Assessment task 2 requires the writing of a business report. The report should explain what the current
situation is, what problems are in evidence and how those problems should be addressed. As a business
report it should be concise, accurate and actionable. At the same time, the report should be founded on
appropriate Operations Management principles and theories, and be supported by appropriate evidence and
discussion from relevant academic literature.
The assessment item is based on the case study titled Laney Collins Motors (a fictitious company). You
should read, and carefully analyse, the case and respond to the issues presented at the end of the case study
within the context of a short business report. The objective of the case study is to provide an operations
management situation that can be studied and analysed. You will need to put yourself in the role of a
management professional who is asked by the organisation to identify the nature of the problem(s), why or
how the problem happened or evolved, and make recommendations that will resolve it.
MGMT19126 2 Term 1, 2015
Case study: Purchasing and Inventory at Laney Collins Motors
Laney Collins, CEO of Laney Collins Motors, has just returned to her office after visiting the
company’s newly acquired automotive dealership. The new dealership was the fourth Laney Collins
Motors dealership in a network that served a metropolitan area of over two million people. Beyond the
metropolitan area, but within a 45-minute drive, was another half a million people. Each of the
dealerships in the network marketed a different make of car and historically had operated autonomously.
Collins was particularly excited about this new dealership because it was the first “auto supermarket” in
the network. Auto supermarkets differ from traditional car dealerships in that they sell multiple makes
of cars at the same location. The new dealership sold a line of Daewoos from Korea, Mahindras from
India and Cherys from China. This brought the total number of brands sold by the group to six.
Since the purchase of a bankrupt Mitsubishi dealership 15 years ago, Laney Collins Motors had grown
steadily. As the city was relatively small, it was difficult to expand within a single brand, so eventually
Collins purchased a rundown Mazda dealership, and shortly afterwards, a small Hyundai dealership as
well. Under her direction, all three dealerships saw rapidly improving sales figures and the Laney
Collins Motors network grew in strength and reputation.
Collins attributed this success to three highly interdependent factors. The first was volume. By
maintaining a high volume of vehicle sales and turning over inventory rapidly, economies of scale could
be achieved, which reduced costs and provided customers with a large selection. The second factor was
a marketing approach called the “hassle-free buying experience.” Listed on each automobile was the
“one price—lowest price.” Customers came in, browsed, and compared prices without being
approached by pushy salespeople. If they had questions or were ready to buy, a walk to a customer
service desk produced a knowledgeable sales person to assist them. Finally, and Collins thought perhaps
the most important, was the after sales service. Laney Collins Motors had established a solid reputation
for servicing, diagnosing, and repairing vehicles correctly and in a timely manner—the service
division’s motto was “do it once, do it right”.
High-quality service after the sale depended on three essential components. First was the presence of a
highly qualified, well-trained staff of service technicians. Second was the use of the latest tools and
technologies to support diagnosis and repair activities. And third was the availability of the full range of
parts and materials necessary to complete the service and repairs without delay. Collins invested in
training and equipment to ensure that the fully trained personnel and the latest technology were
available at all sites. What she worried about, as Laney Collins Motors grew, was the continued
availability of the right parts and materials. She knew there was a fine line between too much and too
little stock. With the new dealership, the complexity of inventory control had increased dramatically.
This concern caused her to focus on the purchasing function and management of service parts,
accessories and materials flows at both a supply chain level, and as an internal function.
Collins thought back on the stories in the newspaper’s business pages describing the failure of
companies that had not planned appropriately for growth. These companies outgrew their existing
policies, procedures, and control systems. Lacking a plan to update their systems, the companies
experienced myriad problems that led to inefficiencies and an inability to compete effectively. She did
not want that to happen to Laney Collins Motors.
