Business Service Procurement: Challenges and Opportunities - Essay Sample

Introduction

The growth of business services in the recent past has always been orchestrated by the increasing specialization and outsourcing of services such as accounting, Information Communication Technology, security, among others. Interestingly, the nature of the services offered and the corresponding cost of provision of such services often remain unchallenged by the customers. There are several challenges encountered when buying services by various organizational buyers. The content of the paper identifies such problems and proposes the approaches and purchasing process that can help in overcoming such challenges.

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Several pieces of research that have been done in the area of purchasing have traditionally focused on the industrial goods rather than the services thereby giving limited coverage of the pertinent issues relating to the purchase of the services. For instance, if we assume that products and services are not that different, then it is intuitively reasonable to believe that the challenges experienced in the purchase of goods are similar to those experienced with the purchase of services.

Taking into cognizance the four features of services such as intangibility, simultaneity, heterogeneity, and perishability, several top management officials perceive that the purchase of services is not as complicated as that of goods. One of the significant challenges in purchasing services is that there is often knowledge gaps concerning the purchase of services. Again, buyers always deem drawing specifications for services is difficult; thus; there is need for collaboration between the industrial service marketers and the customers particularly at the service specification phase. This is because the service providers could help the purchasers to construct a decent frame for decision-making. Incorporation of the steps of pre-selection of the suppliers as well as detailed specification in close collaboration with them would help in maximizing the value for the buying company.

Public E-Procurement

One of the fast-emerging models in the field of procurement is electronic procurement, which is applicable in both the private and the public business sectors. Although e-procurement has gained maturity in the United States, its application in public purchase is still taking off in other countries across the world. Alongside its ability to connect the buyers and the suppliers, electronic procurement could facilitate building of electronic workplace that comes along with bundle of privileges to the firm. For instance, electronic purchase offers a platform for carrying out business while at the same time providing essential opportunities that cut costs thus improving the effectiveness in service delivery to customers.

This method of purchase also encourages public transparency in making procurement orders, thus ensuring contracts are awarded only to the bidders that offer the best value for the firm's money. The various summits and initiatives in Europe indicate that investments in electronic procurement would have tremendous impacts on the development of electronic commerce. Furthermore, the adoption of the electronic systems in business operations such as electronic procurement ensures maximum scalability, maintainability, extensibility, and the interoperability.

Another advantage that electronic procurement comes along with is the ability to deal with the most complex equations such as logistics capabilities, price as well as certain service response time, among others. Although the adoption of the electronic systems in the public sector offers excellent benefits such as cost and effectiveness in procurement, these systems require significant organizational changes in the public areas. However, the major challenge that could face the adoption of the e-procurement systems is the lack of the proper legislation that would ensure non-discrimination, transparency and intense supervision of the suppliers.

Pricing Strategy and Practice: The Impact of Market Structure on Pricing Objectives on Service Firms

Service companies set market prices on goods and services based on various objectives that have direct impacts on the market structures. However, there is a lack of literature on the effects of market structure on the pricing objectives and behaviors of various organizations thus calling for the need for empirical examination of this concept from the marketing perspectives. Therefore, the paper aims to explore the different pricing objectives that companies pursue in setting prices as well as to examine the impacts of market structures on pricing goods and services.

The value of this article is to present the empirical examination of the impacts of market structure on the pricing objectives, especially from the marketing perspectives. To meet the purpose, the paper employed the data collected through personal interviews of individuals from 170 companies in Greece, all operating in different services sectors. The significant findings therein indicated that competition in the market plays a vital role in price setting of goods and services. For instance, companies that operate in a highly competitive market with well-informed customers always place their emphasis on maximizing the profits through the prices they set to gain competitive advantage in the highly competitive market.

Therefore, companies that operate in a more competitive market with no competitive advantage will always tend to place more emphasis on the determination of many fair prices for their customer. Furthermore, the market structure plays a vital role in determining the rates for market goods and services. For example, oligopolistic markets often avoid pricing practices that would be risky in terms of stability and balance of the markets the thus they prefer price collusions. Most importantly, companies seem to follow a particular pricing hierarchy based on customer satisfaction without disregarding financial considerations

Outsourcing? At Your Own Risk

Outsourcing of business functions and processes overseas have always been viewed as a way of cutting the cost and in turn, maximizing on the profitability of the business. However, outsourcing may come along with several risks if not effectively managed, thus increasing rather than decreasing the total chances to the organization. In this sense, there needs to be a thorough analysis from the perspective of enterprise risk management before outsourcing.

