Assignment:
Create a 3-4 Pages (in addition to the cover and reference pages that you must include), write a summary of this study and its findings.
Analyze and discuss the importance of negotiations for the purpose of procuring goods and services.
Use 2-3 References/ citations (American)
APA Format
Introduction
Huang, Zhao and Zhao state that the practical methods of procurement encompass negotiation, bidding, payment transfer and verification of the quality of the products (Huang, p.652). The three researchers modelled two proposed methods of multi-stage acquisition. One model emphasized on the development of the auction price while the second method emphasized on the negotiation of price. Both approaches emphasized on the quality of the incentives while deliberating the satisfaction of the customers.
The researchers obtained various results from their study. According to the modelling method developed by the Huang et al. (2011), the results showed that the optimal bonus depended on the type of incentive used. There were also two kinds of premium configurations that seemed to be optimal for the evaluation conducted by the researchers. The tree then shows how to simulate the optimal effort of the supplier to give quality goods and services and determine the value of the bonus structures offered in procurement auction methods.
The researchers then presented a process for decision-making based on the selection of the best procurement auction technique and optimal bonus. They finally considered the coordination of supply chain management as a problem from the perspective of social planners.
The methods that incorporate the development of auction prices by completing the sale of the procurement, in conjunction with the post-auction bonus always offer lower surplus for the supply chain compared to the method that involves negotiation. The method that includes talk always creates a possibility for the improvement of Pareto.
The Effectiveness of the Projected E-Procurement Method
The effectiveness of the proposed e-procurement technique substantially depends on the ability of the customers to offer adequate incentives to the vendors to give them the information on how much they might need to procure goods and services. This will also depend on the quality of the products and services offered for procurement auction and if it meets the demands of the customers. Basing on the observation made by the three researchers on the existing practices in the market, it is evident that the new customers would give extra cash for high-quality goods and services (Huang, 2011). Similarly, the customers may negotiate if they feel that the product or service do not meet their demands or the price of the goods or services do not match the cost offered.
What missed in the determination of the efficacy of the method is that the elements of the e-procurement mechanism were built on the ability of the e-procurement auction to operate and the development of new prices for fixed qualities of goods. In the approach of modelling, the three researchers deliberated the possibility of the impatience between the buyer and the suppliers while negotiating for prices in e-procurement. In e-procurement practices, it is evident for the customers to negotiate over the quality and the price of the commodity or the service for several rounds as the intensities of conditions vary from one buyer to the next (Lee, 2015).
The Impacts of E-Procurement Market Intermediaries
The researchers did not include the possibility of an electronic market intermediary in the modelling analysis. The electronic exchange broker could offer services to both the suppliers and the customers and help promote value through a third-party method that is neutral in e-procurement. The intermediation theory states that intermediaries only exist when the value created by the broker is greater than that incurred by both parties including the sellers and the buyers (Lee, 2015). Furthermore, intermediaries are only useful if it can meet its rationality and its provision of services impacts positively on the results of the e-procurement.
In conclusion, the researchers explored a problem in the selection of e-procurement methods for the supply chain management of the organizations. From the review of various research, there are no preferred or standard approaches of designing a multi-stage e-procurement mechanism. The presence of negotiation between the buyers and the sellers and the bonuses of the suppliers are only evident in the real world despite various methods being established to fill in this gap. Finally, the researchers did not find an analysis of the aspects of the e-procurement mechanism that met their projection.
The Importance of Negotiations in the Procurement of Goods and Services
Negotiation is a crucial element in the purchase of goods and services. First, consultation is needed to challenge the requirements of the recognized user because of the role of procurement (Chong, 2014). As such, the procurement experts can ensure the comprehensiveness and the real value of the requirements of the acquisition process. Secondly, negotiation can be useful in cases where requirements of the sale involve various clauses, for instance, if the buyer is not comfortable with the price of the commodity or the service. Third, negotiation is necessary in open or less narrow specification to come to terms on the better profits, value for money and the total package of the goods or services. Fourth, negotiations can be useful in resolving conflicts between the customer and the supplier's due to miscommunication or other causes of the conflict. Finally, negotiations can improve the offer of the vendor and therefore create customer loyalty.