Strategic Information System For Supply Chain Management: Case Study Of Citizen Gas Company

Background of the organization

Discuss about the Strategic Information System for Supply Chain Management.

Citizen Gas Company is one of the biggest residential gas suppliers in the United State that likewise manages the residential and industrial gas supply. The organization was confronting issue in their business because of a change of interest and supply in the business sector. As indicated by the case situation, Citizen Gas Company is attempting to enhance the gas supply to the household level that is likewise reliant on the climate. The utilization of gas is high in the winter season and the supply around then stays low (Joskow and Kahn 2011). The organization buys their gas from a few other pipeline organizations through contract premise along these lines; they need to store the gas to supply in the business sector amid the interest circumstance. The gas stockpiling arranging of the organization exceedingly affects this procedure of free market activity. The organization keeps up a framework in their gas stockpiling, which is not creating any advantage to the organization. At the point when the interest is high and supply is low then they needs to abridge the supply to the business and business segment coming about colossal business misfortune (Guang Shi et al. 2012). To manage the problem organization has employed an executive of corporate planning who can give an appropriate idea of storage capacity to take care during demand. The goal of this report is to distinguish the few parts of the storage capacity issues and give appropriate planning. The report will concentrate on the new framework that gives an appropriate month-to-month planning of the entire process.

Citizen’s Gas Company is a cooperative organization established in the year of 1887 in United States with a objective of supplying gas to the residential customer without any interruptions. The company is operated by the public charitable trust with a mission to benefit the customers and community. The business of the company is associated with the supply of natural gas in different customers like residential, commercial and industrial. Citizen’s Gas Company is operating the business in three segments but the strength of the business is domestic customer because they provide maximum revenue to the organization. Therefore the preference of gas supply also remain with the domestic customer first. Among the base of 200000 customers, they have 160000 domestic customers and revenue income from this base is 160 million. Therefore, the focus of the company is always to serve better to the domestic customer in a efficient way. Along with the domestic customer, industrial business of the company is also increasing that needs prior attention for a better growth. To enhance the service the company is improving the service through the proper planning of storage and supply. The company is aiming to provide an uninterrupted supply to all customers to sustain within the market competition.

Corporate structure of the company

Corporate structure of the company

The CEO who is responsible for the overall performance of the organization heads citizen’s Gas Company. The structure of the organization is very normal and traditional where several directors are appointed for every department. All these directors report to the CEO and manage the several functions (Chopra and Sodhi 2014). There are functional manager in each department who report to the director and provide valuable support to the employees. The structure of the organization is given in the below image.

Figure 1: Organizational Structure of CGC (Source: Citizensenergygroup.com, 2016)

Existing and future business opportunity

The business of the company is associated with the natural gas supply that has good demand in the market. The problem of this business is the market prediction and sales forecasting. The company always fails to match the demand of the gas and the supply from the producer because of the uncertain market (Chen and Baldick 2011). The storing capacity of the company is also different and they directly store gas from supplier and supply them to their customer. It is found that the production of gas in low in the winter season and the demand of the gas is high in the same season therefore company always lose their business (Attaran and Attaran 2012). If Citizen’s Gas Company is able to plan their storing capacity then they will be able to store the extra gas in the summer season which will enables to match the extra demand in the winter season. The company has lot of scope in the industrial segment because they are not focusing in this segment. If the company is able to improve the situation then they will make more business in this segment. The residential business also has lot of scope as other company is growing in this segment as compared to Citizen’s Gas Company. Since the market growth is high than the market leader therefore there are lot of scope existing in this market.

Existing operating system

Figure 2: Current operation of CGC to supply gas to their customer (Source: Citizensenergygroup.com, 2016)

The present operation of the organization is related to three levels that are purchase from the supplier, Storage of the gas and supply to the customer. The initial step is the receiving of the gas from five suppliers. CGC has is getting the supply from five pipeline company who are in contract with CGC. All the organization supplies their gas to the storing unit of the organization (Zednik et al. 2011). The buying option of the gas is associated with the character of the contract with the pipeline company. To some company CGC has to pay the contract amount irrespective of the consumption. A portion of the organization has made the agreement with a settled measure of cash and utilization. In the event that CGC is expending less then additionally they need to pay the full cash to the organization. Along these lines, this sort of agreement is acquiring misfortune for the organization since when demand is low and supply is high then they are not ready to supply gas. Purchasing is also associated with the ability of the pipeline company at that point of time. The next step of the system is the storage of gas that is solely dependent on CGC’s infrastructure. The company is struggling to store the excess gas because of the improper planning and low storage capacity. The company is therefore store only few amount of gas that is supplied (Winter and Knemeyer 2013). The last step is the supply of the storage gas to their customer. Since the company has three type of customers therefore they has to prioritize the supply procedure during the sort supply. The company first fulfill the requirement of the domestic customer because they are committed to them then the company distribute the extra gas to the commercial sector. Another reason to prioritize the domestic segment is that they provide higher rate to the company and most of the revenue is coming from this segment.