Enterprise risk management analysis has become more vital when outsourcing because most companies have been involved in outsourcing several functions than never before. Although outsourcing was only left for the big companies, the narrative changed in the mid-1990s where small and mid-tier companies could engage in outsourcing due to the low cost that that characterized the act. Outsourcing began with products such as IT and payrolls then proceeded to include software management applications, among others.

The risks associated with outsourcing in companies include risks related to operations, market, finance, human capital, IT, Legal, regulation, as well as reputation among others. For instance, when outsourcing, the company aims at changing the strategy of the organization such as call centers, reservation centers among others. One of the strategic risks of sourcing is the likelihood of revealing organization's confidential information. Furthermore, during outsourcing there is often the likelihood of selecting the wrong vendor, which, may result in operational risk characterized by risks of the failure to meet the operational objectives outsourcing.

Additionally, the financial risks that could be associated with outsourcing include both financial reporting and cash flow risks. For instance, the hidden costs, if not managed well, may decrease the cash flow in the organization. However, the Proposed Federal Outsourcing legislation on enterprise risks would be much useful in the management of the risks associated with outsourcing.

Effective Purchasing Strategy; The Untapped Source of Competitiveness

For many years, purchasing and supply management has been the principal subject of several pieces of research across the world. Many investments have been placed on the exploration of fundamental purchase issues such as outsourcing, networking, and partnerships, among others. However, it is only in recent years that the purchasing functions, especially in the medium and the large scale by businesses, have been given much attention. Although many companies are often not keen about investing in making improvements in the supply chain management, suggestions are that making such investments in the supply chain management always result to increased profits and productivity that is geared towards achieving the leading-edge company status.

Usually, there are failures of many companies to invest in the development of the purchasing activities, thus rendering them an untapped source of competitiveness. Surprisingly, only a little has been done to measure the impacts of new purchasing strategy, and this could be attributed to lack of experienced personnel capable of acknowledging the relationship between purchasing strategy and the competitiveness of an organization. The design of this chapter thus was to benchmark on both the effectiveness and efficiency of the project function as a competitive strategy for firms.

Evidence has indicated that the productivity and profitability of the firms have improved because of the improvement in the company's supply chain management. Research also suggests that there is less inclination of businesses being sold to and that the much time is spent by more effective salesforce in planning and coordinating than on the visiting customers. Conclusively, companies would greatly benefit if they could invest in skilled people with the right visions that could set the appropriate strategies and implement them both within the organization as well as with the supplier. This, in turn, results in a competitive advantage for the firm.

Estimating Cost-Saving Potential from International Sourcing and Other Sourcing Levers

Even though there would be differing interests of the international sourcing from one country to the outstanding motive of any state or organization is the cost-saving motives. However, only limited efforts have been put in place to empirically quantify such impacts of international sourcing as well as the benefits with which such kinds of supply come along. In recent studies, the results obtained concerning the potential cost-saving of global sourcing has often been so ambiguous that the topic has always been viewed in isolation rather than looking at the alternative cost-saving approaches. Because of the eminent ambiguity in the recent studies, this particular work is aimed at analyzing the potential impacts of the international sourcing with consideration of the saving potential attributed to other types of sourcing tactics such as the collaborative product improvement among others, as well as the potential tradeoffs between various levers.

The findings obtained for this chapter are based on the data from 134 cross-functional cost-saving workshop with identical methodology. The participants of the workshops identified and estimated the cost-saving projects through consideration of the seven sourcing levels. Most importantly, the findings of this research indicated that 3.4 percent saving expectations from the international sourcing. However, over 80 percent of the cumulative savings are attributed to other sourcing levers such as process improvement of pooling of demand. From the findings, it could be observed that there are clear tradeoffs between the international so...