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IMPORTANCE OF SERVICES PURCHASES

In view of global competition, there is much pressure on organisations to reduce costs. The area of services acquisition is an obvious first choice in achieving this goal, since it has received little attention in the past. The proven ability of purchasing and supply management to reduce costs by increasing the efficiency of the procurement processes has influenced top management to allocate cost reduction goals for services to this function.

The introduction of e-procurement and other sourcing tools has assisted supply managers in performing procurement activities much more efficiently. Purchasing and supply management is now positioned well to access information regarding markets for services. User departments that were traditionally assigned the responsibility of purchasing services have recently rec-ognised the advantages of using new technology in purchasing and supply management. Outsourcing of non-core activities is another management philosophy that is stimulated by the relentless global drive for cost reduction. Outsourcing non-core activities offers an opportunity to purchasing and supply management to reduce total costs and optimise value in providing services through third-party suppliers. Gen-erally, non-core activities are generic in nature, such as secretarial, catering and cleaning ser-vices. The costs associated with these services are relatively low and the risks to core business are almost negligible; therefore, involving purchasing and supply management in the acquisition of these services is of little value. Traditionally, when buying a particular (pro-fessional) service, the relationship with the supplier was more important than cost. This was due to the fact that services were provided in close collaboration and interaction with the users. Therefore, the user departments and budget holders had a dominant role in the purchasing decision, for example preparing the scope of work, selecting suppliers, and taking care of contracting and negotiations. The purchasing and supply management function played a subservient role in taking care of the administration of the process. Increasing competition and cases of non-procurements staff not following procurement policies, procedures and regulations, cost pressures, and the development of purchasing and supply management now necessitate that the ex pertise of the purchasing and supply function be utilised in the purchasing of professional (high cost and high risk) services to ensure that the best value is realised.

Volkswagen Group South Africa Established in 1946, Volkswagen Group South Africa is a wholly owned subsidiary of Volkswagen Aktiengessellschaft (VWAG) in Germany. It is the largest German investment in South Africa and is a major contributor to foreign direct investment, technology transfer and skills development. Volkswagen Group South Africa is located in Uitenhage, an industrial town some 35km from Port Elizabeth in the Eastern Cape. Our first priority is to build a strong and successful business that protects and creates jobs within Volkswagen and our broader family of suppliers and franchised dealers. As a multi-national corporation, Volkswagen has a strong commitment to boost foreign direct investment in South Africa and promote the transfer of world-class technology, knowledge and skills. Hundreds of Volkswagen Group South Africa employees at all levels have received training at Volkswagen plants throughout the world. To manage the operation that gets vehicles from the factory to the dealer network, carmakers rely on local logistics providers for end-to-end support across the finished vehicle supply chain, from plant logistics to dealer distribution. The end-to-end (E2E) supply chain means integrated systems, agile processes, and collaboration for all supply chain functions, from order planning and scheduling, shipping, and vehicle processing to final delivery to the end customer or dealer. Right now, the biggest challenge facing global logistics is lack of space on vessels. End-to-end logistics services helps to address this by allowing transport logistics providers to work very closely with the Original Equipment Manufacturers (OEM) right from the forecasting and planning stage up until delivery of the vehicle. With an expansive fleet of RoRo vessels and a global trade network that includes deep sea and short sea services, logistics transport providers support OEMs to ship large volumes to their key markets across the world. Beyond that, the inland distribution network means logistics transport providers can help manufacturers with the final leg of the journey, too, safely transporting vehicles to end customers by rail and truck. But getting vehicles to their end destination is only one piece of the puzzle - making sure they're in dealer-ready condition is of the utmost importance. Explain why service purchasing is important for Volkswagen South Africa. Note: you are required to provide at least 3 paraphrased theoretical points and at least two application points