Purchasing and Inventory Control

Running head: MANAGEMENT
Purchasing and Inventory Control
Name of the Student:
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Executive Summary
This present report deals with the major challenges of the purchasing department of Voyager
Logistics. It has been received that lack of staff knowledge, high cost and lack of proper strategy
are the major reasons of the poor performance of the purchasing department. However, it has
been found that the staffs have not good training, which leads them to face confusion while
taking purchasing related decision. On the other hand, they have no idea about the forward
trading strategy. On the other hand, due to lack of company purchasing card they faced issues
while purchasing a product during an emergency. Hence, application of transformational
leadership, forward buying strategy, and staff training will be helpful for this organization to deal
with these challenges.

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Table of Contents
Introduction......................................................................................................................................4
Purchasing function of the vehicle maintenance department of Voyager.......................................4
Organization of the purchasing department of Voyager..................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

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Introduction
Purchasing and inventory management is a vital division of any business. However, the
purchasing decision of an organization has a direct impact on the control process of this
organization (Mikkelsen and Johnsen 2018). It is important for an organization to reduce the
high carrying cost and replenish the inventory. To reduce the carrying cost smart inventory
management is required. This study deals with the purchasing department of Voyager Logistics.
This organization distributes chemical and provides tanker washing facilities. However, logistic
service is the main part of their business. Since, 2012 Voyager has been facing issue to gain
profit in their business. However, the function and system of their purchasing department is too
old, which affects the profitability of their business. Despite having good contract Voyager has
faced challenges to achieve profit in their business. In this current study, the issues of the
purchasing department of Voyager will be addressed.
Purchasing function of the vehicle maintenance department of Voyager
According to the given scenario, it has been received that Voyager Logistics has been
facing challenges due to its low profitability. Despite havening many good contracts this
organization failed to achieve high profitability in the market. The main reason of this issue is
the old infrastructure of the purchasing department. Green is the head of the purchasing
department of Voyager. He has a team of three members and the members are always trying to
conduct the service at low price. Baxter is the new general manager of Voyager. He was shocked
by observing that the purchasing department gives their concern towards the low price rather
than the cost. However, for every purchasing department, it is essential to use strategy to reduce
the cost (Almeida et al. 2018). This enables an organization to gain profit through their business.

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Hence, Baxter suggested to Green to implement the Total acquisition cost or TAC process in the
system of their purchasing process. TAC is a managerial accounting method. This includes
purchasing cost of goods and service. This cost is the summation of the price of the service and
other associated cost. On the other hand, Voyager has made a contract with Lightfinger Security
Limited in order to outsource the security service. However, this contract makes major problems
for Voyager. The gates are locked between the midnight and 6 am as a result, the driver cannot
enter. Therefore, during the occasion, the security is not present and a brand new track was
stolen. According to the Liightfinger Security Limited Voyager has to pay additional cost if they
want these facilities as these are out of contract. This high cost affects the profitability margin of
Voyager.
High fuel cost is the great concern of the vehicle maintenance department of the logistics
service. Often the rising fuel cost increases the cost of the operation (Monczka et al. 2015).
Voyager takes drum fuel from the local company and the cost is £1.22. This cost is high. From
the investigation it has been received that 50% of total cost of Voyager comes from purchasing
of fuel. The manager of purchasing department of this organization has no idea about purchasing
consortia and forward buying. Baxter has taken initiative to reduce 20% of fuel cost. Voyager
has got a contract from the Ketch Automotive. It is a first-tier supplier of UK. Establishment of
partnership business with this organization will give a good opportunity to get a new market.
However, some challenges are associated with this contract as Ketch is a demanding customer
and may charges penalty if any issue takes place. Morgan looks the vehicle maintenance
department of Voyager. The team of Morgan gives more concentration towards the off-road
vehicle. Hence, to buy a spare is a nightmare for this team. Morgan gives responsibility to the
purchasing team to buy the spare. One of the major problems to shop the spare at cheapest price

