Physical Distribution And Logistics Management

Current Purchasing and inventory management process

Discuss about the Physical Distribution and Logistics Management.

The retail industry has grown at a massive rate in the recent years that increase the level of competition due to free entry and exit of firms. New trends have been developed in the market with extensive changes in the strategies of the leading organisations. A change can be noticed in the taste and demand of the consumers that makes the customers look for huge merchandise and variety of products (Holmström, 2008). Hence, it is important for the retailers to implement competitive strategy by reducing cost of operations, provide on time deliver and variety of products. It has become mandatory for any retail organisation to implement innovative supply chain management to obtain speed and flexibility in operations (Farahvash & Altiok, 2011).

The study focuses on the current purchasing and inventory management system used by Brisbane Outdoor Power Centre. Furthermore, the paper discusses the advantages and disadvantages of the current purchasing and inventory management system used by the company. In accordance to the issues, innovative supply chain and inventory management concepts have discussed that can be helpful to increase the efficiency and reduce investment while maintaining adequate stock. Finally, the study presents necessary recommendations for Brisbane Outdoor Power Centre to restructure its procurement and inventory functions.

Under the leadership of Belinda Green, Brisbane Outdoor Power Centre has followed strict procurement and inventory management system controlling management practices directed to maintain the stocks. In the contemporary business scenario, the firm requires massive investment in stock. In addition to that, adequate resources of management have been included to utilise the investment to the stock. Meanwhile, the entire process of existing purchasing and inventory has been established according to Saxon’s laissez-faire approach. As a result of the scenario, the purchasing and inventory management system has looked somewhat odd in compared to other retail operating companies. The major areas of purchasing and inventory management of Brisbane Outdoor Power Centre have no integrated approaches (Viale, 2016). Each of the stores functioned autonomously, and the inventories have been managed following substantial orders. Whenever shortage of products has taken place, stocks have been shifted between stores to manage the situation. In the inventory management system, some of the most offered product brand’s items may vary within the shops. Primarily, this type of inventory management cannot be adopted in the competitors’ inventory management system (Ancarani, Di Mauro, & D’Urso, 2016).

Competitive advantages and disadvantages of the currently used process

As the managers of the three stores of Brisbane Outdoor Power Centre have operated different levels of purchasing and inventory management system, the system of inventory and purchasing are entirely unconnected. Conversely, the diverse management systems of the three stores of Brisbane Outdoor Power Centre have no similarities and uniformities for practical sustainability (Zhang, Xu, & Wu, 2009). On the basis of practical interest, the inventory management and purchasing system of the three stores of the firm is not providing any sustainability to the corporate business. Though in the case of shortage of items the system looks outstanding, the disconnection among the three management systems is not tactically correct (Zhuang, 2014).

The current purchasing and inventory management process of Brisbane Outdoor Power Centre have several advantages and disadvantages that impacts the business of the organisation. For example, the primary advantage of the current process is the less investment required to maintain the inventory (Jessop, 2014). Another advantage of the inventory management process is the less spaced required to store the inventories. It is known that advantages and disadvantages are two sides of the same coin. The competitive advantages and disadvantages of the currently used process are discussed herein below:

• Low Investment: The current process of the Brisbane Outdoor Power Centre needs low investment because there is no need of maintaining extra inventory. Along with that, it buys inventory according to the demand of the customers (Jessop, 2014). Along with that, few products are kept in the store that minimise the cost of inventory management.
• Low Space to Manage Inventory: The Company does not need any extra space to maintain the inventory that reduces the cost of warehouse (Nasiri, Davoudpour, & Karimi, 2010). There is no need of any extra employee to maintain the warehouses. It reduces the work pressure of the inventory managers as the location of the warehouse is situated at the store.
• Individual Operations: Each and every store of the organisation operates separately. They order inventories according to their need (Jessop, 2014). Hence, the pressure over the inventory managers reduces due to low area of operations.

• Delay in Shipment: The orders for the inventory are made whenever needed according to the exhaustion of the stock. In other words, the orders are made when the stock finishes that leads to delay in shipments (Laing & Cotton, 2007). Customers visiting the store need to wait for the stock to come for purchasing a product.
• Lack of Stock: The lack of stock makes the customers wait for the new shipments to come. Every store does not have all products that are in demand and manages from other stores to meet the customers need (Jessop, 2014). It leads to loss of time and money to bring new stocks to meet the customised needs of the customers.
• Loss of Reputation: The lack of stock and delay in shipments leads to loss of reputation of the stores in this competitive market. It impacts the loyalty of the customer towards the company. Hence, it will negatively impact the business in the current market scenario (Laing & Cotton, 2007).

The appropriate supply chain and inventory management system to increase efficiency and reduce investment whilst maintaining adequate stock levels can be achieved by implementing the following strategies. Understandably, supply chain management theory can be taken into consideration in the business structure of the organisation. By identifying the demand of the customers, innovative, high quality and low cost brand products must be promoted according to the latest supply chain management theory to meet the demand of the customers. Moreover, the hybrid type of supply chain management will be suitable for significant operations in the each of the branches of Brisbane Outdoor Power Centre.

Constant analysis and manipulation: There is a need of constant analysis and manipulation of new procurement strategies by conducting regular market research (Raki, 2014). Decisively, demand theory must be identified as one of the best theoretical concepts to develop latest procurement ideas delivering solid inventory management system. The supply chain management of the company must be aware of the facts regarding the changes of price in the market and must maintain good relation with different suppliers

Implement Just-In-Time Strategy: The organisation must implement Just-In-Time strategy to minimise cost of maintaining extra stock (Wild, 2007). It helps to reduce the space of maintaining inventory. Furthermore, the Just-In-Time policy increases the reputation of the company in the market.