Existing operating system

Business performance

The business performance of CGC is good because they have always developed the competitive advantage in their business to beat the competitors. The business of CGC is also associated with the customer base that no other companies have in the country. The company is making profit every year though the rate of growth is in the negative side as compared to the past. Therefore, company is focusing on the business aspect and opportunities in the market to enhance the growth of the company (Park, Hong and Roh 2013). More often, the company fails to fulfill the exact demand of the market only because of lack of planning. Therefore company is taking initiative to enhance the performance through several functional initiative.

Sales and marketing is the key aspect of the business because that helps to sale the product in the market better than competitors do. CGC has very less focus on the sales and marketing because they are very old organization and till today they are dependent on the relationship business. Most of the residential customer of the company is taking the service for long time therefore addition of new customer is comparatively less as compared to other company. The company is habituated in the common trend of sales that are not forecasted in the past (Mena, Humphries and Choi 2013). The new system of the company will help to make a sales forecast for the company and the marketing of the product will be done in that basis. If the company has over supply then marketing department will remain active to increase the demand in the market. Once the demand is high then they will be able to generate more business in the off-season also (Ipakchi and Albuyeh 2012). Therefore, CGC will prepare a sales budget that will forecast the future sale for the next year. The budget will be based on the data of last year.

Month	Sales 2015 residential in million $	Budget 2016 in million $	Sales 2015 commercial in million $	Budget 2016 in million $	Sales 2015 industrial in million $	Budget 2016 in million $
Jan	17	19	2	2	1	4
Feb	17	16	1	2	2	5
Mar	13	15	1	2	7	6
Apr	13	13	2	3	8	7
May	11	11	3	3	9	8
Jun	11	11	3	4	10	10
Jul	10	10	3	4	9	9
Aug	10	10	3	4	8	8
Sep	12	13	1	2	6	7
Oct	14	14	1	2	2	6
Nov	15	16	2	2	2	5
Dec	17	18	3	2	1	4
Total	160	171	25	32	65	79
Total	278

Table 1: Sales budget for 2016 (Source: Created by author)

Operating such a big organization also includes lot of expenses. Therefore to operate such organization expense is very important to handle otherwise it will impact the profitability of the organization. During the operation, company has to deal with different type of expenses that are fixed expense and variable expense (Lund et al. 2014). Most of the fixed expenses are predictable but the variable expenses are unpredictable therefore they should be done through proper planning so that they could be done in a proper manner without affecting the profitability.

Operating Expenses	Actual Expense 2015 in million $	Budget 2016 in million $	Difference
Accounting and Legal	0.6	0.6	0
Advertising	2.1	2	.1
Depreciation	3.1	3.5	-0.4
Dues and Subscriptions	1.5	0.9	0.6
Insurance	2.5	2.5	0
Interest Expense	4.5	4.8	-0.3
Maintenance and Repairs	5.9	8.5	-2.6
Office Supplies	0.005	0.003	0.002
Payroll Expenses	0.003	0.003	0
Rent	1.3	1	0.3
Salaries and Wages	18	20	-2
Taxes and Licenses	5.6	6.3	-0.7
Web Hosting and Domains	0.002	0.002	0
Other	1	0.5	0.5
Total Operating Expenses	46.11	50.608	-4.498

Table 3: Expense budget 2016(Source: Created by author)

Business performance

Procurement of the organization is associated with the sales of the product throughout the year. The company is mainly focusing to plan the procurement by developing a sales forecast based on the last year sale. If the company is able to plan the forecast properly then it will help to develop a procurement budget. The procurement will be done depending on the sale and the storage so that company will not suffer any loss due to short or over supply (Belkin, Nichol and Woehrel 2013). The company is emphasizing on the month wise procurement budget that will help to organize the purchase in the right manner.

