Purchasing Organization Metrics Report

Balanced scorecard

A balanced scorecard is a concept used by managers to analyze their business using four different perspectives. It helps to provide a customer’s perspective, the organization’s internal perspective, the innovation and learning perspective and the financial perspective. The advantage for this measure is that it reduces the data overload by minimizing the number of required measures.

The mission statement of the organization is used to determine the customer perspective. This is helps to frame how the customer views the organization. The mission for the organization is to become a leader in delivering products used in laboratory testing. The concerns of the customer deal with time, quality, cost and performance and service. The company has been able to deliver orders made by customers within a short lead time except for few instances when suppliers had failed to deliver the raw materials within the stipulated time. The quality of the products it delivers has been undisputed. The cost of the products is also competitive in the market when compared to those of the competitors. This has helped the organization to gain a substantial market base. Convenience has been created for the customers by carrying out delivery to their preferred destination. Under this goals and achievements, it can be concluded that the organization is preferred by many customers (Kaplan & Norton, 1992).

Company based measures are important as they dictate how the organization meets the customer’s needs. Quality is the main concern for the organization’s customers and therefore, measures should be put in place to ensure that the final products are of good quality. This can be achieved through the selection of the best suppliers based on the quality of their raw materials rather than the price. This was achieved in the process of supplier selection and the continuous evaluation of the suppliers to ensure that they maintain the quality. The processes undertaken to produce the products used in laboratory settings are also meticulously monitored and improvements made over time. This means that the quality increases with time and this ensures that the internal metric of quality is achieved (Kaplan & Norton, 1992).

Innovation and learning is part of the culture within the organization. There is a research and development department within the organization whose sole purpose is to carry out research and come up with new and improved products. These are aimed at meeting the ever changing needs of the consumer. The financial perspective of the organization is also promising since the profitability has increased. The company has experienced growth and this has placed it in a better position to bargain for lower supply costs. It has been able to enjoy the benefits of economies of scale (Kaplan & Norton, 1992).

Total cost of ownership

Total cost of ownership (TCO) is different from the procurement approach because it does not account for the purchase price only. Other costs associated with the supply include storage, taxes, shipping, insurance and disposal. The raw materials that are purchased some of them are perishable such as the hearts of pigs. Although there might be an advantage in buying bulk, it is advisable to buy in small quantities that are required in the manufacturing process. This prevents any losses from being incurred in the form of deterioration when the raw material is purchased in large quantities (Plues, 2012).

There are several other factors to be considered in TCO model. First is the supply partner development costs. There are costs associated with the development of the partnership and this should be proportional to the value that the supplier brings to the organization. An example is for the turkey legs; it is advisable to look for a supplier that will supply the muscles only rather than the whole leg for the organization to obtain muscle from it. This reduces the manufacturing costs associated with the product. The location of the supplier is also important as it determines the shipping cost and time. Although a supplier may have quality products at a lower price, their location may disqualify them because the shipping cost and time taken to transport them ultimately makes the product expensive. Therefore, it is advisable to source for raw materials in a nearby location (Lancione, 2018).

There are various costs associated with the quality of the raw materials. Low quality raw materials lead to low quality final products and disappointment by the customer. There are also costs associated with returns when the quality is not good. Low quality also presents safety issues. It is therefore advisable to choose high quality suppliers to avoid the costs associated with low quality. The payment terms should also be clearly outlined. Payment to the suppliers should be done after delivery and not before as this would hurt the cash flow and places the organization at risk. The procurement department should also protect the organization from potential cost fluctuations by choosing to purchase a position in the foreign currency for the price at that point in time (Lancione, 2018).

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