Industrial buying behaviour: decision-making in purchasing

Companies such as Amazon have revolutionized third party order processing and order fulfillment. But, while a lot has been written about Amazon Services, many small but growing companies have inefficient and ineffective order processing. The aim of this case study is to explore the role of order processing and management systems and the decisions that need to be taken to invest in and maintain an integrated order handling system.

A new generation of subscription-based order systems are appearing that offer integrated facilities such as on-demand order reports, real-time order status, invoicing, tracking shipping status, inventory management, field sales enhancement, digital catalogue along with warehouse picking, packing and shipping. 'End-to-end' order management software aims to integrate sales order software, with accounting and Customer Relationship Management packages.

The aim of a multi-channel purchasing and delivery system is to avoid 'Frankenstein information systems'. These are the stand-alone computer packages that duplicate entry and which increase the chances of user input error. When a company manages several distribution channels issues arise about the sharing of supply, marketing and logistical resources. In theory, the integration of sales staff, communication and logistical operations should improve service delivery to multi-channel consumers.

As a Business Systems Manager, you have been asked to present the Board with a paper exploring automation options for improving order handling across multiple sales channels. Order management refers to an integrated order process including; product listing, inventory management, order placement and processing, billing, payment collection, fulfillment, shipping management, CRM and communication. The starting point is to map out the order processing part of the process.

Unlike Amazon Marketplace which sells direct to customers your system is designed for your B2B supply chain. As a downstream oil and gas services company supplying logging services, you have been contracted by a tier three firm to provide a logging service. This means that you are expected to provide an order processing audit trail.

Your system is expected to manage the back-office order functions by tracking any customer enquiry through a sales inquiry to dispatch and delivery. Specifically, the system is expected to link the purchasing department with the sales department, as well as handling the finance payment systems. The brief is straightforward. It is to source a 'best in class' subscription buying and supplier system that will increase sales, profit and margins, and reduce inventory markdowns and costs. The question is how is 'best in class' to be measured?

Porter, 2008, has written extensively on Value Chains. He asserts that there are internal links between a firm's infrastructure and resources and its objectives and profits. Typically, a value chain will map these relationships in terms of Infrastructure, Human Resource Management, Technology Development, Procurement, Inbound Logistics, Outbound Logistics, Marketing and Sales and finally Servicing and Support.

In addition, your system needs to be able to provide 'live data' (analytics). This allows the effective delivery of product to customer to be linked with the real time analysis of information about what the customer will buy. What this means for the purchasing manager is that the Business System Manager needs to evaluate subscription supply partners that can be trusted to provide a 'mission critical' order processing package.

Questions

1. Begin this task by exploring the breadth and depth of order fulfillment services provided by Amazon Europe to third parties and how this may help a smaller independent retailer. With reference to these services produce an analysis of what options may be made available through technical innovation (An options paper). (20 points)

2. Next conduct a value chain analysis and explain its implications for buying into a multi-channel order handling service. (A needs analysis) (10 points)

3. Prepare your briefing paper to the Board as one that outlines the opportunity-cost of investing in an online order processing system. (Briefing paper) (20 points)