ADDIS ABABA MEDICAL AND

BUSINESS COLLEGE

MATERIAL MANAGEMENT INDIVIDUAL ASSIGNMENT

GIRUM FIREW 40/17060/13

Submitted to :- Teshale Woldeyohannis

Submission date:- 03/06/2023

 GF FURNITURE

Our Vision

Our vision is to be a leading international furniture manufacturer

offering innovative and superior quality products.

This statement reflects our purpose and anticipation for the future, inspiring factors
that drive us forward
in providing the best value-for-money products accompanied by the best service in the
industry, right from design to delivery.

Our Mission

Our mission is to create Value for our customers through Reliability and Flexibility.
We want our customers to experience the warmth and comfort through Respect and
Trust.

We will achieve our aims through implementing the following values:

Focus On Quality

We emphasis on our products quality which requires diligence and dedication.

Value For Money

We offer a wide range of well-designed, functional home furniture products at prices

many people can enjoy.

Satisfy Customers’ Needs

We pay attention to our customers in meeting their preferences and specifications.

Build Relationships

We strive to grow relationships with our customers.

Furniture manufacturing resource
efficiency
Furniture manufacturing design and purchasing practices
Guide

One of the most effective ways furniture manufacturers can reduce resource use and waste
production is to look closely at design practices, material suppliers and manufacturing
processes.

Eco design in furniture manufacturing

Eco design is a process that enables your business to consider each aspect of a product in
detail to identify where you could eliminate waste from the production process. Aspects that
you should focus on include:

 suitability of materials - you may be able to use cheaper, more sustainable materials
for some product components
 quality checks - to ensure minimum waste is produced
 volume of materials - cutting the amount of material used in a component could mean
a significant reduction in costs and materials
 rationalization of your product line - reducing product lines or changing product
designs can enable you to use fewer, more sustainable materials
 life-cycle assessment - you can use this technique to analyze environmental impacts
throughout the life cycle of your products.

Purchasing raw materials

Your business can improve its environmental credentials by reviewing how - and from whom
- it purchases raw materials. You should consider:

 how much stock your business is holding - just-in-time stock control can be a highly
effective way to reduce storage costs
 purchasing raw materials in different quantities to reduce handling costs
 buying better quality raw materials as they will need less processing
 whether the quality of your goods is high enough to avoid short life cycles and
reduced functionality
 buying partly processed components to save on-site energy, labor and maintenance
costs

Furniture manufacturing process optimization

The manufacturing processes your business uses can be a major source of cost savings. Using
certain systems and technologies can minimize waste, increase process speed, reduce set-up
times and improve product consistency -.
The 6 key steps of the purchasing process
Step 1: Identification of the need
When faced with an issue, the company identifies a need, which results in the purchase of a
product or service.

Internally, the company may, for example, need new equipment in order to launch a new
product. It may also want to replace a machine that has just broken down or simply seek a
better quality/price ratio. The need may also arise externally: the buyer may have the idea for
an acquisition at a trade fair, by seeing an advertisement or by listening to a representative
present a new product.

To improve an existing product or to innovate, to reduce purchasing costs by seeking the best
value for money: the identification of the need is dictated by a policy of performance gains.
At this stage of the purchasing process, it is a question of making the need emerge so as to
be able to source suppliers capable of solving the problem.

Step 2: The description of the product characteristics

Specifying the need allows the company to establish exhaustive and rigorous specifications.
This document serves as the basis for the rest of the purchasing process. At this stage, it is a
question of detailing the characteristics and technical specifications sought in order to
address the problem in the best conditions. This process involves a number of questions:

Step 3: Drafting the specifications

The preparation of an invitation to tender leads to the drafting of the specifications. The
more precise and informative the specifications are, the easier the next steps in the
purchasing process will be. A good specifications document (Statement of Work = SOW)
should allow suppliers to offer several solutions. In all cases, the SOW should clearly specify
the expectations that the product or service must meet, an estimate of the annual volume and
a description of the context (problems encountered, services involved, budget allocated).
Depending on your needs, the specifications can take different forms :

 A technical specification that describes a request in terms of solutions and means of

implementation. This document can detail precisely everything that is expected from
the product or service, through general and individual specifications.
 A functional specification that describes the demand in terms of needs and expected
services. This document describes the function expected by the product or service,
leaving the door open to various technical solutions..

Step 4: Supplier sourcing

Sourcing must allow the selection of the best suppliers. In this context, it is important to
gather all the information necessary to have a good knowledge of the market.
  Draw up an exhaustive list of referenced suppliers, extending to potential suppliers
not identified. Internet, professional directories, supplier catalogue… All means are
good to identify potential suppliers by country. To assist you in this market
prospecting, it may be useful to have a subscription to sites providing access to
professional directories, or a subscription to professional journals.
 Submit RFIs, requests for information, to the potential suppliers previously
identified, in order to collect more information about them.
 Monitor supplier approvals. This step involves sending additional RFIs and
conducting supplier audits to minimize financial risks and ensure technical reliability
and logistical capabilities.

Step 5: In-depth analysis of applications

With or without a call for tenders, you now have several candidates to meet your needs.
These must now be screened against the elimination criteria, before the remaining offers are
analysed in more detail.

Perform a pre-screening

Start by defining elimination criteria. These can be a particular technical skill, geographical
location or the search for a specific industrial equipment. This initial selection can then be
followed by a multi-criteria analysis to evaluate the remaining candidates.

Carry out a detailed analysis of each proposal

The buyer establishes a list of criteria, ranked in order of importance, and evaluates the
performance of each company on each criterion. Of course, depending on the situation
encountered, the importance of the criteria fluctuates. For routine purchasing products, for
example, timeliness and price are key attributes, followed by the supplier’s reputation.
Conversely, for products that require a change in internal operating methods, the priority
criteria are technical assistance, the supplier’s adaptability and the reliability of the product.

