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Sapphire Energy Case Study: Effectiveness of the present ordering system

Discuss about the Case Study Of Sapphire Energy and AusCotton.

The report has investigated two important facets of business portfolio under Laburnum Group. The main discussion of the study has considered both quantitative and qualitative perspectives of the inefficiencies and challenges of Sapphire Energy and AusCotton as per the given case. Laburnum Group is depicted to continuously monitor the activities of the diverse portfolio of businesses which is essential to their corporate strategy decisions”. The important elements of discourse have addressed the specific questions frame by the top management in both energy and clothing business portfolios of “Laburnum Group”. The first part of the study has evaluated the efficacy of the present ordering system and applied the model of “Economic Ordering Quantity (EOQ)” for recommending the changes which are required optimising the inventory for “Sapphire Energy”. The next part of the report has evaluated the global business environment of AusCotton with the market and supply sources. The important elements of the descriptions have also included the issues associated to areas of strategic sourcing. The study will also discuss about the actions for illegal merchandise which results in competing with the fake branding (Pimenta & Ball, 2015).

The main assessments as per the “Sapphire Energy” case study has highlighted on total ordering system of 4500 meters of cable. The total stocking cost for the given standard is depicted as $ 9318.75. The implementation of the EOQ model is seen to be conducive in ordering only 3388.43 meters of cable.  Henceforth, as the ordering quantity is seen to be less than 4500 meters the strategy of implementing EOQ is not recommended.

EOQ for AWG aluminum triplex cable

 

Unit

Meters

Dollars

Annual Demand (D)

155000

Present Order Quantity (Q)

12917

Annual cost for carrying one unit (C')

 $         1.350

Annual cost per order (S')

 $         50.00

Total Annual Stocking Cost (TSC 1)

(Q/2) x C'+(D/Q) x S'

Total Annual Stocking Cost (TSC 1)

 $    9,318.75

Economic Order Quantity (EOQ)

SQRT(2xDxS')/C

Economic Order Quantity (EOQ)

3388.43

Total Annual Stocking Cost in case of implementing EOQ

Total Annual Stocking Cost (TSC 2)

(EOQ/2) x C'+ (D/EOQ) x S'

Total Annual Stocking Cost (TSC 2)

 $    4,574.39

Estimated annual savings in stocking costs

Savings

TSC 1 - TSC 2

Estimated savings in stocking costs

 $    4,744.36

 

As per the depictions made in the present study the ordering system has been discerned with a total savings of $ 4574.39 and implementation of the strategy for savings in stock will allow the company to save $ 4744.36. However, the scope of the ordering more units is evident with the given case. The main recommendation for Sapphire energy needs to increase the quantity to 4500 meters of cable.

The problem associated to changing market environment is understood as the main issue to address the consumer behaviour. This trend is depicted with the changes in the globalization and technological facets. The role of social media is considered with pressure from the consumer which will be able to conform the utilization of these sources of information to respond to changing preferences to stay interesting and relevant. The main challenge at a global scale have been realized with a shorter life cycle for rapidly changing demand in the market. The different types of the enterprises for the cotton production are facing several issues associated to cotton production and keep “itself up to date with the latest trends and innovations”. The integration and data management are considered to solve the main problems related to data management. This will be done by connecting the “manufacturer’s supply chain management systems with those of their suppliers and partners”. The problems related to the supply chain integration may be affecting the operations at ground level (Council of Supply Chain Management Professionals, 2015).

Recommendations on improving the current system

The important aspects related to the technology is able to discuss about the new issues which is seen to be related to the non-awareness for the product demand. There have been several issues which are seen to be considered for the inappropriate demand forecast. In several situations the issues are related to the “inaccurate demand forecasting is seen due to unavailability of the data”. In several cases the consideration of “raw information coming from suppliers, partners, and even customers” includes the unstructured data which makes it more challenging for the enterprises to generate and analyse the insights from unrelated information (Pimenta & Ball, 2015).

The companies may be further facing several problems related to the managing of the commodity and the category of the materials which depend on the spending characteristics of a supply. There may be dilemma in choosing the appropriate outsourcing strategy. This is understood to be critical for the answering whether the important decision needs to be based on the buying the product from third party or make on its own. The factors for achieving the optimal portfolio is able to reflect the different requirements for the suppliers as per the individual category of commodities (Lummus et al., 2014).

The main form of the opportunities for the exact requirement for the conjectures are depicted to be fundamental for the assembling of the various components of value chain. This is necessary to meet the demands of the customer without defaulting with incorrect requests. It has been further considered to be important to ensure that there is a timely forecast for the factors which are critical to allocation of resources (Chopra & Sodhi, 2014). The different initiatives taken to resolve the issues has been discerned with creating an alliance with the customers and suppliers to improve the accuracy of the forecast. The spontaneous response to the changes in demand is aimed at reducing the error in cost of forecasting. The resolution of the problems needs to be done by entering into a partnership with the suppliers on the clients for measuring the susceptibility to the changes in demand. Therefore, the accuracy in forecasting is depicted as a critical factor for proper allocation of resources. The different types of initiatives taken to eliminate the problems among the customers and suppliers is also seen with creating an alliance in the customer than the suppliers for better forecasting. The focus of the company to respond to the changes in customer request should be followed with such a strategy which will be able to minimize the impact of cost (Martínez-Jurado & Moyano-Fuentes, 2014).

