Achieving efficiency and competitiveness has become an urgent need for companies, which operate in an increasingly changing environment and this largely conditions their operation and strategies to follow.
Every organization, in both the public and private sectors, is dependent in a significant way on the materials and services offered by other organizations. Even the smallest office needs space, heat, light, power, communication, and office equipment, furniture, stationery, and various items to perform its functions.
This work proposes improvement actions for purchasing management using the ABC Clasico and ABC multicriteria methods in a food service company in Angola. Keywords: purchasing, method, management.
Introduction
Purchasing is an administrative activity that goes beyond the simple fact of buying, it includes planning and policy activities that encompass a wide range of related and complementary activities. Some of these related activities are: research and development required for the proper selection of materials and sources of supply; the certainty of delivery; inspection of incoming shipments in order to ensure that their quality and quantity are adequate; the development of procedures to implement purchasing policies; coordination of purchasing activities with other related internal departments such as engineering, production and accounting;developing effective communications with senior management in order to ensure a full performance evaluation of the purchasing function.
The purchasing concept involves the entire process of locating suppliers and supply sources, acquiring materials through price negotiations and payment conditions, as well as monitoring the process (monitoring) with the chosen supplier and receiving the material for control and guarantee the supply within the requested specifications.
The absence of clear and precise purchasing management policies can be a factor that affects the development of the procedure, influencing the quality of the service that is being provided to both internal and external customers. To achieve the effectiveness of the purchasing process, it is necessary to concentrate efforts on acquiring the materials with the highest possible quality, at the best price, at the right time, and most importantly, establish a commitment with the supplier that ensures the continuity of these good talks. In this sense, it is essential to use economic-mathematical techniques or methods that, given the diversity and complexity of the environment, need to be increasingly precise and flexible schemes.
Materials and methods
The application of the Classic ABC method and the ABC Multicriteria method are proposed. Classic ABC Method - A widely used quantitative technique for ranking, also called ABC analysis, Pareto analysis, or the 20/80 rule. It is based on the results achieved by the Italian economist Wilfredo Pareto in 1897, after carrying out a study of the distribution of income. This analysis showed that a large percentage of income was concentrated in the hands of a small percentage of the population. This principle became known as Pareto's law. It is classified based on 3 groups, ABC.
Applied to purchases, it would have:
Group A products: These are those that represent 20% of the total and 80% of the value of purchases is concentrated in them.
Group B products: These are those that represent 30% of the total and 15% of the value of purchases is concentrated in them.
Group C products: These are those that represent 50% of the total and 5% of the value of purchases is concentrated in them.
It is worth noting that these percentages are not always applicable in all companies, since it depends on the characteristics that the organization presents in terms of the criteria that must be used for the classification of the products to be purchased.
The ABC classification suggests that the higher the value of the purchases, the greater the control over the products. In other words:
- For products classified as A: Maximum control For products classified as B: Medium control For products classified as C: Minimum control.
The classification that is established by the ABC method, presupposes the use of a single criterion or base indicator to establish the classification, with which it turns out that the chosen criterion or indicator determines the importance of the product. However, when it comes to inventory management, the problem cannot be focused solely on the basis of a single indicator, as there are a set of factors, both quantitative and qualitative, that are of vital importance for the good performance of the company. organization. For example, there are products in inventory that, despite not representing an important product for the organization in terms of invested value, improper management of them could have serious consequences, which is why in terms of value in use it represents. Therefore, the ABC method,Based on a single criterion or indicator to classify the inventory items, it does not solve the problem in question.
Hence, the need to use more than one criterion to carry out said classification.
To solve this problem, Dr. Maritza Ortiz Torres, based on the experience gained in solving inventory problems in Cuban organizations, has developed a multi-criteria classification method, whose application has been carried out with very positive results in numerous companies.
ABC Multicriteria method
The proposed method consists of 3 steps:
Step 1: Determine the factors that will measure the degree of importance of each product.
To do this, the following notation will be used:
i: Number of selected factors or criteria i = 1,2…., mj: Number of products j = 1,2…., n
Step 2: Evaluate the impact that each factor i has on the performance of the organization, for each product j.
