Laburnum Group: Challenges and Solutions in Procurement and Supply Chain Management

This case study explores the challenges faced by Laburnum Group in procurement and supply chain management, specifically in the clothing and energy sectors. It provides an assessment of the effectiveness of the current ordering system and discusses major global issues relevant to strategic sourcing. Recommendations for improvement are also provided.

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Running Head: LABURNUM GROUP
Laburnum Group
Student's Name
Tutor's Name
Course
Institutional Affiliation
Date

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Table of Contents
Table of Contents....................................................................................................................................................2
1.0 Introduction..............................................................................................................................................3
2.0 Methodology.............................................................................................................................................3
2.1 Sapphire energy........................................................................................................................................3
2.2 Challenge..................................................................................................................................................4
2.3 assessment of the effectiveness of current ordering system ................................................................4
2.3.1 Calculation of the current order system.............................................................................................4
2.3.2 Theories of procurement and management........................................................................................6
Organisation buying behavior..........................................................................................................................6
2.4 Challenges.................................................................................................................................................6
2.5 Major global issues relevant to strategic sourcing................................................................................7
2.5.1 Supplier identification..........................................................................................................................7
2.5.2 Consultative relations...........................................................................................................................7
2.5.3 Impacts of less-than-perfect demand forecasts for AusCotton products.........................................7
2.5.4 Importance.............................................................................................................................................9
2.5.5 Response.................................................................................................................................................9
3.0 Conclusion................................................................................................................................................9
4.0 Recommendations....................................................................................................................................9

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1.0 Introduction
Victorian farmers' cooperative originated in 1920, laburnum group has grown into Australia biggest listed
company with its headquarters in Australia, Victoria, and the sector covers office supplies, energy industries,
and safety products as well as home products. The main function of the group is to give a suitable return to its
stockholder while addressing various needs of the wider bondholders. The firm monitors the outcome across its
diverse range of firms which are very important to cooperate strategy judgments. (Van Weele et al., 2010).
The portfolios are facing challenges which motivate their top management to check the current systems,
strategies across different product groups. Laburnum shows a variety of Inefficiencies and problems across the
areas. As a result of a number of procurement and supply chain related problems across clothing and energy
areas when analyzed by the factional team to identify the areas where improvement is needed. There are several
sections shows areas with the challenge that is clothing as cotton and sapphire energy.
2.0 Methodology
The study used case study to investigate two different aspects of the business portfolio. The portfolio
includes the energy sapphire and the Auscottton. The As cotton is a global maker of summer and winter outdoor
sports apparel.in winter it includes outwearing such as jackets, footwear, wide breakers, freezes and sky jackets.
In summers they include running entails such as shirts and shorts. Hydration system, wide breakers, backpacks,
and footwear. The energy Sapphire is responsibilities for electrical services provisions to customers around
areas such as Mildura, Geelong, Bendigo, Ballarat, Melton, Sunbury, and Wodonga.
2.1 Sapphire energy
This sector has a duty to provide reliable electric services to customers in and around include as
Bendigo, Mildura, Melton, Ballarat, Geelong, Traralgon, Wangaratta, Wodonga, Sunbury, and Shepparton. The
very material that's used to provide the service is the aluminium triplex cable and main function is to offer
electric current from spreading pole to the meter coil on the house (Burgess et al .,2006).

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2.2 Challenge
There is no quantity discount offered to this cables and the distributor needs at least 4500 meters to be
mandated.
Associated with each cable shipment orders cost of fifty US dollars which includes every price from making
the purchase demand to giving a check for payment.
2.3 assessment of the effectiveness of current ordering system
Lee at al., (2007) suggested that Sapphire energy is involved in the business of providing electric
services to many different people in Ballarat, Geelong, Sunbury, Melton, Traralgon, Bendigo,
Wodonga ,Wangaratta, Shepparton and Mildura. There are various material types that are needed in the
provision of electric services where 1/0 AWG aluminium triplex cable is the main component (Van der Zwart et
al., 2005).
2.3.1 Calculation of the current order system
According to Harland et al., (2007). Said that in order to find the success of the existing collation
system one must calculate the economic order quantity as shown below
EOQ= √2 DC
hC
Where
EOQ is a formula that aims at minimizing the overall cost of inventory by helping reach a balance between
holding too much stock(Overstocking) and too little stock(Understocking)
D is the annual demand
C is ordering cost per unit
he is the cost of holding inventories per unit per order.
Q is the same as EOQ
EOQ=2×155000×50÷10100×1.35
=10919.28 UNITS.

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The EOQ is used to reduce inventories cost between overstocking and understocking that actually have far-
reaching implications as far as competitiveness is the concern. The system is much effective since it reaches the
supplies standards and specification of 4500 meters on an order set by the supplies.
Reorder level it involves identification of minimum stock level so as to place a new order when existing stoke
reaches that level.
Reorder level =annual demand ×lead time ÷ numbers of days in the year
= 155000 ×120÷360
=5666.67 UNITS
The system is effective since it guides the company on when to place a new order which is 5666.67 units. It
helps the company on the amount of quantity to maintain in their store.
Number of orders per year= annual demand ÷EOQ
155000÷ 10919.28 = 14.2EOQ=2DChC
EOQ is a formula that aims at minimizing the overall cost of inventory by helping reach a balance between
holding too much stock(Overstocking) and too little stock(Understocking)
D is the annual demand
C is ordering cost per unit
he is the cost of holding inventories per unit per order.
Q is the same as EOQ
EOQ=2×155000×50÷10100×1.35
=10919.28 UNITS
Reorder level =annual demand ×lead time ÷ numbers of days in the year
= 155000 ×120÷360
=5666.67 UNITS
The system is effective since it guides the company on when to place a new order which is 5666.67 units. It
helps the company on the amount of quantity to maintain in their store.

