MKT2605 Supply Chain Management For The Laburnum Group

As a procurement and supply chain consultant, you have taken time so far to visit the company’s global facilities and to become aware of the situation, problems, and concerns that are faced by the company. You are asked to investigate and analyse the following challenges:

 

1. Considering the global business environment and the positioning of AusCotton with regard to its markets and supply sources, investigate major global issues that will be relevant to the area of strategic sourcing at AusCotton? Justify.

2. Investigate the impacts of less-than-perfect demand forecasts for AusCotton products, and of volatility in the length and cost of transport services used to move its products from contract manufacturers to distribution centres? What can be done by AusCotton to mitigate these problem areas? Assess and justify.

3. What elements of the strategic sourcing methodology are the top candidates for improvement at AusCotton? Assess and justify. 

4. How AusCotton should respond to the assertion that some of their contract manufacturers are involved in producing illegal merchandise that ends up competing with the branded merchandise of AusCotton? Justify. 

Answer:

Introduction

Laburnum group has engaged the services of a cross-functional group to analyse the challenges faced by Sapphire Energy and AusCotton. The company faces various challenges in the two sectors that hinder smooth flow of products to the market. Therefore, the Laburnum group would require the cross-functional group to develop solutions to the problems. Sapphire energy faces challenges with the inventory ordering system and would like the cross-functional team to undertake possible improvements. On the other hand, AusCotton wishes to solve problems relating to the supply of clothes to the customers in time to avoid delays and shortages.

The Sapphire Energy Company

The company provides reliable energy to the customers around Ballarat, Bendigo, Geelong, Mildura, Melton, Sunbury, Shepparton, Traralgon, Wangaratta and Wodonga. The energy company uses the aluminium triplex cable to deliver electricity. The energy company focusses on efficient and effective inventory management to ensure the availability of the cable.

Quantitative evaluation of the ordering system

Sapphire energy uses the economic order quantity method to manage inventory (Mark Pagell, 2018).

Q=  

C= ordering cost

D= demand

H= holding cost

The annual demand for the company is 155,000 meters while the ordering cost is 50$ and the holding cost is (13.5*10/100). Therefore, the quantity equals to 2916.30.  

The quantity economic order quantity amount is 3388.43 units.

Qualitative evaluation

The inventory management method takes into account the timing of making new orders for the cables (Boag, 2018). The reordering period ensures that the sapphire company does not incur shortages when meeting the customer demands. The energy company makes inventory orders when the inventory reaches the set quantity levels to reduce the ordering and carrying costs incurred (Ishola, 2016). Therefore, the energy company maintains low costs by avoiding the trend of making many small and random orders. The economic order quantity level of 3388.43 units signals the point of ordering new inventory to avoid losing customers to other suppliers who meet the demands with adequate products (Christopher, 2018).

Improvements in the current inventory system

The inventory management system should eliminate the use of assumptions when forecasting the demand and reordering points (Mandviwalla, 2015). The method used assumed that the production levels will remain constant and the economic order quantity will indicate the period of reordering. However, the production could require more units at a certain point, which the inventory system does not consider. Therefore, in the case of a change in the normal amount of quantity, then the operations could fail to meet market demand due to less inventory (Mandviwalla, 2015).

Consequently, the inventory system requires adjustment to avoid assumptions in the ordering of inputs from the suppliers. The inventory system could improve to adopt a method that signals orders that match the existing demand. For example, the business could adopt the just-in-time system that ensures accuracy when making customer orders (Smet, 2018).

AusCotton portfolio

AusCotton is a global manufacturer of winter and summer outdoor sports clothing. The main winter clothes include outerwear such as windbreakers, footwear, fleece and ski jackets. The summer wear includes shorts, shirts, windbreakers, hydration systems and footwear. The business has headquarters in Geelong but does business through retailers in Australia, New Zealand, Europe and North America. Additionally, the company has established as a well-known internet retailer. Despite the success, the business is facing challenges in the operations that require an expert’s assessment to provide solutions.

Global issues relevant to strategic sourcing

Other issues experienced by the company include discrepancies in quality due to cultural differences. The different cultural standards cause a challenge in the way people understand quality due to different languages and approaches to quality. Therefore, AusCotton faces difficulty in acquiring the exact quality of supplies (Suzanne de Treville, 2016).