For this, a scale of 1 - 3 will be used as follows:
High Impact: 3; Medium Impact: 2; Low Impact: 1
Step 3: Determine the ranges of values for the different groups ABC, as follows:
It will be denoted by X i j: Evaluation given to factor i for product j (depending on the impact it has on the organization).
- For each product j, the sum of the evaluation obtained in each factor i, denoted by ET j, will be calculated, that is:
j = 1,2,….., n
- Set the ranges for each group as follows:
ü Group A: For Values of ETj = (2 * (m-1) +3; 3 * m) ü Group B: For Values of ETj = (m + 2; 2 * m) ü Group C: For Values of ETj = (m; m + 1)
The ranges of values for each group guarantee that, if at least one factor is evaluated as high impact, although the rest are evaluated as low impact, the product will never classify within group C.
Considering that it is convenient to draw up a purchasing strategy for these products, a technique called the Benefit Impact Matrix - Supply Risk (IB / RS) will be applied.
Matrix of Impact in the Benefit - Risk in the Supply (IB / RS). Another technique that can be used to classify products is the so-called Benefit Impact-Risk in Supply (IB / RS) matrix. It is used for decision-making regarding the inventory policy to be followed and for the configuration of a purchasing strategy. In this case, the classification of the products will be based on the impact on the benefits and the risk of their supply.
Using these criteria, the company can classify the products it purchases into the following categories:
- Strategic products: High impact and high risk Commodity products: High impact and low risk Non-critical products: Low impact and low risk Bottleneck products: Low impact and high risk
For each of the four categories in which the products are classified in the IB / RS Matrix, a different purchasing approach is required, the complexity of which is given by the strategic consequences they entail.
For decisions about the supply of strategic products, the company will need to rely on analytical techniques such as market analysis, risk analysis, simulation models, price forecasting.
For commodities, vendor analysis techniques, price forecasting models, and decision-making models can be used. In the case of bottleneck products, specific models of market analysis and decision analysis will be needed.
Decisions about non-critical products can be made with simple market analysis and the establishment of policies for decision making.
Results
To carry out the study, a commercial company was chosen and within it the group of products, which turned out to be the most important in terms of volume of purchases during the year that the investigation was carried out.
The results of applying the Classic ABC method are as follows:
Group A (High impact): Composed of 30 products that represent approximately 28.30% of the total sample and 79.38% of the total value of the products.
Group B (Medium impact): Composed of 31 products, which represent approximately 29.25% of the total sample and 14.89% of the total value of the products.
Group C (Low impact): Composed of 34 products that represent approximately 42.45% of the total sample and that accumulate the remaining 5.72%.
(See table in annex for more details)
For the classification in the ABC Multicriteria method, the 30 products that were classified within group A in the classic ABC method were selected, the results of which are shown below.
Step 1: Determine the factors that will measure the degree of importance of each product.
The following factors have been determined:
- Product value Importance of product Risk in supply Risk of theft or obsolescence Delivery time Reorder point
Step 2: Evaluate the impact that each factor i has on the performance of the organization, for each product j. To do this, a scale from 1 to 3 is used as follows:
High Impact: 3; Medium Impact: 2; Low Impact: 1
Step 3: Determine the ranges of values for the different ABC groups.
They have been determined as follows:
Group A: For Values of ETj = (13; 18) Group B: For Values of ETj = (8; 12) Group C: For Values of ETj = (6; 7)
The table below shows the results obtained by applying the ABC Multicriteria Method.
