Describe about the Brisbane Outdoors Purchasing and Inventory Management,
Purchasing and Inventory Management is that system which is helpful in identifying the flow of products and services within the organization (Jones, P & Robinson, P, 2012). In order to meet the organizational needs, a company may decide to implement inventory management techniques (Scott, S, 2016). Such techniques are needed to create invoices, purchase orders, receipts generation and control accounts that are related to the inventories. Organizations usually maintain inventories policies so that these policies can helps in smooth functioning and thus making large investment by the company (Hamlett, K, 2016).
In relation to the given case study of Brisbane Outdoor Power Centre, we can say that operation management plays a very important role in managing the purchase and availability of inventories. Operations Management is that area of management that is related to the control and design of various process of production (Martinich, J, 2008). Thus it is the responsibility of the business to conduct efficient operations. We can see in the case study that Brisbane Outdoor has three retail locations and it is very important to control and develop a strategic operational process. Now Belinda Green is the new owner of this company, and has identified ways to achieve the common goal of the organization rather than focusing on individual interests of these three departments.
Brisbane currently uses Decentralization process in purchasing and maintaining its inventories. Decentralized purchasing, means purchasing materials for different department independently to accomplish their needs. This system helps in making purchases in case of emergency. An immediate action can be taken in an urgent situation. Brisbane has three stores and all three stores are managing their activities without taking into consideration the activities of other departments. The company hold a good reputation among its customers and has been successful in building a trust factor amongst them. The customers relied on their tools for its performance, after sales service and obtainable supplies. The customers where actually very attracted to the company as they had very knowledgeable and experienced staffs who were always ready to give free advice to their potential customers. The company was famous for holding the high quality merchandise. Customers said that they can easily buy the products that they desire in a cheap price from some other company but they will not be offered with such high quality products. This made Brisbane one of the best industries.
Brisbane was busy making purchases in a decentralised form as it reduced the burden on the top authorities of the company. Whole responsibility was put on the shoulder of the immediate executive. The top management were able to concentrate on other important managerial areas. This system was adopted to decentralise the decision taking power to the subordinates. The employees of Brisbane were highly motivated since they had a large degree of authority. The managers made independent decisions when it was an urgent task.
The key advantage of making decentralized decisions that is taken on an individual basis by those personnel who are much aware of the factors and upcoming events of the local areas. They are actually in that position which allows anticipating special promotions that are strictly local in nature. Furthermore, this helps the purchasing manager to be aware of various inputs related to the plans of their potential customers. As a result this allows the local management to manage and control the inventories to keep a sense of desirable ownership.
Better control: Brisbane is providing better supervision and control because the employees are allowed to make independent decisions; due to this the subordinates can gain knowledge related to the task under their control. The subordinates can even make necessary amendments and can take corrective action.
Empowering employees: The employees of Brisbane are empowered by holding autonomy to make decisions on their own. They feel their importance make them to work effectively to give more inputs.
Relieving burden: The burden of the owners of Brisbane is reduced. The owners are looking to other serious issues that have to be controlled rather than focusing on purchasing and inventories management that is not a priority area of supervision.
Prepares for emergency: When the top management authorities of Brisbane are away and an immediate action has to be taken, in this case the subordinates are free to act during emergencies without having to wait for the chain command.
Ease of Expansion: For a growing business like Brisbane, The process of expansion can be facilitates by decentralization system. A new business can be opened in new geographical area that can be operated independently (Toomey, J, 2012). It has the capacity to act with ease to the specific needs such as making decision to purchase those products that can help in producing appealing products (Joseph, C, 2016).
Decentralization purchasing can be extremely beneficial but sometimes it can be dangerous unless it is not carefully constructed and monitored for the benefits of Brisbane as a whole. Some disadvantages that Brisbane has to face due to the purchase system are as follows:
Uniform policies not followed: Under this system, the company is not being able to make uniform policies for the entire organization. The company is not capable of maintaining the standardised procedures. Each manager of Brisbane of three stores will have to work and frame different policies.
Problem of Coordination: Brisbane is working smoothly but there is a lack of coordination among its various departments, as the authorities lies dispersed throughout the company.
High financial burden in purchasing: Brisbane has been making purchases individually, and they are not availing any discounts from their suppliers. When purchase is made in bulk the suppliers can be negotiated and agreed upon giving supplies in a discounted rate.
Required qualified personnel: Brisbane has to hire highly qualified managers with experience so maintain the activities of each department. We know that decentralization system becomes a waste if there is a lack of qualified and competent personnel (Weele, A & Weele, A, 2005).
Conflict: In Brisbane the responsibility lies on the head of different managerial personnel. Often in meeting the plan implemented by various managers brings conflicts among them. This will bring a bad impact on the functioning of the company.
Currently Brisbane is following decentralization process in purchasing and maintaining inventories. Due to change in ownership it becomes essential to look after the loopholes of the company and make necessary changes to solve the problems that arise because of old traditional process. Brisbane will be able to increase their efficiency and reduce investment and maintain adequate stock by adopting the centralized system. The advantages of this system are explained below to give a clear look of its comparative benefits.
The centralized purchasing will help Brisbane to tap the competitive advantage of specialized skill of the staffs who makes purchases.
The duplication function will be completely eliminated when all the three departments will purchase their inventories collectively by one purchase manager (Li, L, 2007).