Impact of poor capacity forecasts and volatile length and cost of transport

AusCotton faces various challenges due to inaccurate demand forecasts and variable lengths and costs of transport. The challenges include the failure to meet the customer expectations with timely deliveries. Additionally, the company suffers losses since the customers cancel orders due to delays in delivery (Olsen, 2018). However, the business could solve the problem by opening up more outlets and franchises to get close to the customers.

The other impact includes the failure to reach the market early before competitors. AusCotton experiences challenges of inability to introduce new products to the market early for the customers to purchase. Therefore, AusCotton faces difficulty in beating the competition in the global market. The company should use privately owned transport systems to ensure that the products reach the market in the required time (Juneja, 2018).

Moreover, AusCotton should introduce information systems to enable quick communication with the market and retail outlets. The information systems collect useful data about the market demand and communicate with the production sections. The production departments respond to the information by producing accurate amounts of outputs (Ishola, 2016). Furthermore, the information systems make accurate future demand predictions that allow the maintaining the output at a level that adequately meets the market demand.

Elements of strategic sourcing methodology

AusCotton should improve the supplier relationship management and maintenance to eliminate the challenges faced in the meeting market demands (Boag, 2018). The maintenance of supplier relationships will ensure equal efforts towards meeting market demand. The suppliers collect market information and supply inputs that meet the required quality and quantity.

On the other hand, AusCotton should prioritise vendor selection activities. Vendor selection activities ensure that only qualified and ethical suppliers deal with the company (Juneja, 2018). The vendors who qualify the selection should show the commitment to supply inputs that match the required output to avoid market shortages. Furthermore, vendor selection will allow AusCotton to maintain a group of suppliers who will deliver timely to the retail outlets and avoid shortages.

The other element that the company should prioritise is market information. AusCotton should develop systems that collect timely and accurate information from the market (Ishola, 2016). The information will help AusCotton to identify the market demand and trends. Therefore, the company will have information about the competitors introducing competing products. AusCotton could respond to the competitor information by delivering products quickly to the market to beat the competition. Furthermore, market information will help the company to understand the demand patterns and produce products that accurate satisfy the customer needs. Therefore, the business will not experience shortages in the retail outlets located in distant regions (Nigel, 2013).

AusCotton response to allegations of illegal manufacture

The company should respond to the assertions by cancelling the manufacturing contracts (Mandviwalla, 2015). The cancellation will ensure that the contractors cannot use the AusCotton brand illegaly. Additionally, the cancellation will ensure that the illegal manufactures lack the necessary expertise and resources to produce clothes bearing the AusCotton brand.

On the other hand, the company should make a requirement that the contracted companies include AusCotton staff and management in operations (Smith, 2018). The inclusion of the staff will help to ensure that the contracted manufacturers do not engage in the illegal branding of products. The management and staff will inspect the operations and report any illicit activities. Therefore, the contracted companies will only stick to the production of AusCotton products.

Conclusion

With the improvement suggestions provided by the cross-functional teams, laburnum group will increase the operations in both sapphire and AusCotton. The solutions will enable Laburnum group to have better procurement plans that meet the customer demands. Improving the procurement system will allow the business to avoid wastage by producing more products that demanded. On the other hand, the business will prevent shortages by having accurate input that matches the necessary output.

Bibliography

Boag, P., 2018. Customer Journey Mapping: Everything You Need to Know. [Online]
Available at: https:www.sailthru.com
[Accessed 14 May 2018].

Christopher, D. M. L. A. P., 2018. Review of Assessment Approaches in Stability Operations. In Assessing Locally Focused Stability Operations. S.l.: Rand Corporation.

Ishola, T., 2016. Principles of Purchasing and Supply. S.l.: National Open University of Nigeria.

Juneja, 2018. Management Study Guide. [Online]
Available at: https://www.managementstudyguide.com

Mandviwalla, M., 2015. Fox School of Business. [Online]
Available at: https://www.community.mis.temple.edu

Mark, B. F., 2018. Journal of Supply Chain. Wiley Online Library.

Nigel, A. B.-J. J., 2013. Operations Management. 7 ed. Madrid, Spain: Pearson.

Olsen, E., 2018. Strategic Implementation. [Online]
Available at: https://www.onstrategyhq.com

Smet, A. D., 2018. The Agile Manager. McKinsey Quarterly China.

Smith, G. A., 2018. Journal of Supply Chain Management. Wiley, 54(4).

Suzanne de Treville, T. B., 2016. Journal of Operations Management. Elsevier.

Wagner, D. B. A., 2018. Supply Chain Management; An International Journal. Emerald Publishing.