Table-1 Classification according to the ABC Multicriteria method
| products | F1 | F2 | F3 | F4 | F5 | F6 | Etj | Group |
| Beef | 3 | 3 | one | one | one | two | eleven | B |
| Tender cheedar cheese | 3 | 3 | one | 3 | two | 3 | fifteen | TO |
| Whole pig | 3 | 3 | one | one | one | one | 10 | B |
| Butter with salt | two | 3 | two | one | one | one | 10 | B |
| Turkey ham | 3 | 3 | two | 3 | 3 | 3 | 17 | TO |
| Cooked ham | 3 | 3 | two | two | two | two | 14 | TO |
| Pork chop | 3 | 3 | one | one | 3 | one | 12 | B |
| Ham bar | 3 | 3 | one | 3 | two | two | 14 | TO |
| Locust | 3 | 3 | one | two | one | two | 12 | B |
| Chicken thigh and against thigh | one | 3 | one | one | one | one | 8 | B |
| Parmesan | 3 | 3 | one | 3 | 3 | 3 | 16 | TO |
| Garlic | one | 3 | one | one | one | one | 8 | B |
| Gouda cheese | 3 | 3 | two | 3 | 3 | 3 | 17 | TO |
| Sugar | one | 3 | two | one | one | one | 9 | B |
| Rice consumption | two | 3 | two | one | one | one | 10 | B |
| Prime beef | 3 | 3 | one | two | two | two | 13 | TO |
| Unsalted butter | two | two | two | one | one | one | 9 | B |
| Fish | 3 | 3 | one | one | one | one | 10 | B |
| Juice | one | 3 | one | one | one | one | 8 | B |
| Natural water | one | 3 | one | one | 3 | 3 | 12 | B |
| Mortadella | one | two | one | one | one | one | 7 | C |
| Smoked loin | two | 3 | one | 3 | 3 | 3 | fifteen | TO |
| Beer glass / bot | two | 3 | one | one | one | one | 9 | B |
| Green olives | two | 3 | two | one | 3 | 3 | 14 | TO |
| Super bok / bot beer | two | 3 | one | one | one | one | 9 | B |
| Coca cola soft drink | one | 3 | two | one | one | one | 9 | B |
| Tuna | one | 3 | one | one | two | two | 10 | B |
| Milk powder | one | 3 | one | one | one | one | 8 | B |
| Natural whole milk | one | 3 | one | one | one | one | 8 | B |
| Frozen chicken | two | 3 | two | one | one | one | 10 | B |
Source: self made.
When the ABC Multicriter method was applied to the 30 selected products, 9 products A, 20 products B and 1 product C were classified.
Considering that it is convenient to draw up a purchasing strategy for these products, the technique called the Benefit Impact-Risk in Supply (IB / RS) matrix was applied. This matrix can be used for this purpose, since in this case the classification of the products that are acquired will be based on the incidence in the benefits and the risk in their supply, which allows analyzing the supply market of the products, determining what is its strategic position in terms of purchases and develop the consequent strategies and action plans.
Applying the IB / RS Matrix, the organization can classify the products it buys into the following groups:
- Strategic products: High impact and high risk. Commodities: High impact and low risk. Non-critical products: Low impact and low risk. Bottleneck products: Low impact and high risk.
For the evaluation of the Impact on the Benefit and the Risk in the Supply, the following criteria were considered:
For the Impact on Profit the following factors are used:
- Product value. Product importance.
For the Supply Risk, the following factors are used:
- Risk in the supply. Delivery time of the supplier.
As the IB / RS matrix classifies both the impact on the benefit and the risk in the supply in high and low, and for the evaluation of the considered factors the scale of high, medium and low impact was used, then to classify each product in the matrix will use the following procedure:
The product will be considered to have a high impact:
- If you scored high on both factors If you scored a factor with a high score and another factor with a medium score If you scored a factor with a high score and another factor with a low score If you scored medium on both factors.
It will be considered low impact:
- If you scored low on both factors If you scored low on one factor and a half on the other factor.