AusCotton Case Study: Major global issues relevant to the strategic sourcing

The diverse factors associated with strategic sourcing for the top candidates at AusCotton is recognized with developing a benchmarking, tracing results and conducting a supply market analysis. The application of supply market analysis is often useful for reanalysing the various types of global perspectives to know more about the cost constituents of a service or product. AusCotton has the scope of reviewing supply marketplace for knowing about the associated risks and opportunities. The strategy development as per the top management will be able to discuss on the issues of minimizing the risks and costs. Additionally, the top management will be able to discuss on main strategies of supply competitiveness by conducting a meeting (Wiengarten et al., 2015). The various types of initiatives such as “benchmarking and tracking of results” are seen to be having a significant role in process sourcing and identification of the need for re-monitoring. It is important for the business specialists to know about the present status of a category or commodity. In addition to this, AusCotton should look forward to improve the supply-chain assessment. It is necessary to understand the possible suppliers who may be most influential in the sourcing strategy. This needs to be followed with supply research and identifying the opportunities to remain on contract or to be considered for the contract. The main attention should be given on strategy elements and monitoring the key issues for the business specialists of a category (Chin, Tat, & Sulaiman, 2015).

The main response of assertions of contract manufacturers is observed with producing illegal merchandise which goes through several stages. The first stage is depicted with and getting into a new contract negotiation. The intellectual property protection maybe also beneficial in meeting the demands of manufacturers. It is important for AusCotton to know about the results of an investigation process. The company needs to identify the true facets depicted from the investigation. The procedure of investigation is seen to be conducive for tracking any legal proceedings which needs to be taken after knowing about any anomaly (Fahimnia, Sarkis, & Davarzani, 2015).

The issues associated to illegal merchandise, needs to be done by contract manufacturers by hiring of a new supervisor for supply-chain activities. This needs to be further estimated with process of sourcing focused on minimizing the errors. Moreover, the new owner of the company may be asked to visit the global facilities. This will be able to create awareness of a situation and follow with the legal proceedings. It is important to set as a good example for suppliers and vendors. In addition to this, the manufacturers need to assess the documentation process and approve the actual order placed by the company. This needs to be followed with a manual procedure rather than depending on automation (Gold, Trautrims, & Trodd, 2015).

Impacts of less-than-perfect demand forecasts for AusCotton products

Conclusion

The interpretations made from the study has been able to reveal that the effectiveness of present ordering system at “Sapphire Energy” is not a feasible decision. This is evident with EOQ model being conducive in ordering only 3388.43 meters of cable.  Henceforth, as the ordering quantity is seen to be less than 4500 meters the strategy of implementing EOQ is not recommended. The main strategy for improving the present ordering system is recommended with total savings of $ 4574.39 and implementation of the strategy for savings in stock will allow the company to save $ 4744.36. The main recommendation to “Sapphire Energy” is for the depicted with increasing the scope for more number of orders. The interpretations for assessment of the challenges in global supply-chain for AusCotton is identified with changes in the globalization and technological aspects. The main challenge at a global scale have been seen with a shorter life cycle for rapidly changing demand in the market. The various types of “impact of less-than-perfect demand forecasts for AusCotton products” is further identified with to resolving the issues by creating an alliance with the customers and suppliers to improve the accuracy of the forecast. The response to illegal merchandise and branding needs to be taken care off with appropriate legal proceedings.

References

Chin, T. A., Tat, H. H., & Sulaiman, Z. (2015). Green supply chain management, environmental collaboration and sustainability performance. In Procedia CIRP (Vol. 26, pp. 695–699). https://doi.org/10.1016/j.procir.2014.07.035

Chopra, S., & Sodhi, M. S. (2014). Reducing the Risk of Supply Chain Disruptions. MIT Sloan Management Review, 55(3), 73–80. https://doi.org/10.1017/CBO9781107415324.004

Council of Supply Chain Management Professionals. (2015). CSCMP Supply Chain Management definitions. Retrieved from https://cscmp.org/imis0/CSCMP/Educate/SCM_Definitions_and_Glossary_of_Terms/CSCMP/Educate/SCM_Definitions_and_Glossary_of_Terms.aspx?hkey=60879588-f65f-4ab5-8c4b-6878815ef921

Fahimnia, B., Sarkis, J., & Davarzani, H. (2015). Green supply chain management: A review and bibliometric analysis. International Journal of Production Economics. https://doi.org/10.1016/j.ijpe.2015.01.003

Gold, S., Trautrims, A., & Trodd, Z. (2015). Modern slavery challenges to supply chain management. Supply Chain Management-an International Journal, 20(5), 485–494. https://doi.org/10.1108/scm-02-2015-0046

Lummus, R. R., Vokurka, R. J., Texas, A., & Station, C. (2014). Defining supply chain management?: a historical perspective and practical guidelines. Industrial Management & Data Systems, 99(1), 11–17. https://doi.org/https://dx.doi.org/10.1108/02635579910243851

Martínez-Jurado, P. J., & Moyano-Fuentes, J. (2014). Lean management, supply chain management and sustainability: A literature review. Journal of Cleaner Production, 85, 134–150. https://doi.org/10.1016/j.jclepro.2013.09.042

Pimenta, H. C. D., & Ball, P. D. (2015). Analysis of environmental sustainability practices across upstream supply chain management. In Procedia CIRP (Vol. 26, pp. 677–682). https://doi.org/10.1016/j.procir.2014.07.036

Wiengarten, F., Humphreys, P., Gimenez, C., & Mcivor, R. (2015). Risk, risk management practices, and the success of supply chain integration. Intern. Journal of Production Economics, 171, 361–370. https://doi.org/10.1016/j.ijpe.2015.03.020

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