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Number of orders per year= annual
14 orders per year.
With the guide of the ordering system, the company will have to make only 14 orders per year which reduces
the inventories charges involved when making frequent ordering per year.
Total relevance cost =1/2 QHC+ D/Q C
1/2×10919.28×50 +155000/10919.28 ×50 = $ 273682
The total cost of ordering that the company will incur is $ 273682
The total cost gives the overall economic costs of making and involves the variable cost, which refers to a
number of products that are produced.
based on inventory management.
2.3.2 Theories of procurement and management
Organisation buying behavior
Focuses on precontract and request management part of obtaining process. The corrective information is
in organization sociology with a look at political models of making a decision. The main supposition behind the
theory is the restricted rationality and opposing inspiration and likes that performers have. The theory concerns
itself with the process of procurement and management through request. Theories or models in business try to
solve the problems all over the firms. Every decision made by the company impacts the outcome of any
enterprise.
2.4 Challenges
In the clothing business company, any product label came illegally under authorities. As cotton contains
its producers all over the world, due to their consistent and large demand in the marketplace. Due to its large
and potential market, Auscotton outsourced producers have made illegal products and sell them through grey
market routes. Furthermore, Auscotton goes for the widening of dealer base by developing a mechanism for the

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suppliers with quality product specifications the top challenge faced was to analyze in the inventory cost of
sapphire and to come up with a solution that could reduce cost transport system and the agreement between the
dealer and themselves.
The initial condition is one of leading clothing businesses in Australia but faces many problems in
supplier chain that deteriorates market values. The way forward to reduce the supply issues is through working
on the inventory management thus the current ordering system can be improved. Each shipment charge is fifty
dollars and of minimum order increase to nine thousand meters, the shipment charge lowers and this on return
reduces recurring cost. Sapphire energy introduces the discount that leads to in sales which later reduced the
carrying cost (Nelson et al., (2013).
2.5 Major global issues relevant to strategic sourcing
2.5.1 Supplier identification
The procurement manager identifies appropriate material at low cost from dependable dealers.
2.5.2 Consultative relations
According to De Man et al., (2007) suggests that Supplier identification is very crucial but there are
more strategic sourcing, cultivating is a positive relationship which is a long-term relationship through working
in close contact with suppliers provide many win-win scenarios. Developing a firm relationship helps sourcing
professionals to become good at making costs.
2.5.3 Impacts of less-than-perfect demand forecasts for AusCotton products
The ineffective need forecast in both the very cold and hotline of products and location served. In
presence of unexpected differences in consistency, cost and length of transportation amenities have arisen from
time to time in stock-outs of items needed at retail shops (MonczkaLet al., 2015).
High competition from producers of same summer and winter outdoor sportswear. This is because of high-
profit margins of much of its products thus the number of new competitors have arisen.
Contractors in Auscotton manufacture illegal; counterfeit products that are sold through dark market channels.

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Mitigation.
To mitigate these problems, the Auscotton must ensure that there is an intact relation between clients
that is, the clients and Auscotton Company. The management must ensure also the firm works to faster
responses to every need to be changed. Which will ensure minimum cost met and influence that may come from
forecast error. As cotton also should come up with strategic sourcing which will help in areas covering
distributors' research by providing an opportunity to check find out if a distributor has qualities that are
Desirables Company thus the company considers tender offers or keep the existing suppliers.
Essential elements
According to Monczka et al., (2015) says that one must lay down goals and the rules for outsourcing
where a firm lays down its urgency with respect to outsourcing. They include principles and rubrics.
 Consideration of existing structure which needs to be evaluated to know whether it fits the customer
demands.
 Evaluation of ability to manage outsourced donors, they are firm executives ready to merge outsourced
service providers knowledge and skills are very crucial in making a change to outsourcing.
 Consider challenges barriers and outsourcing advantages, the level of government support for
outsourcing which varies in different countries.
 Know the outsourcing market, being familiar with outsourcing providers, service offering and also their
client's helps when it comes to service.
 Multiple scenario plans, a nice plan is made up of multiple plans, making up for a potential let-down.
 Do a risk assessment study, for any given scenario in a business where risks are involved.
 Write a business plan which involving compiling sourcing scenarios, financial control, and other
business details.
 Creation of a plan for action in order to implement the plan.

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2.5.4 Importance
Firms can reach their outsourcing goals with a complete sourcing way that entails internal abilities
combined with outsourced services. Without such policy, companies are not able to fully take gain of
outsourcing as the best business tool towards making a profit.
2.5.5 Response
The response to the contract manufacturer will be warning them to utilize well the contract and avoid
such practices which may lead to contract termination. Employing the best channel of distribution of quality
and approved goods.
3.0 Conclusion
The conclusion is that the laburnum group faces some problems which should be addressed keenly so as
to keep the firm running the top management should consider all the loopholes the better solutions. The
contractors
4.0 Recommendations
The firm should improve their ordering system so as to minimize the ordering cost. They should also
adopt new strategies such as just-in-time techniques seven wastes maintains techniques lean maintains so as to
reduce the waste involved in ordering.
Reference

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