Challenges And Strategies Of The Purchasing Department In Voyager Logistics

Challenges Faced by the Purchasing Department of Voyager Logistics

Purchasing function of the vehicle maintenance department of Voyager

According to the given scenario, it has been received that Voyager Logistics has been facing challenges due to its low profitability. Despite havening many good contracts this organization failed to achieve high profitability in the market. The main reason of this issue is the old infrastructure of the purchasing department. Green is the head of the purchasing department of Voyager. He has a team of three members and the members are always trying to conduct the service at low price. Baxter is the new general manager of Voyager. He was shocked by observing that the purchasing department gives their concern towards the low price rather than the cost. However, for every purchasing department, it is essential to use strategy to reduce the cost (Almeida et al. 2018). This enables an organization to gain profit through their business. Hence, Baxter suggested to Green to implement the Total acquisition cost or TAC process in the system of their purchasing process. TAC is a managerial accounting method. This includes purchasing cost of goods and service. This cost is the summation of the price of the service and other associated cost. On the other hand, Voyager has made a contract with Lightfinger Security Limited in order to outsource the security service. However, this contract makes major problems for Voyager. The gates are locked between the midnight and 6 am as a result, the driver cannot enter. Therefore, during the occasion, the security is not present and a brand new track was stolen. According to the Liightfinger Security Limited Voyager has to pay additional cost if they want these facilities as these are out of contract. This high cost affects the profitability margin of Voyager.

High fuel cost is the great concern of the vehicle maintenance department of the logistics service. Often the rising fuel cost increases the cost of the operation (Monczka et al. 2015). Voyager takes drum fuel from the local company and the cost is £1.22. This cost is high. From the investigation it has been received that 50% of total cost of Voyager comes from purchasing of fuel. The manager of purchasing department of this organization has no idea about purchasing consortia and forward buying. Baxter has taken initiative to reduce 20% of fuel cost. Voyager has got a contract from the Ketch Automotive. It is a first-tier supplier of UK. Establishment of partnership business with this organization will give a good opportunity to get a new market. However, some challenges are associated with this contract as Ketch is a demanding customer and may charges penalty if any issue takes place. Morgan looks the vehicle maintenance department of Voyager. The team of Morgan gives more concentration towards the off-road vehicle. Hence, to buy a spare is a nightmare for this team. Morgan gives responsibility to the purchasing team to buy the spare. One of the major problems to shop the spare at cheapest price is the unacceptable delay. Often the purchasing department of the logistics organization faces challenges due to buy service at the low price (Paesbrugghe et al. 2017). The off-road vehicle has to wait for a long time for spare and often the spare is wrong, which is purchased at low price. Morgan has tried to solve this problem by purchasing the products from local suppliers. However, they want straight away payment.  Due to lack of company purchasing card such organization has been facing issue while trying to buy a spare.

Organization of the Purchasing Department of Voyager

  Based on the above case study it has been addressed that the purchasing department of Voyager follows old system, which creates an issue. It is important for every organization to restructure their purchasing department to reduce the high cost of the business (van Weele and van Tubergen 2017). For Voyager, they need to reorganize their purchasing department to maximize the performance of the business.

Organization of the purchasing department of Voyager

Reduction of the cost is an important way to improve the function of the purchasing department (Diallo and Siqueira 2017). It has been received from the case scenario that the high cost of the fuel leads Voyager to face challenges in their business. The cost of the fuel for the vehicle is high, which increases the operating cost of the business. Hence, implementation of buying forward strategy could be helpful for this organization to reduce the high cost of fuel. This strategy allows the organization to buy the product at low price and sell the product when the demand is high. By applying this strategy Voyager could be able to buy the fuel at a lower price. On the other hand, application of future trading strategy might be effective for Voyager to reduce their cost. Future trading is a strategy that allows the buyer and seller to make a contract for a future date in the context of buying and selling of the product (Ashenbaum and Maltz 2017). Based on this contract the seller is not able to increase the price of the product until the date, which is mentioned in the contract. Hence, application of this strategy could be beneficial to reorganize the purchasing department of Voyager.

Providing training to the employees is a helpful approach for an organization to improve any department (Rodríguez-Escobar and González-Benito 2017). In the context of Voyager, it has been found that due to lack of adequate knowledge the staffs of the purchasing department are not able to perform well. This increases the cost and hampers the performance of the organization. To reduce this issue proper training should be provided to the staffs. If the staffs get adequate training then it could be beneficial for them to take a necessary decision regarding purchasing of the product. Staff training is a vital way to enhance the performance of the employees in an organization. By providing some professional training could be effective for the staffs of the Voyager to improve the purchasing process. Keeping a company purchasing card is crucial for the purchasing department (Paesbrugghe et al. 2017). As per the case study, Voyager faced difficulties in payment due to lack of purchasing card. Hence, by keeping a company purchasing card this organization could carry out a smooth transaction with the seller. Apart from this effective leadership is required in the purchasing department of Voyager. As for example, by using transformational leadership this organization could able to implement changes in their service. This might enhance the activity of the purchasing department and to minimize the certain challenges.

Strategies for Improvement of the Purchasing Department

Conclusion:

The entire piece of work focuses on the challenges of the purchasing department in Voyager Logistics. Lack of knowledge among the staffs and lack of adequate strategy leads this organization to face difficulties in their logistics process. On the other hand, it is important for this organization to reduce the high cost of fuel while purchasing it from the local company. In order to deal with these challenges, this organization needs to provide training to the staffs and to adapt effective strategies. On the other transformational leadership could be effective to improve the performance of the purchasing department.

Purchasing and inventory management is a vital division of any business. However, the purchasing decision of an organization has a direct impact on the control process of this organization (Mikkelsen and Johnsen 2018). It is important for an organization to reduce the high carrying cost and replenish the inventory. To reduce the carrying cost smart inventory management is required. This study deals with the purchasing department of Voyager Logistics. This organization distributes chemical and provides tanker washing facilities. However, logistic service is the main part of their business. Since, 2012 Voyager has been facing issue to gain profit in their business. However, the function and system of their purchasing department is too old, which affects the profitability of their business. Despite having good contract Voyager has faced challenges to achieve profit in their business. In this current study, the issues of the purchasing department of Voyager will be addressed.

References

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Ashenbaum, B. and Maltz, A., 2017. Purchasing-logistics integration and supplier performance: an information-processing view. The International Journal of Logistics Management, 28(2), pp.379-397.

Diallo, M.F. and Siqueira Jr, J.R., 2017. How previous positive experiences with store brands affect purchase intention in emerging countries: A comparison between Brazil and Colombia. International Marketing Review, 34(4), pp.536-558.

Mikkelsen, O.S. and Johnsen, T.E., 2018. Purchasing involvement in technologically uncertain new product development projects: Challenges and implications. Journal of Purchasing and Supply Management.

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

Paesbrugghe, B., Rangarajan, D., Sharma, A., Syam, N. and Jha, S., 2017. Purchasing-driven sales: Matching sales strategies to the evolution of the purchasing function. Industrial Marketing Management, 62, pp.171-184.

Rodríguez-Escobar, J.A. and González-Benito, J., 2017. The effect of strategic alignment on purchasing management. Management Research Review, 40(11), pp.1175-1200.

van Weele, A. and van Tubergen, K., 2017. Responsible purchasing: moving from compliance to value creation in supplier relationships. In Sustainable Supply Chains (pp. 257-278). Springer, Cham.