Case Study Analysis of Sapphire Energy and Aus Cotton

This case study analysis focuses on the procurement and supply chain challenges faced by Sapphire Energy and Aus Cotton, two companies under the Laburnum Group. It evaluates the effectiveness of the current ordering system of Sapphire Energy and ways of improving it. It also discusses the impacts of less than perfect demand forecasts for Aus Cotton and ways of mitigating the issue. The strategic sourcing process for Aus Cotton is also analyzed.

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Running head: CASE STUDY ANALYSIS
Case study Analysis
Name of Student
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Author Note

1CASE STUDY ANALYSIS
Table of Contents
Introduction......................................................................................................................................2
Case Analysis: Sapphire Energy......................................................................................................2
Evaluation of effectiveness of the current ordering system of Sapphire Energy.........................2
Ways of improving the current ordering system of Sapphire Energy..........................................3
Analysis: Aus Cotton.......................................................................................................................4
Personal thinking on strategic sourcing in context of Aus Cotton...............................................4
Impacts of less than perfect demand forecasts for Aus Cotton....................................................5
Ways of mitigating the issue of Aus Cotton................................................................................6
Elements of strategic sourcing process........................................................................................7
Evaluation of the assertion for Aus Cotton..................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................8

2CASE STUDY ANALYSIS
Introduction
Laburnum Group is established in 1920 and it is considered as one of the largest
Australian groups of companies having their main area of revenue is coming from their two
companies which are the Sapphire Energy and Aus Cotton. The main objective of this group is to
maximize the returns of the shareholders. It is seen recently that the two companies under this
group is facing some challenges and inefficiencies which is actually making the top management
of this group to rethink their business strategies and the current processes for maximizing the
returns to their shareholders. The main area which is considered s the challenge for the group is
basically related with the procurement and the supply chain. There is the development of the
cross functional team to be deployed for managing and identifying the areas which needs to be
improved (Kim and Chai 2017). The study is focusing on how Laburnum Group will be
identifying and managing the challenges they are facing recently from their two business
portfolios. It is also describing the qualitative and quantitative analysis of the loopholes created
and the mitigation of the challenges are needed.
Case Analysis: Sapphire Energy
Evaluation of effectiveness of the current ordering system of Sapphire Energy
It is observed from the case study that Sapphire Energy has the contract with Eastern
Power storeroom who is procuring this cable so that the electric service should be delivered at
the different areas of Victoria. It is seen that now Eastern Power actually need around 155,000
meters of cable for providing the best electric service to the customers. The challenge the
company is facing is basically the carrying cost of the cable is very high and there is around

3CASE STUDY ANALYSIS
1/12th part of the annual cost is paid to the Electric Store room for delivering this cable to
Sapphire Energy. There is an agreement to be made with Electric Store for reducing the lead
time. There will be no discounts on the volume of this cable to be made and the supplier is
indicating that the discount will be offered only if it has the minimum order volume of 4500
meters. It is also seen that the ordering costs is also high which is around $50 and the inventory
carrying costs on all the items is around 10 percent of the purchase price which is also high as
this will add up and the total price for supplying this cable for the customers gets enhanced
which is adjusted in the electric bills.
From the case scenario it is depicted that the ordering costs for the cable is around $50 so
the ordering cost is dependent on the annual demand. This tells that of the ordering cost is
increased then the annual demand will also increase. This indicates that the customer across the
different cities of Victoria have large demand of this cable which the Eastern Store should have
to meet it. This is also dependent on the value of economic order quantity. If the economic order
quantity increases the annual demand also increases. So in this case the effectiveness of the
current ordering system is very high for Sapphire Energy as the ordering costs for this cable is
very high. So this depicts that Sapphire Energy has the high demand of this cable for the future
which will be maximizing the sales and this results in maximizing the shareholders of Laburnum
Group as well.
Ways of improving the current ordering system of Sapphire Energy
The ways of improving the current ordering system is to increase the ordering cost for the
cable. The next could be the increase in the annual demand met by Sapphire energy year by year.
The annual demand the ordering costs for the cable is directly related with the economic order
quantity of that product. This depicts the improvement in the financial performance of Sapphire

4CASE STUDY ANALYSIS
Energy which I enhancing the revenue of the business for Laburnum Group as well. There is also
the improvement of the current ordering system to be made by reducing the carrying cost for the
cable. The lower the price of carrying cost per meter for the cable, there is the increase in the
annual demand of the cable to be taken place. There is the other way of improving the
performance of the current ordering system is basically the reduction in the inventory carrying
costs of the cable which is added with the purchasing prices for the cable and this will increase
the overall costs of purchasing the cable for the customers (Presley, Meade and Sarkis 2016).
Analysis: Aus Cotton
Personal thinking on strategic sourcing in context of Aus Cotton
It is important to mention the fact that Aus Cotton a company of Laburnum Group is
facing some of the procurement and the supply chain issues by which they could not be able to
deliver the products with wide variety to the customers. It is required by the newly hired Senior
Vice president of the Supply chain to address the issue of procurement and supply side sources
for this company. According to the case scenario, Aus Cotton is much focused on the contract
manufacturing where they have to provide huge profit margins to the manufacturers with whom
the company is in contracting with. They have to deal with huge number of products with varied
ranges which is involving from the seasonal as well the products which are not found in season
time, rather than it is delivered to the customers as and when required. So it is the responsibility
of the senior Vice president of Aus Cotton to rethink about an approach. The approach which
should be taken into consideration should be the approach of strategic sourcing. In accordance
with Jacobs, Chase and Lummus (2014) strategic sourcing is defined as the approach which is

