Introduction
Laburnum Group has hired me to investigate two different aspects of their business. One is Sapphire Energy and another one is AusCutton. Sapphire Energy and AusCotton are two of its major parts that contribute towards its growth and success. But in recent few years, the company has faced some issues relating to its storage, product sourcing and ordering as well as the supply chain and competition within the market. Therefore I have prepared this report to find out the inefficiencies as well as challenges faced in the procurement and supply chain management of both companies.
Sapphire Energy Case
The case analysis brought the scenario of safety and storage of the cables within the company. Being an Inventory Controller of Sapphire Energy, I should know about all the issues that the company is facing. As per the case, it is seen that Sapphire Energy provides electric service to areas like Bendigo, Ballarat, Mildura, Geelong, Sunbury, Wangaratta and Wodonga.
Eastern Power Storeroom is the producer of the cable which Sapphire Energy used for electric services. The material that is mostly used to provide the electric service is the 1/0 AWG aluminium triplex cable. This cable helps in delivering the electricity from the pole to the meter loop.
To check the effectiveness of the business, it is a must to know the details of the ordering system which can somehow pose a threat to the system of the organisation. In the supply of order, the Eastern Power Storeroom makes the procurement of the cables to be used by Sapphire Energy. Both the company are bound by a contract for the supply of these chains. Eastern Power Storeroom stores as well as procure the cable wires that transfer the electricity to different parts of Australia. Therefore as the Inventory controller, the major responsibility will be checking all the inventories like purchasing, shipping, tracking, storage, warehousing as well as turnover and reordering.
The effectiveness of Current Ordering System
Being an inventory controller, I understand how a company get affected if the company don’t have a proper effective order system and exactly Government-regulated and investor-owned utility, Sapphire Energy is lacking in this case.
In the evaluation of these parameters, it is seen that these cable wires are being used for the routine service works of electric transfer and are installed within normal five days. Therefore to carry these cables to their respective places the company pays a carrying cost of $1.35 per metre. This cost is managed as per the present agreement between Sapphire Energy and Eastern Power. As per that agreement, for the supply of these cables Eastern Power Storeroom has signed for the value of one-twelfth of the annual need of Sapphire Energy.
By this agreement, Sapphire Energy gets assured to have a standard mark in the production schedule of Eastern Power Storeroom which makes the reduction in the lead time. At that same time, it is also seen that if there is no agreement, then there will be a lead time of up to twelve weeks. As there is no discount price for these cables so the supplier should be able to order a minimum of 4500 metres of cable. Also, the shipment and order of each cable cost $50 which again increases inventory carrying cost to 10 % including all the inventory taxes. Therefore as the inventory controller, it can be said that this current ordering system is decreasing the business effectiveness and taking Sapphire Energy towards loss (Axsäter, 2015).
How it can be improved?
The current ordering system can be improved if they will work on inventory management. Each shipment costs $50 along with that 10% of inventory charges which actually creates the problem.
As it’s mentioned minimum order will be 4500 metres and it will take 5 days to implement those cables. So as per Johnson, 2014, Sapphire Energy needs to reduce its inventory cost like $1.35/ metre is the carrying cost. So if the number of carrying units will be decreased then the cost can be decreased. Similarly, per order, the shipment charge is $50 so if the minimum order metres are increasing to 9000 metres then the shipping charge will also be decreased and this also reduced the carrying cost. By doing this Sapphire Energy can reduce some of its costs and even if Sapphire Energy introduced the discount then there will be an increase in sales which will again reduce the carrying cost. So in this way, the ordering system can be improved (Krajewski, Ritzman & Malhotra, 2013).
AusCotton Clothing Case Study
Like Sapphire Energy, AusCotton is also facing various issues of procurement as well as the supply chain that led the situation to a lot of concerns and problems.
Major Global Issues
AusCotton is handling one of the major clothing businesses within Australia and worldwide. As being appointed to be the Senior Vice President of the Supply Chain, it can be noticed that the major global issue is the rise in competition due to globalisation. Therefore basing upon the global business environment AusCotton can face issues in their implementation plan which created issues in negotiating and selecting efficient suppliers. Further, the company will face issues in the implementation of agreements (Christopher, 2016).