Appropriate supply-chain and inventory management system

Common inventory: There is a need of common inventory for all three stores. A common warehouse will help the company to increase the efficiency of supply chain system and reduce pressure by eliminating the situations of emergency (Shockley & Fetter, 2015). In operations management, inventory theory is another exceptional theoretical concept to design the inventory model in order to minimise the cost. Applying the theory, the organisation must promote a significant inventory management and procurement system.

Online Inventory System: The online inventory system will help the stores to order products automatically. The online inventory system can be managed using procurement theory creating a paradigm leading to effective inventory management. Procurement theory can be utilised within the inventory management to develop the inventory management following the supplier and consumer model in the same chain system. It will reduce the pressure of the inventory managers and enable the company with efficient supply chain management (Dollar, 2010). Furthermore, the online inventory management system will work according to a fixed plan that will provide better flexibility and faster service.

As the purchasing and inventory management has been one of the most effective systems to control the productivity of a firm, a purposeful restructuring of the existing purchasing and inventory management of Brisbane Outdoor Power Centre is recommended on basis of certain modern supply chain theories (Babbar & Prasad, 2008). Through the identification of the problems attached to the scenario, some of the valid recommendations have been advised as follows. Clearly, hybrid supply chain management will be evident for Brisbane Outdoor Power Centre as such SCM has used make-to-stock and lean strategies to provide efficient stock maintenance in order to meet the demand of the customers.

Apply Multi-Period and Just-In-Time Inventory Models: By considering the demand theory, the existing business operations of Brisbane Outdoor Power Centre’s three stores have been suitable for multi-period inventory models to be chosen (Ramalhinho Dias Lourenço & Ribeiro, 2015). The fixed-order quantity model can control event triggered situation such as stocking and the Just-In –Time design can increase the sales at the same time (Ramalhinho Dias Lourenço & Ribeiro, 2015). Thus, efficient purchasing and inventory system can be managed.

Modern Supply Chain System: Through the listing of the stockings and products of each of three stores using an online inventory system, a unanimous purchase order decisions should have been promoted to maintain the sustainability of the system (Ramalhinho Dias Lourenço & Ribeiro, 2015). In this way, identifying the Supply chain management theory, a reserve of items and costs of inventory can be suitably handled. It helps to eliminate the lack of stock and allows every store to sell a variety of products.

Recommendations for restructuring the purchasing and inventory functions

Centralised Warehouse: Invariably, centralised warehouse must be planned so that the maintenance of the procurement procedure and inventory system will be lot easier (Ritchken & Tapiero, 2016). According to the procurement model theory, through tracking down the balance of the purchasing items, the reserves and return ratio of the stock must be centralised to restrict the purchasing. Thus, using a single record system the labour cost and maintenance cost can be minimised (Ritchken & Tapiero, 2016).

Cost Savings Contemplation: In purchasing and inventory management, Brisbane Outdoor Power Centre must select standardised suppliers and consignment agreements to promote cost saving contemplation. In this way, by following inventory theory, significant benefits can be achieved reducing inventory and stocks. Standardised suppliers will promote on-time delivery and reduce the price of raw materials through bulk purchase for all of the three stores at a time (Sepehri, 2011). Such efficient purchasing and inventory system can be effective for Brisbane Outdoor Power Centre’s management to control the maintenance functionality of the purchasing and inventory management system (Sepehri, 2011).

If the recommendations are approved, the following action plan can be implemented as given in the table below:

TASK	ACCOUNTABLE  OFFICER	TIME	REMARKS
Undertake stock to take of inventory of Brisbane Outdoor Power Centre	Personal Information Manager (PIM), Branch Manager	15-Oct-16	Report to PIM to conduct baseline data establishment
Formulate and plan latest Supply Chain Management and inventory system	PIM, Branch Manager	Nov-16
Draft contract document for Supply Chain Management partners	PIM, Branch Manager	Nov-16	Approval of Board for recent SCM arrangements, Legal advice regarding latest contract arrangements with partners
Select and appoint SCM partners	PIM, Branch Manager	Dec-16	Contracts signed off
Restructure Brisbane Power’s Supply Chain into latest developed inventory system	PIM, Branch Manager	Dec-16	Report to be drafted by PIM for Board of Directors

Conclusion

The previous operations of Brisbane Outdoor Power Centre under the leadership of Donald Saxon have seen the impressive development of the business. The outlets of Brisbane Outdoor Power Centre have managed effectively creating a massive buzz around the market. The efficient management of the purchasing and inventory system has earned a strong reputation within the target market. The reliability and performance standards of the knowledgeable workforce of Brisbane Outdoor Power Centre’s stores have contributed to the achievements of the three outlets situated at different locations. Meanwhile, as the business moves on, the management of inventory and purchasing of orders has lost the potentials. The quality of the merchandising has decreased considerably under the market scenario. As a result of the circumstances, for the retail establishment within the market, significant steps must be taken by the management improving the existing management standards of supply chain, purchasing and stock maintenance.

Evidently, Ms Green must identify the tight financial situation of the firm to approve the latest recommendations in inventory management. The odd existing purchasing and inventory management system of Brisbane Outdoor Power Centre’s three outlets and the functionality of the managers must be altered as soon as possible. Through the implementation of multi-period inventory models, the efficient strategic modification must be developed within the system. Also, centralised outlets and cost saving considerations must be promoted to reduce the cost of inventory.

References

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