5CASE STUDY ANALYSIS
useful in gathering information and it should be applied in such a way that it should be
enhancing the power from the customers to purchase the products or services available to them.
According to the case scenario the major global issues which are linked with the area of
strategic sourcing is the consistency in the demand and supply of the products by Aus Cotton.
Due to the increasing demand of the products of Aus Cotton, there is always a decreased supply
to be taken place as if demand for the product increases, the prices for the products starts
increasing and the supply side decreases to a certain level. It is also seen that due to unexpected
changes in the volume and length of the product lines developed by Aus Cotton, they could not
be able to supply the products on a constant basis by the manufacturers and this leads to delay in
the delivery of the products for the customers (Swink et al. 2017). The next global issue could be
the inaccuracy and the transparency of the data or information required for the manufacturers to
provide it as this will be causing problems in integrating security for the operations of Aus
Cotton. There is the need of the information regarding the needs and demands of the target
market where they want to enhance their business. It is important for the Senior Vice President to
be able to get the required information from the market and the customer trends and analyzing
their needs and demands from the products they purchase. The Senior Vice President of Aus
Cotton need to analyze and implement the positioning strategy as well for making the products
accustomed with the market conditions.
Impacts of less than perfect demand forecasts for Aus Cotton
The impacts of the less than demand forecasts for Aus Cotton are depicted below
Poor Quality Customer Service- With the less than perfect demand forecasts for Aus
Cotton indicates that there is poor quality of service to be given to the customers. The customers

6CASE STUDY ANALYSIS
will not be getting the products consistently and also at the right time which results in delay of
delivery for them. The less than perfect demand forecasts also reduce the reliability of the
customers towards Aus Cotton.
Lack of volume of products manufactured- It is seen that due to the less than demand
forecasts the prediction for the products manufactured will become less and it does not meet the
expectations of the top management of Aus Cotton which result in loss of customers for the
company.
Urgent Increase in Carrying Costs- It is seen that if the demand forecasted is less, then
there is an increase in the transportation costs for the products takes place if the customers
urgently require the products (Fernie and Sparks 2014). So there is an increase in the cost of the
transport services used for moving the products from the contract manufacturers to the
distribution centers.
Ways of mitigating the issue of Aus Cotton
It is important that for mitigating the issue of less than perfect demand forecasts the
company should be using the local manufacturers in Australia who can be able to manufacture
the summer and the winter lines products for this company (Stadtler 2015). This will help in
reducing the overall cost and profit margin of the company increases. The impact in the volatility
in the length could be mitigated by manufacturing the products after the evaluation of the needs
and demands of the customers and analyzing the market conditions. The cost of transport
services used for moving its products from contract manufacturers is mitigated by increasing the
volume of distribution centers and from sourcing the local manufacturers rather than making
contracts with the outside manufacturers.

7CASE STUDY ANALYSIS
Elements of strategic sourcing process
The elements of the strategic sourcing process which will be the top candidates for Aus
Cotton are depicted below
Category Selection- It is important that Aus Cotton need to define and identify the sizes
and the current quantities used as this is linked with the supply side.
Supply Market Evaluation- It is useful for strategic sourcing to be implemented that,
there is the analysis of the potential suppliers involved with Aus Cotton in order to compete and
develop strategy according to them (Monczka et al. 2015).
Selection of Sourcing process- It is essential in the selection of the sourcing process so
that the product specifications are cleared for the senior vice president of Aus Cotton.
Negotiating with the Manufacturers- The Senior Vice President should be negotiating
with the contract manufacturers that they will be reducing the profit margin and be able to
deliver different range of products without any delay.
Evaluation of the assertion for Aus Cotton
The senior Vice President would respond to this fact that ethics in doing business is really
essential for the sustainability of the business of Aus Cotton. As the senior vice president of Aus
Cotton I would be prioritizing the contract manufacturer who are doing illegal business with us
and would not be making them as our partners as legal obligations can hamper the reputation of
Aus Cotton in Australia.

8CASE STUDY ANALYSIS
Conclusion
It is concluded that the company Sapphire Energy and Aus Cotton of the Laburnum
Group will be able to find out the solutions t the supply chain and procurement issues they have
it (Christopher 2016). It is evident that the strategic sourcing approach is taken for Aus Cotton to
mitigate the supply chain management issue. Hence, the challenges faced by both Sapphire
Energy and Aus Cotton need to evaluate it for the better business in future for them.
References
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and
supply chain management. Cengage Learning.
Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain
management. John Wiley & Sons.

9CASE STUDY ANALYSIS
Cooper, R., 2017. Supply chain development for the lean enterprise: interorganizational cost
management. Routledge.
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for
sustainable supply chain management: Developments and directions. European Journal of
Operational Research, 233(2), pp.299-312.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan page publishers.
Swink, M., Melnyk, S.A., Hartley, J.L. and Cooper, M.B., 2017. Managing operations across the
supply chain. McGraw-Hill Education.
Presley, A., Meade, L. and Sarkis, J., 2016, July. A strategic sourcing evaluation methodology
for reshoring decisions. In Supply Chain Forum: An International Journal (Vol. 17, No. 3, pp.
156-169). Taylor & Francis.
Eltantawy, R., Giunipero, L. and Handfield, R., 2014. Strategic sourcing management’s mindset:
strategic sourcing orientation and its implications. International Journal of Physical Distribution
& Logistics Management, 44(10), pp.768-795.
Kim, M. and Chai, S., 2017. The impact of supplier innovativeness, information sharing and
strategic sourcing on improving supply chain agility: Global supply chain
perspective. International Journal of Production Economics, 187, pp.42-52.
Eltantawy, R., Giunipero, L. and Handfield, R., 2014. Strategic sourcing management’s mindset:
strategic sourcing orientation and its implications. International Journal of Physical Distribution
& Logistics Management, 44(10), pp.768-795.

10CASE STUDY ANALYSIS
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.