Impacts Of Less Than Perfect Demand Forecasts
Mostly this case occurs when there are any fluctuations in terms of demand occurred within the geographies to be delivered. The fluctuation decreases the product value that affects the supply chain. Also, the situation becomes worse by the increase in length and transportation costs of the services. These issues can be mitigated with the implementation of the inventory management system within the organization. The integration of the various functional system into one system helps the company to well run by not getting stockouts from the retail market. These issues can also get mitigated through the opening of various retail outlets. The installation of a computerised tracking system helps in maintaining competitiveness as well productivity by mitigating the stock out issues.
Elements of Strategy
As per the strategic sourcing process, the top candidates that are important for the improvement of AusCotton are going through the supply, needs and spending analysis by developing a proper category profile. Also, the company can go for the positioning of the matrix through the development of a sourcing strategy. Further AusCotton can go for the widening of supplier base by developing criteria for the suppliers with the proper product specification. Moreover, the company should go with continuous improvement of its products by enhancing its value chain, target costing, accurate budgeting as well as benchmarking with competitors. These are essential because through these the company can be able to reach the customers easily and most importantly as per their demand and choice.
Response to illegal Merchandise
In the business procedure copying, any product’s label is illegal and comes under the action of jurisdiction. In that case, when AusCotton comes to know about the involvement of the contract manufacturers in illegal merchandise that competes for the merchandise of AusCotton at that time it is better to call off for the agreement. Also, a new agreement can also be made where there will be the mention of such acts to be punishable under jurisdiction. But mostly as a Senior Vice President of Supply Chain, it can be advised to break all the contracts with such manufacturers who stand up against their manufactured merchandise.
Analysis
After the discussion from two experts, i.e. Inventory Controller for Sapphire Energy and Senior Vice President for AusCotton, it is clear that both divisions have their issues with purchasing and supply chain. Both the companies have faced the issues due to which the Laburnum Group is facing challenges (Wieland & Handfield, 2016). While having a keen observation upon the ordering system of Sapphire Energy, it is seen that the lacking of inventory management laid down the emergence of the issue within the company. The whole inventory process going on cannot be said to be effective for the business. The current ordering system does not contain any discount rather Eastern Power Storeroom poses a high carrying cost as well as a high value of order and shipment cost. In that case, Eastern Power also does not lower down any numbers during a single shipment and made to a minimum of 4500 cables in one go. All these directly affect the effectiveness of the business. In that case from Lu & Swaminathan’s perspective, the improvement of inventory management along with increasing more clauses in the agreement for the discount and the reduction in the purchasing value as well transportation charges is requisite (Lu & Swaminathan, 2015). Moreover if not so then the company have to change its supplier to enhance the effectiveness of its business. Similar is the case of AusCotton. In the initial condition, it is one of the leading clothing businesses in Australia, but gradually it faced many issues in its supply chain that decreased its market value. Therefore as per the personal view, there is a threat in the implementation of a proper plan which resulted in a problem with the negotiation of the company with the suppliers. This will affect the agreements and will hamper continuous improvement. In that case, as per Monczka et al., the company must develop the category profile by making the supply as well as market analysis and go for the widening of the suppliers to reach the customers (Monczka et al., 2015). Most importantly the agreements must be formulated to take care of the procurement and continuous maintenance of the supply chain of the company.
Conclusion
The report is prepared to focus on the identification of the quantitative as well as qualitative analysis of the challenges faced by the Laburnum Group. Therefore the report contains a clear overview of all the possible issues and their related solutions that will help in enhancing the effectiveness of the business of Laburnum Group.
References
Axsäter, S., 2015. Inventory control (Vol. 225). Springer.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Johnson, P.F., 2014. Purchasing and supply management. McGraw-Hill Higher Education.
Krajewski, L.J., Ritzman, L.P. and Malhotra, M.K., 2013. Operations management: Processes and supply chains (Vol. 1). New York: Pearson.
Lu, L.X. and Swaminathan, J.M., 2015. Supply chain management.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.
Wieland, A. and Handfield, R.B., 2016. Supply Chain Management. In 5th World Conference onProduction and Operations Management. P&OM 2016.
