Supply and Materials Budget

Supply and Materials Budget



Supply and Materials Budget

            A budget can be described as a summation of profits, income and expenditures of an establishment over a stipulated period. In this case, the budget concerns the market supply. This type of budget is very important as it acts as a financial guideline (Quitt, 2010). Several functions are performed by the budget.

            The budget allows planning of the finances of the company therefore, ensuring there is complete control by the management. Each department has to create separate budgets prior to the compilation of a conclusive report on finances taken up by the market and supplies (Johnson, Leenders, & Flynn, 2011). The budget allows the company to plan its finances, which might include sourcing for funds, amongst other strategies. Planning benefits the company on many levels.

  1. Strengthening Managerial Perspective

When the company has a strong managerial position for supply and market, it controls the finances and is able to understand the expenditure incurred when procuring materials. Because the process of preparing the budget is thorough and detailed, the managers are able to get involved it the intricate internal matters thus also evaluating other aspects such as inventory (Quitt, 2010).

  1. Recognizing Potential Problems

            During the budgeting process, there may be underlying issues. They might indicate an impending problem thus when detected earlier it further prepares the company for any financial implications. It gives them a chance to improvise on other strategic methods that will enable the company to counteract the problem (Quitt, 2010).

  1. Evaluation of the Company’s Performance

            The budget allows the managers to evaluate the performance of the company and point out the specific areas where the company is stalling. It is an added advantage as the establishment is able to increase activities in these departments thus enhancing the overall organization and performance of the company.

  1. Outlining the Historical Overview of the Establishment

            The detailed historical data provided is very important. Data drawn from the previous budget values offers the company lessons on better decisions concerning the current budget and the suppliers that offer better deals and high quality suppliers and materials.

            Secondly, it enables the company to estimate the producing savings. Due to the instability in prices of raw materials and their availability, the production savings may vary depending pricing (Martin, 2006). It is through the budget that the company can decide on the producing costs. It also allows the company to come up with various methods of bargaining on prices in order to get better deals. This is usually done by the purchasing and management professionals in the company.

            Thirdly, the budget is important as it is part of the forecasting the company’s future. Through the evaluation of the both past and present transactions in supplies, the company is able to determine whether its future growth is feasible (Martin, 2006). In summation, the budget provides a prognosis on the health of the company fiscally thus determining whether it is capable of achieving its long-term goals.

            The budget has a positive impact on the supply of the organization. It is through the budget that the company is able to illustrate its capability to cater for its purchases, as well as incurring expenditure in supplies and materials, that the managers can organize on the provision of these supplies to different departments involved (Martin, 2006). Therefore, it organizes the whole supply chain by giving the exact figures of the supplies thus giving room for efficient planning on their maximized utilization. .

  June Aug Sep   Q-3
  Price Index Monthly Budget    
Cost of Supplies Baskets 1.1452 0.9087 0.9614   0.9614
Key Cost Indicators Indicators Monthly budget    
Business Prime Rate % 4.256 4.893 5.00   4.945
CPI 119.56 123.20 120.2   122.54
Fats & Oils 203.56 219.56 235.45   234.98
Raw Industrials 235.45 259.67 268.67   248.91
Textiles 220.68 241.31 239.23   239.83
Diesel Fuel 61.76 55.56 57.56   58.69
Coarse Road Salt 52.89 51.09 51.90   52.91
Natural Gas 5.89 5.69 5.34   5.96
Copper (US$ per ton) 1567.67 1641.00 1753.00   1723.00
Metals sub index           200.1          207.09        218.15            213.15


Works Cited:

Johnson, P. F., Leenders, M. R., & Flynn, A. E. (2011). Purchasing and supply management. New York: McGraw-Hill/Irwin.

Martin, B. (2006). Outdoor leadership: Theory and practice. Champaign, IL: Human Kinetics.

Quitt, A. (2010). Measuring supply management’s budget effects: Introduction of return on spend as an indicator of supply management’s financial effectiveness. Wiesbaden: Gabler.

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