GAAM is an international company that manufactures mainly hydraulic systems, building systems, and metal products. Specifically, it makes hydraulic equipment such as gear pumps and motors, telescopic cylinders, and control valves. Used in heavy-duty vehicles such as cranes, these products are sold to domestic (US) and foreign original equipment manufacturers. The company’s headquarters are located in the South Australia. Employing nearly 3,800 employees around the world, it operates 27 facilities in seven countries.
GAAM decided to conduct a process reengineering project with the objective of improving its global competitive position. Your team was formed to conduct a thorough investigation of the departments in the company. You are expected to come up with a Business Process Re-engineering recommendation for improvement. The following are the overviews of the major departments that needs major changes:
The purchasing department is mainly responsible for the procurement of hydraulic pump inventory. Maintenance, repair, and operating supplies (MRO) are also purchased through this department. This includes any equipment that needs tooling, supplemental materials such as foundry sand, various ingredients used for pouring castings, and any other non-production related products or services.
The department is comprised of a purchasing manager, two buyers and one secretary/clerk. It purchases an average of AU$15 million in inventory items, or approximately 3,000 parts each year. An additional AU$6 million in purchases in MRO per year is also made.
Inventory requirements are determined primarily by the Purchasing Department (PD), based upon existing order demands, service order forecasts, and safety stock requirements. The requisitions are recorded in the spreadsheet and printed out every morning by the PD. The PD uses a PC-based software that retains historical information regarding the last 11 purchases of an inventory item.
The purchasing department processes an average of 250 purchase orders (P/Os) each month for inventory items. Each of these documents is ?led for two years in the department, then moved to the corporate archives for seven years as required by law.
Historical information regarding inventory purchases is also kept within a separate card ?le in the purchasing department. Each inventory item has its own card(s), upon which is recorded any information regarding past purchases of the item. This information would include date of purchase, P/O number, price, quantity, number of rejections, etc.
Each time an inventory purchase is made, the inventory buyer will retrieve the card for that item and record the new information. This is usually done on the same day that the actual purchase is made, ensuring that the card remains current. Most of the information that the card system tracks are also maintained in the P/O program. However, the card system allows for the addition of notes, as well as a longer history.
After the receiving department receives the goods, the P/O is checked against a generated receiving report that is generated in the receiving department but printed in the purchasing department. This check is done to ensure that there is a match between what was ordered and what was received. The work is usually done by a secretary. Any discrepancies are forwarded to the buyer.
The company occasionally receives purchased items that are defective. In this case, a vendor reject form is forwarded to the purchasing department. This form details the vendor, the receiving location, the P/O, the item and quantity being rejected, and the reason(s) for rejection. Once a rejection form is received by the purchasing department, the necessary purchase adjustments can be made. The changed procurement information is re-entered into the spreadsheet. This process happens approximately 25-30 times each month.
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