Discuss about the Purchasing and Supply Chain Management.
Brisbane Outdoor Power Centre is the garden power tools manufacturer, operates from three retail locations across the city of Queensland of Brisbane. Blending their operational functions under the umbrella, the company has operated from three centers which are similar, although the company has provided ranges of products, preferring the local demand. Donald Saxon, had opened their first retail showroom in Mt Gravatt in the year of 1985. Later the company acquired the Strathpine centre in 2004 subsequent of the Ipswich store. The owner of the business was allowed to operate independently. During the initial days, the owners of the business was not directly supervised their employees and fails to provide regular feedback to those facts under the supervision. Belinda Green had en-cashed the opportunity of Saxons’ retirement in acquiring Brisbane outdoor which eventually changed into GreenPlus Pty Limited. After the transformation of this ownership, the company has experienced a lot of operational and management changes and identified several issues related to the investment and purchasing of the company.
In this business report, the main focus will be given towards the critical analyzing the problem and connect the literature with the appropriateness of the case study based responses. The research will further aim to evaluate different operational approaches which were practiced by the company over the past years comparing the current approach of the organization. Being as the purchasing and inventory manager in the branch of Strathpine, an effective analysis of the case study will be discussed for identifying the area of improvement. Based on such issues, the suitable recommendation will be provided based on the theory and evidence of the literature.
When Belinda Green took the full ownership charge of the branch of the Strathpine, the approach of handling purchase and inventory has been changed. Though the company has associated with retail power tool manufacturing business, Brisbane Outdoor invested a lot for the stock maintenance and maintained an effective means to manage such investment. However, each store of the company has been operated autonomously and stocks have transferred between each branch only when shortages occurred. In other words, Strathpine branch of Brisbane Outdoor, have maintained a non-integrated approach while processing the purchasing and inventory management. This is the reason the branch often coupled with a less capacity management in order to handle fluctuations in demand less effectively (Feng et al., 2014). However, the most concerning part regarding the purchasing and inventory management of the company is that each of designated inventory managers has been functioned independently in terms of sourcing and purchasing and an unconnected and less informed inventory management policies have been processed by the management of the company. For this reason, the company has faced the problem in comprehensive inventory control in all the centers of Brisbane Outdoor. Specifically, this has been found that the distribution process of the outdoor items has also faced problems due to non-availability of products at Strathpine branch. Furthermore, no stock control mechanism has been taken place for avoiding waste. In short, the current inventory management system of Brisbane Outdoor is less effective in terms of controlling aspects and follow-up deficiencies due to not self-directed operations conducted by the individual inventory managers of the company.
As per the case study commented, each of three stores of Brisbane Outdoors has functioned independently. On the other hand, the owner’s laissez-fair approach to the business has resulted the ineffective purchasing and inventory management practices. The owner’s reluctant approach about the inventory and purchasing activities of the organization may create problem in the demand planning of the items of various power tools of the company (Dekker et al., 2013). A lack of inventory balance in maintaining the regional demand can make shortages and overstocking unavoidable.
Secondly, the lack of forecasting in inventory demand may increase the manufacturing cost of the products of Brisbane Outdoors. It may impact on the company’s high quality merchandise business because the company could not afford to deliver their products at the same prices (Loy et al., 2016). Furthermore, the participation of the large number of employees are also be required if the company further maintain the non-integrated inventory management system of the company.
Thirdly, non-availability of the product may decrease the employee productivity of Brisbane Outdoors’ business. Though the company is staffed with experienced people, but an unorganized stock maintenance may create issues related to the completion of tasks. According to Morton et al., (2015), when employees are accomplished tasks, the inventory turnover ratios could be higher and thus, it will increase the productivity and operational excellence of the organization.
Fourthly, the unsynchronized inventory control process could be the reason of conflicting customer vendor relations. Currently, the KPIs of the company are the knowledgeable staff, high quality merchandise and the excellent after sales service. The secret of the success of the company, thus, may be reduced if the company has maintained the unconnected purchasing and the management of inventory systems. Furthermore, thus autonomous operations of the company would also be responsible for conflicts between three retail locations across the Queensland city of Brisbane because the company sourced or purchased stocks whenever transported between stores when stock deficiency incurred.
Fifthly, this has been identified that a non-integrated purchasing and inventory management system can be the reason of an ineffective decision making process. As per the given case study, decisions regarding the purchasing and sourcing have been taken by individual inventory manager of Brisbane Outdoors. In this context, an effectiveness of the systems of inventory management is completely dependent on the potential decision making approaches of the inventory managers (Stadtler, 2015). The current unconnected purchasing and inventory management process of the manager may reflect unanalyzed trends of inventory of the business which might make decisions that don’t provide the greatest return of the company.
On the contrary, the non integrated inventory management process may have several competitive advantages which may impact on the current process of Brisbane Outdoors Limited. Firstly, the value of the physical stocks of the company may definitely value appropriately because an effective in and out of the stock can easily be recorded by each of the three branches individually. Secondly, the major products of the brands differed from store to store. Hence three completely different and unconnected purchase and inventory management process of Brisbane outdoors cannot face internal competitions.