Table-2 Matrix of the Impact on Benefit / Risk in the Supply
| Impact on Profit | Risk in Supply | Classification | |||||
| products | F1 | F2 | IB | F5 | F6 | RS | IB / RS |
| Beef | 3 | 3 | Tall | one | two | Low | Basic |
| Tender cheedar cheese | 3 | 3 | Tall | two | 3 | Tall | Strategic |
| Whole pig | 3 | 3 | Tall | one | one | Low | Basic |
| Butter with salt | two | 3 | Tall | one | one | Low | Basic |
| Turkey ham | 3 | 3 | Tall | 3 | 3 | Tall | Strategic |
| Cooked ham | 3 | 3 | Tall | two | two | Tall | Strategic |
| Pork chop | 3 | 3 | Tall | 3 | one | Tall | Strategic |
| Bar ham | 3 | 3 | Tall | two | two | Tall | Strategic |
| Locust | 3 | 3 | Tall | one | two | Low | Basic |
| Chicken thigh and against thigh | one | 3 | Tall | one | one | Low | Basic |
| Parmesan | 3 | 3 | Tall | 3 | 3 | Tall | Strategic |
| Garlic | one | 3 | Tall | one | one | Low | Basic |
| Gouda cheese | 3 | 3 | Tall | 3 | 3 | Tall | Strategic |
| Sugar | one | 3 | Tall | one | one | Low | Basic |
| Rice consumption | two | 3 | Tall | one | one | Low | Basic |
| Prime beef | 3 | 3 | Tall | two | two | Tall | Strategic |
| Unsalted butter | two | two | Tall | one | one | Low | Basic |
| Fish | 3 | 3 | Tall | one | one | Low | Basic |
| Juice | one | 3 | Tall | one | one | Low | Basic |
| Natural water | one | 3 | Tall | 3 | 3 | Tall | Strategic |
| Mortadella | one | two | Tall | one | one | Low | Basic |
| Smoked loin | two | 3 | Tall | 3 | 3 | Tall | Strategic |
| Beer glass / bot | two | 3 | Tall | one | one | Low | Basic |
| Green olives | two | 3 | Tall | 3 | 3 | Tall | Strategic |
| Super bok / bot beer | two | 3 | Tall | one | one | Low | Basic |
| Coca cola soft drink | one | 3 | Tall | one | one | Low | Basic |
| Tuna | one | 3 | Tall | two | two | Tall | Strategic |
| Milk powder | one | 3 | Tall | one | one | Low | Basic |
| Natural whole milk | one | 3 | Tall | one | one | Low | Basic |
| Frozen chicken | two | 3 | Tall | one | one | Low | Basic |
Source: self made.
By forming the IB / RS matrix, which is shown below, it was obtained that of the 30 products that made up the sample, 12 are strategic products, 18 are basic products, and there are no bottleneck products so few non-critical products.
Strategic products: They are the most important in the organization, those that can paralyze the service, or those that represent greater utility and volume of sales for the service, or those that are essential to provide an adequate level of customer service. However, they are also the products that are most likely to suffer inventory disruptions (due to remoteness, shortage or unreliability of suppliers), making them the most critical product group in the organization. They must be closely monitored, day by day, and an adequate safety inventory must be guaranteed; In addition, lasting relationships with suppliers must be established and alternatives sought with other suppliers to reduce risks, if possible.
Non-critical products : These are products that have relatively little weight in the activity of the company, and in turn do not represent a problem for their location and purchase, perhaps because they are products of widespread use and that can be offered by several suppliers, that is, easily acquisition, so its procurement is not a concern. Safety inventory is not required for these.
Basic products: It is the group of products that, being important for the company, do not present risk in the supply, are easy to acquire, for this reason they give certain "peace of mind" to entrepreneurs.
Bottleneck items: without being the most demanded by customers, or making a significant contribution to sales levels, it requires great efforts to acquire. For them it must be ensured that inventories are protected against the randomness of delivery time.
Conclusions
With this article, it has been intended to present some results of investigations carried out in Angola regarding the classification of products, with mathematical economic methods to the reality of the current Angolan company, in order to contribute to greater efficiency in the management of shopping in a totally turbulent and uncertain scenario.
Under these circumstances, it is essential to apply these methods to economic management problems, reasons for which the use of these techniques increases and extends to all business areas.
Bibliography
- Castellanos Dayana Beatriz Reyes: Design of Purchasing Management Policies for Nardi Venezuela CA a Proposal to Improve Service Quality, Universidad Centro Occidental Lisandro Alvarado, Barquisimeto 2000Diez de Castro, E; Fernández, J. C: Commercial Distribution. McGrawHill Interamericana de España SA 1994. Emilio Rodríguez, Moya: Purchasing Management. Negotiation and Supply Strategy, Madrid 1999. Felipe Valdés, Pilar: Logistics indicators for evaluating the performance of the purchasing process. 45th Anniversary Event of Economic Studies. Ortiz Torres, Maritza: Procedure for managing inventory with independent demand in commercial and service companies. Doctoral Thesis. December 2004 Perdomo Ania Regalado: Purchase management at Tegos Clima Diagnostico and improvement proposal.University of Havana, 2011. University of Havana, Faculty of Economics 2007. Yohany Martínez Pérez: Procurement Management in the Cupet Union: Diagnosis and improvement proposal: University of Havana, Faculty of Economics, Havana - Cuba, June 2010.
