Ness Engineering is a private limited company mainly engaged in the continuous production and assembly of domestic products. The annual turnover is $900,000,000. The largest area of expenditure is raw materials and components where the annual spend is approximately $450,000,000. The Managing Director, Bill, considers that profit margins are too small and has asked you to suggest how profitability might be increased. Bill suggests that this might be done by appointing additional sales staff and by an advertising campaign, which would, hopefully, increase turnover and thereby reduce overhead cost per item. You find that purchasing is little more than a post-office function. Specifications are received from the design or user departments and sent either to supplies designated by the directors or to the supplier providing the cheapest quotation. The company does, in fact, deal with many suppliers and issues many orders for low-cost items. All purchasing is done by manual means. None of the buying staff has had any specific purchasing training and the head of the purchasing department, who will shortly be retiring, has held the post for over 30 years. Bill informs you that the intention is that he will be succeeded by his present deputy. You suggest to Bill that profitability might be enhanced by more efficient purchasing. Bill is unimpressed. His retort is: 'Anyone can buy. Buying is only a matter of obtaining three quotations and accepting the cheapest offer. In any event, only the design staffs have the technical knowledge to specify what is required, and often, the suppliers from whom it should be bought. Questions 1 What general reasons would you advance to convince Bill that efficient purchasing might significantly enhance profitability? 2 What specific recommendations would you make regarding how the efficiency and effectiveness of purchasing at Ness Engineering might be improved?" Ness Engineering is a private limited company mainly engaged in the continuous production and assembly of domestic products. The annual turnover is $900,000,000. The largest area of expenditure is raw materials and components where the annual spend is approximately $450,000,000. The Managing Director, Bill, considers that profit margins are too small and has asked you to suggest how profitability might be increased. Bill suggests that this might be done by appointing additional sales staff and by an advertising campaign, which would, hopefully, increase turnover and thereby reduce overhead cost per item. You find that purchasing is little more than a post-office function. Specifications are received from the design or user departments and sent either to supplies designated by the directors or to the supplier providing the cheapest quotation. The company does, in fact, deal with many suppliers and issues many orders for low-cost items. All purchasing is done by manual means. None of the buying staff has had any specific purchasing training and the head of the purchasing department, who will shortly be retiring, has held the post for over 30 years. Bill informs you that the intention is that he will be succeeded by his present deputy. You suggest to Bill that profitability might be enhanced by more efficient purchasing. Bill is unimpressed. His retort is: 'Anyone can buy. Buying is only a matter of obtaining three quotations and accepting the cheapest offer. In any event, only the design staffs have the technical knowledge to specify what is required, and often, the suppliers from whom it should be bought. Questions 1 What general reasons would you advance to convince Bill that efficient purchasing might significantly enhance profitability? 2 What specific recommendations would you make regarding how the efficiency and effectiveness of purchasing at Ness Engineering might be improved?"