In a broader sense, purchasing involves defining the needs, selecting the suppliers, fixation of the proper price, terms and other conditions as well (Monczka et al., 2015). Starting from the issuance of the products to delivery of the final items is all about a great deal of responsibilities for any manufacturers like Brisbane Outdoors. Thus the clear concept of supply chain management is indeed necessary for ensuring an efficient and cost effective system within the workplace. According to Rizza (2016), the management of supply chain is the collection of steps that an organization transformed components of raw items into the final output. In this context, the managers of Brisbane Outdoors need to gather a clear picture which is contained with proper planning, developing, make and distribution and return.
At the initial step, the company needs to plan properly. Decisions related to the sourcing, purchasing in terms of required number of quantities of raw materials, unit price, proposed sales volume and so on. In the case, it is so imperative that raw material price continues to fluctuate. However, price is the key driver of the sourcing strategies of the company (Barney, 2012). Here the potentiality of the purchasing managers likely to be tested because many buyers are often afraid to pull the trigger in case if they are wrong about the timing of the buy. For this, Brisbane needs to assess the market potentiality along with retail customers’ demand, regional product choices. To meet the demand of garden power tools and other items of the company in the local market, the company needs to ensure the availability of inventory. Being the reputable manufacturer and suppliers, the given company needs to, thus, evaluate the optimum capacity to meet the forecasted demand. However, the maximum capacity shall be ascertained after assessing the strength of operation and the financial aspects of the company. For instance, evidence suggests that the given company has been staffed with experienced employees, so this can be assumed that the hurdle of operational difficulties could be managed effectively. Simultaneously, the company needs to increase the financial excellence by reducing the investment options by manage inventory effectively (Rushton et al., 2014). Before, predicting the demand, the company needs to put price, inventory and other geo-environmental factors together. During the effective sourcing, the company needs to focus on the levels of inventory, decisions regarding the conversions and lastly, the cost-value-trade-offs. Here Brisbane Outdoors does not maintain an integrated approach while managing the optimum level of inventory. Evidence suggests that various stock items have been transported between stores when scarcity occurred. This is considered to be a wrong approach because the leads time of the inventory has been increased due to less productive approach maintained by the management of the company. Thus, the flow time within the production and distribution needs to be fast and integrated.
After the above consideration, Brisbane Outdoors needs to develop a strong relationship with the suppliers and retail consumers of the company. Before making product to deliver, the management needs to involve not only identifying the reputable suppliers but needs to plan for delivery of the products as well (Wisner et al., 2014). In the subsequent manufacturing step, all the power tool products needs to be tested, packaged and delivered and make them ready for the proposed market in Queensland. In this way, the company needs to develop their clear concept about purchasing and procurements for the effective function and maintain the advocacy to procure the materials, manufactures and the end service deliveries. The above analysis therefore, gives the clear concept that sourcing of raw material decision can affect the margins of the profit in the several manners. For maximizing the return and reduce investment, the company needs to improve end-to end supply chain performances along with an effective applications of the inventory management within the workplace.
The current approach of purchasing and inventory management are not sustainable and has been found a lot of loop holes which decreased the productivity and identified several operational gaps. To restructuring the functions of purchasing and inventory, the company needs to maintain the following recommended steps:
Conclusions:
By the above case scenario analysis, this can be said that Green’s familiar approach with Strathpine branch associates is indeed a positive move instead of casual approach delivered by Donald Saxons. While discussing the present purchasing and inventory system, several limitations have been identified. However, the key findings of the report is that the company need to follow an integrated supply chain management process. On the other hand, the company needs to follow the JIT inventory approach for optimum utilization of resources and ensure maximum returns as well.
References:
Barney, J. B. (2012). Purchasing, supply chain management and sustained competitive advantage: The relevance of resourceâ€Âbased theory. Journal of Supply Chain Management, 48(2), 3-6.
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.
Feng, M., Li, C., McVay, S. E., & Skaife, H. (2014). Does ineffective internal control over financial reporting affect a firm’s operations? Evidence from firms’ inventory management. The Accounting Review, 90(2), 529-557.
Loy, M. L., Traub, R. D., Zhang, L., Kotala, P., Roemmich, M., Breidenbach, J., & Nelson, R. (2016). Beyond the Use of Robotics: Operations and Supply Chain Control for Effective Inventory Management in a Health System Pharmacy. In Advances in Healthcare Informatics and Analytics (pp. 145-155). Springer International Publishing.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.
Morton, J., Cambiaghi, R., & Radcliffe, N. (2015). Inventory management requires an end-to-end approach: our consulting team defines the key concepts of inventory management and elaborate on the decisions and cross-functional collaboration required to be more effective. Logistics management (Highlands Ranch, Colo.: 2002).
Rizza, M. (2016). Raw Material Sourcing Strategies Are Critical to Revenue and Profit Margins.
Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.
Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: a balanced approach. Cengage Learning.
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