Background
The Southeastern University is among the largest universities in the state with a population of more than 25, 000 graduate and undergraduate students as well as a staff of 3, 500 individuals. The University has a purchasing department that requires adherence to its standard purchasing procedure when procuring an item. Glen Meredith heads the department, but Heather Skoman is the lead buyer of the department and the university in general. Overall, the most salient objective of the department is to achieve the greatest cost saving.
Key Issues
The central issue in the case is the fact that Walter, a manager at the registrar’s office had procured a new piece of equipment for his department without following the department’s standard purchasing policies. Another issue is the frequency of purchases made by personnel of the university without liaising with the purchasing department; these cases amount to 275 annually. Although trivial, an additional issue is the fact that the folding machine purchased by Walter was expensive and was acquired from a supplier outside the purchasing department’s approved suppliers list.
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Analysis
Qualitatively, the number of purchases outside the purchase department’s recommendations were abounding. Furthermore, these cases cost the university too much money every year as ascertained by Meredith. In these cases, the involved officers violated the department’s procedures which undermined the integrity of the institution. Quantitatively, the number of these outside-the-books cases have amounted to 275 cases annually, and the trend is set to be on the rise if no interventions are implemented. The folding machine cost 14, 000 us dollars, a price which was 3, 000 to 4, 000 dollars higher than quotations from the approved suppliers for the same kind of equipment. To this end, the extra money represents and alludes to the general losses the institution incurs from these rogue purchases. Considering that there are 275 such cases, the loss, drawing from the above case hypothetically ranges from 825, 000 to 1, 100, 000 dollars annually.
Recommendations
As a way of discouraging the university personnel from making the rogue purchases, the purchasing department could implement more stringent policies that warrant harsh penalties if infringed or violated. The policies have to be signed by the head of every department to ensure strict compliance. This recommendation will as well save the institution the unnecessary annual financial loss. For the case of the folding machine, canceling the order would only incur further costs in penalties, and as such, it is recommended for Heather to use the quotations to negotiate for a lower price of the machine.