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is the unacceptable delay. Often the purchasing department of the logistics organization faces
challenges due to buy service at the low price (Paesbrugghe et al. 2017). The off-road vehicle
has to wait for a long time for spare and often the spare is wrong, which is purchased at low
price. Morgan has tried to solve this problem by purchasing the products from local suppliers.
However, they want straight away payment. Due to lack of company purchasing card such
organization has been facing issue while trying to buy a spare.
Based on the above case study it has been addressed that the purchasing department of
Voyager follows old system, which creates an issue. It is important for every organization to
restructure their purchasing department to reduce the high cost of the business (van Weele and
van Tubergen 2017). For Voyager, they need to reorganize their purchasing department to
maximize the performance of the business.
Organization of the purchasing department of Voyager
Reduction of the cost is an important way to improve the function of the purchasing
department (Diallo and Siqueira 2017). It has been received from the case scenario that the high
cost of the fuel leads Voyager to face challenges in their business. The cost of the fuel for the
vehicle is high, which increases the operating cost of the business. Hence, implementation of
buying forward strategy could be helpful for this organization to reduce the high cost of fuel.
This strategy allows the organization to buy the product at low price and sell the product when
the demand is high. By applying this strategy Voyager could be able to buy the fuel at a lower
price. On the other hand, application of future trading strategy might be effective for Voyager to
reduce their cost. Future trading is a strategy that allows the buyer and seller to make a contract
for a future date in the context of buying and selling of the product (Ashenbaum and Maltz

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2017). Based on this contract the seller is not able to increase the price of the product until the
date, which is mentioned in the contract. Hence, application of this strategy could be beneficial
to reorganize the purchasing department of Voyager.
Providing training to the employees is a helpful approach for an organization to improve
any department (Rodríguez-Escobar and González-Benito 2017). In the context of Voyager, it
has been found that due to lack of adequate knowledge the staffs of the purchasing department
are not able to perform well. This increases the cost and hampers the performance of the
organization. To reduce this issue proper training should be provided to the staffs. If the staffs
get adequate training then it could be beneficial for them to take a necessary decision regarding
purchasing of the product. Staff training is a vital way to enhance the performance of the
employees in an organization. By providing some professional training could be effective for the
staffs of the Voyager to improve the purchasing process. Keeping a company purchasing card is
crucial for the purchasing department (Paesbrugghe et al. 2017). As per the case study, Voyager
faced difficulties in payment due to lack of purchasing card. Hence, by keeping a company
purchasing card this organization could carry out a smooth transaction with the seller. Apart
from this effective leadership is required in the purchasing department of Voyager. As for
example, by using transformational leadership this organization could able to implement changes
in their service. This might enhance the activity of the purchasing department and to minimize
the certain challenges.
Conclusion
The entire piece of work focuses on the challenges of the purchasing department in
Voyager Logistics. Lack of knowledge among the staffs and lack of adequate strategy leads this

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organization to face difficulties in their logistics process. On the other hand, it is important for
this organization to reduce the high cost of fuel while purchasing it from the local company. In
order to deal with these challenges, this organization needs to provide training to the staffs and to
adapt effective strategies. On the other transformational leadership could be effective to improve
the performance of the purchasing department.

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References
Almeida, Alessandro Anibal Martins de, and Hironobu Sano. "Purchasing function in the public
sector: challenges to promote agility in electronic reverse auctions." Revista de Administração
Pública 52, no. 1 2018: 89-106.
Ashenbaum, B. and Maltz, A., 2017. Purchasing-logistics integration and supplier performance:
an information-processing view. The International Journal of Logistics Management, 28(2),
pp.379-397.
Diallo, M.F. and Siqueira Jr, J.R., 2017. How previous positive experiences with store brands
affect purchase intention in emerging countries: A comparison between Brazil and
Colombia. International Marketing Review, 34(4), pp.536-558.
Mikkelsen, O.S. and Johnsen, T.E., 2018. Purchasing involvement in technologically uncertain
new product development projects: Challenges and implications. Journal of Purchasing and
Supply Management.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and
supply chain management. Cengage Learning.
Paesbrugghe, B., Rangarajan, D., Sharma, A., Syam, N. and Jha, S., 2017. Purchasing-driven
sales: Matching sales strategies to the evolution of the purchasing function. Industrial Marketing
Management, 62, pp.171-184.
Rodríguez-Escobar, J.A. and González-Benito, J., 2017. The effect of strategic alignment on
purchasing management. Management Research Review, 40(11), pp.1175-1200.

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van Weele, A. and van Tubergen, K., 2017. Responsible purchasing: moving from compliance to
value creation in supplier relationships. In Sustainable Supply Chains (pp. 257-278). Springer,
Cham.