Supply Chain Assessment 2022

Assessment 2 Supply Chain 1
Assessment 2 Supply Chain
Student Name
Institution

Assessment 2 Supply Chain 2
Laburnum Group: Introduction
Laburnum Group was established in 1990 as a Victorian farmer’ cooperate. Headquartered in
Victoria, Laburnum is today amongst the leading listed companies in Australia by product
diversification namely energy, office supplies, clothing, energy, home improvement, industrial
and safety products. In particular, the strategic management of Laburnum considers the clothing
and energy business portfolios of top interest in corporate decision making since these two areas
form the company’s largest share to its entire business operations. Currently, the clothing and
energy portfolios of Laburnum have been encountering challenges and inefficiencies; and this
has provoked the executive leadership to re-examine the current processes, systems, and
strategies across these two areas (Sheth and Sharma, 2017, p. 100). The energy portfolio operates
under the brand, Sapphire Energy and the clothing portfolio under AusCotton. The report will
focus on these two portfolios to analyze the inefficiencies and recommend the right strategies to
ending these problems at Laburnum Group.
Energy Portfolio: Sapphire Energy
Quantitative and Qualitative Evaluation of Ordering System
Sapphire Energy has the responsibility to provide electric service to consumers in a more reliable
way. The customers who rely on Sapphire Energy are located at Sunbury, Melton, and Bendigo
just to mention a few. In the past, this supply of electricity has been reliable to these diverse
customers.
Quantitatively, Sapphire uses 1/10 AWG material of aluminum triplex cable which qualitatively
deliver electric power from the pole to the meter loop installed in the building. As part of
contract with Sapphire, the Eastern Power storeroom procures this 1/0 AWG cable. Eastern
Power needs to procure 155,000 meters of aluminum triplex cable for the coming year. At the
same time, the ordering cost (H) will be maintained at $1.35 per meter because the cable will
only be used for routine service work. In this agreement, Sapphire is facing inefficiencies. On
this cable, there are no quantity discounts given although the Eastern Power supplier supplies not
less than 4,500 meters per order. The agreement between Eastern Power and Sapphire Energy to
distribute 12 parts (1 part every month) within a year is inefficient for Sapphire Energy.

Assessment 2 Supply Chain 3
The Eastern Power wants to reduce lead time that has a potential to increase by 12 weeks (3
months) interference but this contract does not exist. Sapphire on the other hand is incurring
fixed price upon order of power cables form Eastern Power. As mentioned above, Sapphire does
not get any discount no matter the order quantity. The minimum order (4500 m) is very huge to
go without a discount. In analysis, this challenge is associated with absence of a flexible power
cable supplier in the market and an implication that sub charges are devoid of any allowable
discounts (Zimmerman, 2013, p. 140).
In addition, Sapphire experiences high stock carrying costs as the annual order limit is 90,000
meters. In analysis, the effectiveness of Sapphire Energy’s current cable ordering system is now
a supplementary system as $50 is added on the ordering price to all units shipped. This affects
Sapphire Energy’s financial budget adversely.
Discuss if (and how) the current inventory system be improved?
The current ordering system of Sapphire Energy has inefficiencies as discussed above; this calls
for urgent need to modify the system. To begin with, the terms and conditions surrounding
Sapphire’s contract with the Eastern Power should be modified. In analysis, Sapphire holds the
capability to renegotiate the contract with Eastern Power to require that bulk power cable orders
qualify for a discount (Rahman et al., 2013, p. 180). Also, Sapphire should adopt the Just-in-
Time inventory model as an approach to reduce wastages. The application of JIT model would
enable Sapphire Energy to negotiate with Eastern Power and any other cable suppliers when it
comes to setting supplier expenses for all inventories; this would ensure meeting market
demands is easy and at the most minimum costs possible. As per the JIT model, Eastern Power
should increase the production and storage facilities so as to meet all orders done by the client
(Sapphire Energy). This would improve efficiency for Sapphire Energy and ensure that the
market demand is effectively met at all times. In Sapphire Energy’s case, the management should
anticipate that demand for energy increases and those more Australian cities would require the
company to deliver power at their house doors (Rahman et al., 2013, p. 180). In this context,
increasing storage capacity from 90,000 m to 155,000 meters would be a wise decision.
Clothing Portfolio: AusCotton