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PGN21C Global Supply Chain Management

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Question:

Please read the detailed case study below. You have been just been appointed as the Procurement Manager of Derbyshire Fabrication Group. The managing director has asked you to produce a report to critically analyse the current procurement situation and propose a new viable procurement strategy.

Consider the situation and propose a number of strategic alternatives taking into account the advantages and disadvantages of each. Provide a justified recommendation on the way forward, ensuring that your work refers back to the appropriate theory and provide a comprehensive reference list in the correct APA standard.

When writing the report you may wish to consider:-

  • What is the current organisational structure and what do you wish to propose to improve it. o How would you reorganise your team to best make improvement in:- § Reducing Expenditure
  • Leveraging Economies of Scale
  • Improving Quality
  • Developing and Improving relationships
  • Ensuring on-time delivery
  • Delighting Customers (both internal and external)
  • Consider the role of procurement in the global supply chain o Critically analyse procurement best practices
  • Discuss which best practices could be implemented
  • Short, medium and long term actions o What are your short medium and long-term actions, given the challenges detailed in the case study?

Derbyshire Fabrication Group - Case Study

Background

Derbyshire Fabrication Group is a medium-size producer of aerospace finished components, ranging from simple to highly complex and small to very large, machined and sheet metal fabricated parts. Over the last 10 years the company has expanded, partially due to additional orders from its principal customers but principally due to the acquisition of eight smaller competitors companies. The company has nine sites located in Europe, and the UK and is currently operated as nine individual organisations within one group structure. Many of the processes and procedures and strategies vary between operating companies.

The company’s major customers typically include aerospace Original Equipment Manufacturers (OEMs), first-tier suppliers to the OEMs and Maintenance Repair and Overhaul (MRO) companies who maintain aircraft for the operators. Consequently the company is required to supply its products both for new build aircraft and to ensure the ongoing in-service maintenance of existing aircraft.

The demand for items supplied to the OEMs is reasonably predictable. Each OEM produces a forward forecast typically covering the next 12 months. The quality requirements demanded from the OEMs is extremely high, due to flight safety reasons. Consequently, any minor errors at any stage of the production mean that parts must be scrapped and made unfit for use. This unquantified high scrap rate has a consequential impact on the overall production schedules, the suppliers, as well as leading to additional costs for the company.

The demand for items supplied to the MRO customers is un-predictable. This is especially apparent when there is an aircraft not fit to fly due to needing a spare part. Such unpredictability has a significant impact on the production schedules as such orders are contractually required to be prioritised. Again due to flight safety reasons the quality requirements are high, hence in order to ensure on-time delivery the company typically makes excess stock and thus a large number of finished items are held in inventory.

Situation

In July this year a new managing director was appointed. Following a strategic review it was recognising that the existing buying department operated on a very traditional basis it was considered that there is an opportunity to take a strategic approach in management, sourcing and procurement. There is currently an opportunity to develop and establish a new organisation and procurement strategy.

The company is currently spot buy key raw materials and components and measuring its performance on the price achieved. The company has not sought to develop long, medium of short term contracts, preferred suppliers or develop relationships with suppliers.

Staff and Organisational Structure

You have been appointed as the first Procurement Manager the organisation has had and have inheriting a large team of buyers, sourcing agents, logistics operatives who are based across the nine operational companies.

The Department is currently fragmented, with different processes, procedures, ways of working, systems and management. It is clear that the majority of focus appears to be the processing of paper-based purchase orders, goods receiving and payment of invoices.

There are pockets of best practice across the organisation including activities on supplier development, strategic sourcing and quality management, however most of this activity appears to have been instigated due to the personal initiative of individuals, there is not a coherent strategy in place.

Many of the individuals are unhappy with the proposed reorganisation including a concern surrounding ongoing employment.

Procurement Expenditure

You took the immediate action to analyse company spend, and identified the following:-

  • Packaging, the company purchases pallets, returnable boxes, internal liners, steel straps and shrink-wrap from a large variety of different suppliers. The annual spend is approximately 1% of the known production expenditure. Currently there is no procurement strategy. A total of six staff members are involved in the sourcing and procurement of packaging on a part-time basis
  • Castings, were there are multiple different suppliers, however the yield rate seems low and the majority of the suppliers appear to be unreliable. Again a large number of buyers are involved in the sourcing of castings with no overall strategy identified.
  • Finishing and treatments, there is the availability of numerous global suppliers, however the company appears to use three local suppliers to supply the majority of its requirements. There is a concern that the current supplier of the Shot Peening service will close due to a decline in demand. Thus there is a threat to the ongoing supply from this current source.
  • Machining, similar to the castings, there are multiple different suppliers, however the yield rate seems low and the majority of the suppliers appear to be unreliable. Again a large number of buyers are involved in the sourcing of castings with no overall strategy identified.
  • Miscellaneous expenditure, including repair parts for the production machinery, safety equipment, services, office equipment and other miscellaneous items. There are a large number of suppliers supplying many different products and services.
  • In addition, the company purchases a very large and unquantified amount of raw materials, typically Titanium, Aluminium and some specialist copper and nickel alloys. It is not currently known how this expenditure is broken down.
  • There is additional unquantified expenditure, which is being made on an ad-hoc basis, that is not managed by the buying department. No further information is currently available.

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help (2021) Global Supply Chain Management [Online]. Available from: https://myassignmenthelp.com/free-samples/pgn21c-global-supply-chain-management/procurement-strategy-and-sustainability.html
[Accessed 16 May 2021].

My Assignment Help. 'Global Supply Chain Management' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/pgn21c-global-supply-chain-management/procurement-strategy-and-sustainability.html> accessed 16 May 2021.

My Assignment Help. Global Supply Chain Management [Internet]. My Assignment Help. 2021 [cited 16 May 2021]. Available from: https://myassignmenthelp.com/free-samples/pgn21c-global-supply-chain-management/procurement-strategy-and-sustainability.html.


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