Month	Purchase budget of 2015 in million $	Actual sale of 2015 in million $	Purchase budget of 2016 in million $
Jan	16	23	20
Feb	13	21	17
Mar	13	21	16
Apr	16	22	16
May	17	23	17
Jun	16	23	18
Jul	13	21	16
Aug	12	20	13
Sep	14	17	13
Oct	14	18	14
Nov	13	19	15
Dec	14	22	18
Total	171	250	193

Table 2: Purchase budget of 2016 (Source: Created by author)

Taxation

Taxation is one of the important aspect of the business that directly impact the net profit of the company. The company is planning to sale more in the 2016 therefore with a increased volume of business company has to pay more amount of tax (Moore et al. 2014). Therefore, to operate business by paying proper tax to the government pricing of the product is very important. CGC is planning to increase the price from the next year to increase the infrastructure.

Future planning of the organization is connected with the continuous supply of natural gas over all clients. CGC is starting to make a capacity arrangement for their storeroom that will work in a month-to-month premise however will likewise keep up yearly information. The future arranging of the organization is exceptionally centered on the month-to-month business gauge and they will make an incremental arrangement as per the past business (Monczka et al. 2015). On the off chance that the organization can estimate their business legitimately then they will have the capacity to improve their capacity arrangement. The arrangement of the new chief is to make a calculated configuration of a data framework that will center to examine the free market activity. The new framework will give a month-to-month gas plan to next five years with specific accentuation on the main year of offers. The new framework will utilize genuine information amid the year to venture interest for the following year (Seuring 2013). This kind of activity will enhance the working wage of the association that will bring about more gainfulness. Future arranging of the organization is likewise connected with the arranged stockpiling that will stay full in the beginning of consistent.

Figure 3: New system of the storage facility and uninterrupted supply to customer (Source: Created by author)

Proposed new system of the company is associated with proper planning for every functionality that will help to make a planned purchase of natural gas. The proposed system of CGC therefore suggests a four tire system for operation. The first tire is the supplier of the company. Since CGC has different type of supplier, therefore they get their product through different contract (Stern 2012). According to the supply agreement, every supplier supplies natural gas when it is available from nature. The second tire of the system is the main operating system that plans monthly supply and demand of the product. When supply is more than the demand then it send the excess gas to the storage unit where it can be stored for whole year that can be utilized for the uninterrupted business. The third level is the storage facility and the objective of the company is to keep proper stock throughout the year to manage the high demanding situation. The forth tire is the supply of the gas that is again done on the priority basis. In the new system, the supply of gas has the same priority for every customer however; it can be controlled during the high situation (Wisner, Tan and Leong 2015).

Identification of data for adequate planning capability

Data’s that are identified for the adequate planning system are described below.

Number of customer – Number of customer in each segment is important to incorporate into the system to understand the demand in the market. If CGC focuses on every customer consumption then it will be easier for the system to understand the usage (Ashby, Leat and Hudson-Smith 2012). According to the usage future planning will be done.

Weather data – Weather data is also important for the system because according to the weather condition demand fluctuate. During the winter demand remain maximum however if the weather forecast says that the span of winter will remain short then new system will procure less.

Heating factors – Heating factor influence the demand of natural gas. Industrial customer will procure more gas during the summer time because production remains high in this period. However, heating factor in the residential sector is in high demand in the winter season therefore CGC has to supply maximum gas at that time (Cheenkachorn, Poompipatpong and Ho 2013).

Sales forecast – Sales forecast of the company will depend on the system data like weather condition, therefore according to the weather forecast will be planned.

Supplier contract terms – Supplier contract terms is also important for the new system to plan the amount of gas to be procured from suppliers that is also associated with the storage facility.

Storage field capacity – The system has to aware about the storage facility to maintain the planned stock for the demanding situation.

Conclusion

From the above report, it can be outlined that Citizen Gas Company was inadequate in the planning part that is bringing about tremendous business loss. The organization was not able supply gas as indicated by the demand since demand and supply of the gas was not coordinating. At the point when supply was high then demand was low and when demand was high then supply stay low. To beat this circumstance CGC has chosen to execute a legitimate data framework that will comprehend the future interest in the industrial sector. The storage capacity framework in the new framework, which is distinctive, and it will store the abundance gas when demand is low with the goal that it can be used in the season of low supply. The report likewise concentrates on the present execution of the organization and it is observable that the organization was confronting loss because of uneven market activity.

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