The manufacturing manager and the heads of other departments including the office managers will be relieved from the responsibility of purchasing individual requirements. They can concentrate on other areas that are more important in the business (Wisner, J, Tan, K & Leong, G, 2014).
Brisbane can strengthen its bargaining position as a buyer by makes purchases in bulks. This will tap a quantity discount, thus reducing the involvement of intermediaries (Pizzey, M, 1989).
The company can now maintain a good relation with their suppliers, as there will be only few buyers (Monczka, R et al., 2015).
It will enable Brisbane Outdoor to make standardized purchase through standardized procedure.
The inventory carrying cost will also be reduced along with other costs related to the storage of inventories by different departments.
The transport cost will also be reduced if Brisbane starts making collective purchases. A large supply will be received by making consolidated orders (Day, M, 2002).
In this process the company will be making few orders of large quantities which will reduce the cost related to placing, inspection, receiving and accounts of the inventories.
One departmental head will be assigned with specific responsibility and it becomes easy to hold liable of that head that makes wrong decision. The person behind misconduct can be easily held liable.
Scarce materials according to the economical advantage can be allocated easily, thus adjusting the intersection requirements of the materials.
Brisbane is a small sized organization having three departments, so it is preferable to make purchases by centralizing its activities. This way the power will be concentrated in the hands of a single head, creating coordination and cooperation in leadership. Centralization is usually recommended when the company has inadequate control over the practices of the management (Hurley, M, 1980). All the three departments should allocate the tasks to one head for example give purchasing task to one head that is the purchasing manager who can make purchase on behalf of all the three stores. This will decrease the cost as purchase will be made in bulk. Transportation cost will also be reduced.
It is an important issue to decide whether an organization should make purchase and inventory systems collectively or in an individual basis (Hill, C, Schilling, M & Jones, G, 2016). The decision should be based on following matters:
According to the goals and objectives of Brisbane, it is recommendable to make purchases and manage inventories in a centralised form because of the comparative advantages that it holds (Mok, K, 2004). All these years Brisbane was practicing its activities smoothly and efficiently. Due to the change in leadership and ownership, it is essential to make some changes in the structure of company.
Brisbane will surely be able to make high profits by controlling its duplication process by avoiding the reckless process of purchasing. When Ms. Green took a round in the three location stores she was concerned about the system that company was following all the years. Now that she is aware of the disadvantages that Brisbane has been facing, she wants to change the system of entire organization. Mt Gravatt, Strathpine and Ipswich will appoint one head under purchase department so that the authority can make better deals. This will create a better layout of each store. Brisbane will now maintain economy in recording and an accounting system that is systematic and appropriate.
Conclusion
Brisbane Outdoor is has a good reputation among their customers due to its exceptionally excellent services. It has three departments that perform their activities independently irrespective of the situation and conditions of other departments. The ownership of Brisbane has been changed and the new owner wants to change its purchasing system so that the activities of these three departments can be coordinated and the employees can coordinate their activities.
Mt Gravatt, Strathpine and Ipswich will appoint one purchasing and inventory head so that the company can maintain their funds, make better accountability and keep healthy relationship with their suppliers. Suppliers of Brisbane will allow discount when the purchase will be made in bulk. Coordination and cooperation will help Brisbane to achieve their common goals in an effective and efficient manner.
References
Day, M. (2002). Gower Handbook of Purchasing Management. Gower Publishing, Ltd.
Hamlett, K. (2016). [Online]. The Advantages of Inventory Control. Viewed 5 October 2016 from https://smallbusiness.chron.com/advantages-inventory-control-2228.html
Hill, C, Schilling, M & Jones, G. (2016). Strategic Management: Theory & Cases: An Integrated Approach. Cengage Learning.
Hurley, M. (1980). A Comparision of Decentralized with Purchasing in the Jackson City School System. University of Tennessee at Martin.
Jones, P & Robinson, P. (2012). Operations Management. OUP Oxford.
Joseph, C. (2016). [Online].The Advantages of a Decentralized Organizational Structure. Viewed 5 October 2016 from https://smallbusiness.chron.com/advantages-decentralized-organizational-structure-603.html
Li, L. (2007). Supply Chain Management: Concepts, Techniques and Practices Enhancing the Value Through Collaboration. World Scientific.
Martinich, J. (2008). Production and Operations Management: An Applied Modern Approach. John Wiley & Sons.
Mok, K. (2004). Centralization And Decentralization: Education Reforms and Changing Governance in Chinese Societies. Springer Netherlands.
Monczka, R, Handifield, R, Giunipero, L & Patterson, J. (2015). Purchasing and Supply Chain Management.
Pizzey, M. (1989). Cost and Management Accounting: An Introduction for Students. SAGE.
Pooler, D & Pooler, V. (2012). Purchasing and Supply Management: Creating the Vision. Springer Science & Business Media.
Scott, S. (2016). [Online].Top Ten Ways to Manage Inventory. Viewed 5 October 2016 from https://smallbusiness.chron.com/top-ten-ways-manage-inventory-11099.html
Toomey, J. (2012). Inventory Management: Principles, Concepts and Techniques. Springer Science & Business Media.
Weele, A & Weele, A. (2005). Purchasing & Supply Chain Management: Analysis, Strategy, Planning and Practice. Cengage Learning EMEA.
Wisner, J, Tan, K & Leong, G. (2014). Principles of Supply Chain Management: A Balanced Approach. Cengage Learning.
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