Each of the four dealerships purchased its own service parts and materials. Each location had its own
purchasing officer and parts manager. Purchases were based on forecasts derived from historical
demand data, which accounted for factors such as seasonality. Batteries and alternators had a high
failure rate in the winter, and air-conditioner parts were in great demand during the summer. Similarly,
coolant was needed in the spring to service air-conditioners for the summer months, whereas antifreeze
was needed in the autumn to winterise cars. Forecasts were also adjusted for special vehicle sales and
service promotions, which increased the need for materials used to prepare new cars and to service other
One thing that made the purchase of service parts and materials so difficult was the tremendous number
of different parts that had to be kept on hand. Some of these parts would be used to service customer
MGMT19126 3 Term 1, 2015
vehicles, others would be sold over the counter to retail customers, whilst others (particularly genuine
replacement parts) were on-sold to wholesale trade customers. Some had to be purchased from the car
manufacturers (genuine replacement parts and accessories), to support, for example, the “guaranteed
genuine parts” promotion or because that was the only source of supply. Non-genuine replacement parts
and accessories were purchased from a variety of suppliers and other parts and materials such as oils,
lubricants, fan belts and other generic service parts and materials, could be purchased from any number
of suppliers. The purchasing department had to remember that the success of the dealership depended on
(1) lowering costs to support the hassle-free, one price—lowest price concept, and (2) providing the
right parts at the right time to support fast, reliable after-sales service.
As Collins thought about the purchasing of parts and materials, two things kept going through her mind:
the amount of space available for parts storage and the level of financial resources available to invest in
parts and materials. The acquisition of the auto supermarket dealership put an increased strain on both
finances and space, with the need to support three different car lines at the same facility. Investment
dollars were becoming scarce, and space across all the locations was at a premium. Collins wanted a
‘whole of organisation’ approach, and wondered what could be done in the purchasing, supply chain,
and inventory areas to address some of these concerns and alleviate some of the pressures.
As a newly appointed Purchasing Manager at Laney Collins Motors you are required to prepare a report for
Laney Collins that addresses the following questions:
1. How might purchasing and inventory management policies and procedures differ because the
dealerships purchase different types of service parts and materials (e.g. lubricants, non-genuine parts
versus genuine parts) from different types of suppliers?
2. What appear to be the main weaknesses of current purchasing and inventory management practices
at Laney Collins Motors, and how could these weaknesses be affected by the new acquisition?
3. How can supply-chain and inventory management concepts help Laney Collins reduce investment
and space requirements whilst maintaining adequate service levels?
4. What recommendations would you make to Laney Collins with respect to restructuring the
purchasing and inventory functions for the Laney Collins Motors dealership network?
The report should be a confidential report for the CEO, and be presented as a suitably professional document.
It is expected that your discussion will refer to appropriate models and theories covered in this course, but
your research should extend the theoretical discussion beyond the course material. The assessment criteria
should give you a clear indication of what you need to include in this assignment. The report should include
an effective introduction and conclusion; an executive summary of no more than one page to preface the
report; and a table of contents to give guidance to the reader.
This assessment item involves researching your assigned topic to enhance your understanding of Production
and Operations Management concepts and utilisation of academic literature. If you are not familiar with the
retail motor industry, some field and/or desk research would be advisable. Whilst you should AVOID using
only textbooks, the prescribed textbook for the course must be cited in regard to broad operations
management principles highlighted by the case. You are expected to present information and evidence from,
and cite, at LEAST eight (8) relevant peer-reviewed, academic journal articles (minimum requirement).
Refer to your recommended readings for examples of academic journals. While you can cite these articles,
you must find at least eight (8) peer reviewed journal articles not listed in the course materials. The quality
and number of citations will demonstrate the breadth and depth of the literature used to formulate your
argument. Your marker is interested in the analysis that you have developed from YOUR review of the
literature and how well you use the literature to respond to the topic.
AVOID presenting a descriptive account ONLY of your readings. What is required in this assessment is a
critical evaluation of the evidence in the case and the academic literature as it relates to the specific details