International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
The major cost relationships are discussed, starting with storage and
warehousing. The major cost breakdown is outlined below, with the
percentage values indicating the approximate relative importance of the
different factors based on conventional warehouses.
Percentage
I. Building costs including rent, furnishing and depreciation 24
II. Building services, such as heating and lighting 16
III. Equipment related 13
IV. Labour overheads 38
V. Management, supervision and security 9
Procurement
Procurement is one of the key links in the supply chain. It can have a
significant influence on the overall success of the organisation. Ensuring that
there is a sufficient supply of raw materials of the required quality, at the
right price, in the right place at a right time is obviously crucial to any
manufacturing plant. Over the years many organizations have developed
large departments to deal with the sheer weight of supplier transactions.
Recently, many companies have reduced the number of suppliers in order t
reduce the cost of transactions. Single entity takes the responsibility and
committed to supply many product lines required by customers.
In addition to supplier reduction programmes many companies have moved
away from the traditional adverse relationship with suppliers. Companies
practice cooperation and coexistence concept wherein the buyer is also part
of supplier. This style of relationship recognizes that both the parties need to
make a profit to survive.
Procurement is not just about raw materials. The following goods and
services also need to be acquired:
1. Utilities like gas, water, electricity and telephones
2. Fuel including diesel and petrol
3. Capital assets such as machinery, vehicles and buildings
4. Stationery
5. Consultancy services
6. Outsourced services such as distribution contracts, IT services etc.
7. IT equipment, e.g., hardware, software and support systems.
Very large sums of money are involved in the above areas. Depending on
the nature of business of the organization concerned, emphasis will be
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