and supply chains. Business Process Management Journal.

Brandon-Jones, A. and Kauppi, K., 2018. Examining the antecedents of the technology acceptance model within e-procurement. International Journal of Operations & Production Management.

Brown, A., Chouldechova, A., Putnam-Hornstein, E., Tobin, A. and Vaithianathan, R., 2019, May. Toward algorithmic accountability in public services: A qualitative study of affected community perspectives on algorithmic decision-making in child welfare services. In Proceedings of the 2019 CHI Conference on Human Factors in Computing Systems (pp. 1-12).

Ivanov, D. and Dolgui, A., 2021. A digital supply chain twin for managing the disruption risks and resilience in the era of Industry 4.0. Production Planning & Control, 32(9), pp.775-788.

Ivanov, D., Dolgui, A. and Sokolov, B., 2019. The impact of digital technology and Industry 4.0 on the ripple effect and supply chain risk analytics. International Journal of Production Research, 57(3), pp.829-846.

MCKEEN, P., 2019. The Pursuit of Streamlined Purchasing: Commercial Items, E-Portals, and Amazon. GM RACCA, CR YUKINS (a cura di), Joint Public Procurement and Innovation: Lessons Across Borders, in Droit Administratif/Administrative Law Collection, pp.373-387.

Nikolova, M., Tabassum, N. and Nayak, B.S., 2022. The Internal Organisational Environment in Amazon. In Modern Corporations and Strategies at Work (pp. 35-71). Springer, Singapore.

Olmsted, L., 2018. THE AMAZON-IZATION OF FEDERAL PROCUREMENT. Public Contract Law Journal, 48(1), pp.101-122.

Rosa, P., Sassanelli, C. and Terzi, S., 2019. Circular Business Models versus circular benefits: An assessment in the waste from Electrical and Electronic Equipments sector. Journal of cleaner production, 231, pp.940-952.

Srai, J.S. and Lorentz, H., 2019. Developing design principles for the digitalisation of purchasing and supply management. Journal of Purchasing and Supply Management, 25(1), pp.78-98.

Wang, C., Liang, Q. and Urgaonkar, B., 2018. An empirical analysis of amazon ec2 spot instance features affecting cost-effective resource procurement. ACM Transactions on Modeling and Performance Evaluation of Computing Systems (TOMPECS), 3(2), pp.1-24.