It is then advisable to find out the overall cost of acquisition and commercial conditions by
asking suppliers for detailed costing. The terms of payment requested should be acceptable
and the proposed Incoterms advantageous, depending on the geographical location. Finally, it
is important to ensure that the timeframe is appropriate and under control.

At this stage, you should also take into account the adaptability, financial security and
sustainability of the company!

The list of objective and subjective criteria to be taken into account

Objective criteria

 The price
 Geographic location
 Terms and conditions of payment
  Respect of delivery times
 Ease of operation or use
 Ease of maintenance
 Relevance of the product/service to the user’s needs
 Reliability and product quality
 The technological maturity of the solution
 Technical specifications
 The existence or not of technical services offered
 The existence or not of training offered by the supplier
 Duration of training required
 The after-sales service

Subjective criteria

 Pre-existing relationships
 The supplier’s prestige and reputation
 Perceived competence
 The personality of the interlocutors, the professional “feeling”.

How many suppliers for the same product ?

Today, companies tend to drastically reduce their number of suppliers. The strategy of
increasing the number of interchangeable suppliers is thus being abandoned in favour of other
strategies such as using two suppliers in parallel. In this way, the buyer avoids over-
dependence. Rather than using a single supplier, it is possible to choose a preferred
supplier, which will be used in 80% of the cases, relying on a second supplier for the rest.

Step 6: Preparing for the negotiation

With the information gathered in the previous phase, you should be able to develop a
negotiation strategy. If the buyer has a lot of information about a registered supplier, a new
supplier may be more difficult to approach. The focus should then be on its economic
situation, its business forecasts, its production resources and its competitive positioning.

Technical preparation of the dossier

This stage consists in determining the administrative and technical clauses to be negotiated,
as well as the objectives to be achieved. The buyer needs to prioritize: to know on which
clauses he can agree to make concessions to the seller. He must set realistic and ambitious
objectives.

In addition to enquiring about the characteristics, performance and final positioning of the
product, it is necessary to find out about the supplier’s dependency rate. Knowing the
share of company purchases in the supplier’s turnover will make it possible to assess the
balance of power and use it as leverage during negotiations.
Opting for sequential negotiation

Rather than negotiating en bloc, addressing all clauses at the same time, it is recommended to
negotiate sequentially. With this approach, the buyer does not move on to the next clause
until it has achieved its objective on the first clause. It is then better to start with the easiest
points, before finishing on the most sensitive ones.

Negotiation helps to reinforce the stakes and to identify the risks. It is also an opportunity to
lower the cost and to lay the foundations of a relationship of trust with the supplier, in
order to move towards a partnership. In this sense, it is preferable to carry out an individual
interview with each supplier consulted. This approach will enable the proposal to be
revalidated, whether in terms of quantity, price or lead time, but also to assess the risks: stock
shortages, production planning, substitute products, etc. Finally, it is an important step in
renegotiating pricing conditions, by acting on the purchase volume, payment terms or
transport.

At the end of this process, a contract is signed. This must include the following elements:
quantity, price, deadlines, price revision, compensation clause, as well as mentioning the
competent jurisdiction in case of dispute.

What Are the Functions of a Purchasing Department in an

Organization?
Most major companies and even some government organizations have a purchasing or
procurement department as part of everyday operations. These departments provide a service
that is the backbone of many manufacturing, retail, military and other industrial
organizations. Many individuals, even some who work for these companies, are unaware of
what the purchasing department does, why it exists or what purposes it serves. To understand
better what the role of the purchasing department is, consider some functions it performs.

Procuring Raw Materials and Other Resources

One role of the purchasing department is to procure all necessary materials needed for
production or daily operation of the company or government organization. For a
manufacturing company, this might include raw materials such as iron, steel, aluminum or
plastics, but it also might include tools, machinery, delivery trucks or even the office supplies
needed for the secretaries and sales team.

In a retail environment, the purchasing department makes sure there is always sufficient
product on the shelves or in the warehouses to keep the customers happy and keep the store
well-stocked.

With a small business, it is especially important to keep inventory ordering at a reasonable

level; investing large amounts of capital in excess stock could result in storage problems and
in a shortage of capital for other expenditures such as advertising or research and
development. Purchasing also oversees all of the vendors that supply a company with the
items it needs to operate properly.
Achieving the Best Possible Price
A purchasing department also is charged with continuously evaluating whether it is receiving
these materials at the best possible price in order to maximize profitability. This can be
challenging for a small business that may purchase in lesser quantities than a larger vendor
and which thus may not receive the same type of bulk discounts. A purchasing department in
a small business needs to shop around to find the best vendors at the most reasonable prices
for the company's particular size orders.

Purchasing department staff may communicate with alternate vendors, negotiate better
pricing for bulk orders or investigate the possibility of procuring cheaper materials from
alternative sources as part of their daily activities.

Paperwork and Accounting

Purchasing departments handle all of the paperwork involved with purchasing and delivery of
supplies and materials. Purchasing ensures timely delivery of materials from vendors,
generates and tracks purchase orders and works alongside the receiving department and the
accounts payable department to ensure that promised deliveries were received in full and are
being paid for on time. In a small business, this means working closely with the accounting
department to ensure that there is sufficient capital to buy the items purchased and that cash is
flowing smoothly and all payments are made on time.

Compliance with Business Protocols

The purchasing department also must ensure that it is complying with all company policies.
For example, in a small business, individual staff members may communicate with the
purchasing department about purchasing needs for things such as office supplies or
computers. Before making a purchase, the purchasing department must ensure that it heeds
the proper protocols for purchase and budget approval and must ensure that any items are
purchased in accordance with the overall purchasing policy of the organization.