Purchasing And Inventory Management For Business Entities – Analysis And Recommendations

Current Purchasing and Inventory Management Processes

Discuss about the Purchasing and Inventory Management for Business Entities.

Brisbane Outdoor operates in the Queensland city of Brisbane through three of its retail centres. These centres are present in the Ipswich, Mt Gravatt and Strathpine localities and have been operating as isolated business entities, instead of a single business unit. The purchasing and inventory management strategies implemented in each of these centres are different. This report analyses these strategies along with a couple of areas of improvement for the corresponding business processes. The report also includes a number of recommendations for the restructuring of the purchasing and inventory management processes of the organisation based on a number of corresponding concepts and theories available in the market. The report also includes a brief action plan for the implementation of the recommendations mentioned for the purchasing and inventory management processes of the organisation.

Each of the centres of the Brisbane Outdoor has been operating as a separate business entity for quite some time, under the leadership of Donald Saxon. Hence the purchasing and inventory management processes implemented in each of these centres are quite different. Some of the activities involved in these processes are analysed in this section.

The procurement processes implemented in each of the retail centres of the organisation are analysed in this section of the report.

• Each of the centres choose its suppliers based on their locality and the availability of the corresponding suppliers. Hence each of the centres of the organisation consider different set of suppliers as the options for their purchasing operations (Mehra, 2014).
• The orders for the products are placed by the corresponding centre of the organisation based on the availability of the corresponding material or product with the organisation.
• The purchase orders placed by each of the retail centres of the organisation are manged under different budgets and are monitored through different means.

The inventory management processes implemented in the workplace of each of the retail stores of the organisation are mentioned in this section.

• Each of the retail centres of the organisation maintain local inventories instead of a centralised inventory for the entire organisation. The inventories are quite small in size, which in turn leads to frequent scarcity of a number of products.
• The products are transferred among the retail stores to satisfy the demand of the customers in the corresponding market.
• The inventory management process implemented in each of the centres of the organisation doesn’t focus a lot on the analysis of the future demands of the products and the changes in the trends in the corresponding markets.

The inventory management and procurement processes of each of the retail centres of the organisation are managed by separate management teams focusing on separate aspects of the corresponding processes.

This section of the report gives a brief overview of the competitive advantages and disadvantages for the procurement and inventory management processes implemented in the three retail centres of the organisation.

Some of the advantages of the current procurement and inventory management processes used by the various centres of the organisation are mentioned below.

• The maintenance of small inventories in each of the retail stores allows the organisation to have the products to be readily available in the retail stores (Chen, 2012). This in turn allows the organisation to satisfy the needs of the customers quicker.
• The maintenance of the small inventories allows the organisation to ensure the minimised costs of maintaining excess inventory. This in turn minimises the operating costs of the maintain the inventory for the satisfaction of the demand of the customers in the corresponding market of operation (Christopher,2016).
• The choice of the suppliers in the corresponding locality allows the organisation to ensure close and positive relationships with the suppliers, which in turn minimises the turnaround time for the demand of the customers for the products not available in the corresponding retail stores (Fernie, 2014).
• The procurement activities and inventory managed differently in each of the retail stores of the organisation allows the organisation to keep track of the damaged goods in an efficient manner. The replacement of the damaged goods with the manufacturers becomes easy because of the availability of the products at the corresponding retail store (Solyalı, 2015).

This section of the report mentions some of the disadvantages of the procurement and inventory management processes implemented in the organisation.

• The management of the procurement activities from isolated retail centres of the organisation leads to a possibility of accidental orders (Stadtler, 2015). These orders cause the presence of various products more than the demand or the presence of excessive number of products.
• The contract of the organisation with various suppliers for different localities might lead to an inefficient ordering and purchasing process. The suppliers aren’t chosen through effective market analysis, which could lead to them being inflexible with the orders (Tayur, 2012).
• The organisation is placing the orders for various products with the suppliers in each of the corresponding localities and under different budgets, which might lead to inefficient budgeting in the organisation. The total costs of the procurement and inventory management activities might be very high in comparison to the ideal values.
• The organisation maintains small inventories at each of the retail stores, which might increase the costs of maintaining and securing the products (Monczka, 2015). The activities of maintaining and keeping the products secured takes a lot of resources in case of the maintenance of three small inventories at each of the retail stores.
• The transportation of the products from one store to another increases the costs of maintaining the products in the organisation (Heckmann, 2015). At times, deadlock scenarios are created in the organisation by the same products being required at multiple stores and is present at a different store.

This section of the report mentions several supply chain and inventory management concepts, which can be implemented in the workplace of the organisation to have efficient procurement and inventory management processes. These concepts also allow the organisation to have low costs of these processes and adequate maintenance of stock level.

The organisation can analyse the needs of the customers and the demand of the products in the corresponding market in order to create an inventory model with the inclusion of the buffer stocks (Brandenburg, 2014). The presence of buffer stocks allows the organisation to have a number of products having uncertain demand, in buffer. This in turn allows the organisation to satisfy the needs of the customers at any point of time and also decreases the transportation costs of moving the products around the three retail stores of the organisation (Coyle, 2016).

Purchasing/Procurement

The push-pull strategy allows the organisation to modify the intensity of the procurement activities based on the demand of the products, need of the customers and the inventory state of all the retail stores (Hofmann, 2014). According to the push-pull strategy, the procurement strategy of the organisation is aggressive while ordering the new products and becomes more stable once the product is available on the shelf in the retail stores. This strategy of procurement and inventory management allows the organisation to have adequate stock levels at any point of time.

This concept of supply chain management and inventory management is based on the concept of customer value. The customer value can be defined as the capabilities of the products or services provided by an organisation to satisfy the needs of the customers. In other words, customer value is also considered to be the value proposition provided to the customers to buy the products or services of an organization (Wisner, 2015). The involvement of this concept into the supply chain and inventory management strategies of the organisation will allow effective maintenance of the inventory along with the minimisation of costs associated with the corresponding activities.

This section of the report mentions a number of recommendations for the organisation in order to improve the procurement and inventory management activities.

• The organisation should establish a centralised inventory with high capacity along with the local inventories of low capacity in the different retail stores (Dekker, 2013).
• The organisation should implement a number of data analytics technologies and strategies in order to have better insights into the needs of the customers and trends in the market (Kaplan, 2015). This in turn will allow the organisation to have better efficiency of the procurement and inventory management activities.
• The organisation should implement various information and communication technologies in order to enhance or improve the activities involved in the supply chain management strategy of the organization (Rushton, 2014).
• The organisation should implement strategies to drive all the supply chain activities from a centralised inventory (Seuring, 2013). This in turn allows the organisation to ensure the high efficiency of the corresponding activities and also ensures the minimisation of the costs.

The organisation can initiate the implementation of the changes recommended in the previous section through the action plan mentioned in this section.

• The management should train the employees in various information and communication technologies along with various data analytics technologies.
• The employees of the organisation can also be trained in the concepts of supply chain management strategy to allow them to have a brief knowledge on the various factors involved in the corresponding strategy.
• The organisation can set the centralised inventory at a location having equal or close to equal distance to each of the retail stores of the organisation. The choice of the location of this centralised inventory can be based on the analysis of the demands of the products and needs of the customers in corresponding localities.

Conclusion

The current procurement and inventory management processes implemented in the organisation has a number of issues. These issues in the corresponding business activities lead to the decrease in the performance of the organisation. The report included a number of concepts that can be implemented in the corresponding processes along with a number of recommendations. 

References

Brandenburg, M., Govindan, K., Sarkis, J., & Seuring, S. (2014). Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), 299-312.

Chen, X., & Simchi-Levi, D. (2012). Pricing and inventory management. The Oxford handbook of pricing management, 784-822.

Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.

Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. (2016). Supply chain management: a logistics perspective. Nelson Education.

Dekker, R., Fleischmann, M., Inderfurth, K., & van Wassenhove, L. N. (Eds.). (2013). Reverse logistics: quantitative models for closed-loop supply chains. Springer Science & Business Media.

Fernie, J., & Sparks, L. (2014). Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers.

Heckmann, I., Comes, T., & Nickel, S. (2015). A critical review on supply chain risk–Definition, measure and modeling. Omega, 52, 119-132.

Hofmann, H., Busse, C., Bode, C., & Henke, M. (2014). Sustainabilityâ€ÂRelated Supply Chain Risks: Conceptualization and Management. Business Strategy and the Environment, 23(3), 160-172.

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

Mehra, S., & Inman, R. (2014). Inventory management and efficiency of manufacturing firms. Journal of Operations Management, 1(2), 1-4.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.

Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Seuring, S. (2013). A review of modeling approaches for sustainable supply chain management. Decision support systems, 54(4), 1513-1520.

Solyalı, O., Cordeau, J. F., & Laporte, G. (2015). The Impact of Modeling on Robust Inventory Management Under Demand Uncertainty. Management Science, 62(4), 1188-1201.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

Tayur, S., Ganeshan, R., & Magazine, M. (Eds.). (2012). Quantitative models for supply chain management (Vol. 17). Springer Science & Business Media.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: a balanced approach. Cengage Learning.