Procurement and Supply Chain Management

This study explores the critical situations and challenges in supply chain management for Sapphire energy and AusCotton. It provides solutions to mitigate the issues and discusses the impact of demand on supply chain management.

PROCUREMENT AND SUPPLY CHAIN MANAGEMENT
Page | 1

Executive summary:
Towards the continuation of this study, the researcher has stated the discussed critical
situations and challenges within Sapphire energy and AusCotton. Based on the challenges,
relevant solutions have been provided to mitigate the issues. Along with this, the researcher
has stated possible EOQ standard to control costs and increase profit in business. This study
has covered the issues regarding the company Laburnum Group, which has faced several
issues throughout their supply chain management system. Along with this, few common
global issues of supply chain management have also been discussed to support the answers.
Towards the continuation of this study, the researcher has justified the impact of demand on
supply chain management.
Page | 2

Table of Contents
Introduction:...............................................................................................................................4
Energy portfolio- Sapphire energy:............................................................................................4
1. Evaluating the current ordering system:.............................................................................4
2. Discussing the improved inventory system:.......................................................................5
Clothing portfolio- AusCotton:..................................................................................................5
1. Investigating major global issues that will be relevant to the area of strategic sourcing at
AusCotton:..............................................................................................................................5
2. Investigating the impacts of less-than-perfect demand forecasts for AusCotton products:
................................................................................................................................................6
2.1 Examining the volatility of transport services from manufacturers to distributors:.........7
2.2 Strategies to be used to mitigate the issues of the organisation:......................................7
3. Elements of the strategic sourcing methodology for improvement at AusCotton:............8
4. Respond to the assertions that some of the manufacturers are involved in producing
illegal merchandise to end competition:.................................................................................8
Conclusion:................................................................................................................................9
Reference list:...........................................................................................................................10
Page | 3

Introduction:
Supply chain management is an important aspect of each manufacturing business unit;
because this is the only way to deliver the products to market and customers. In supply chain
management, the manufacturers will need to monitor the channel of distribution so that
competitors cannot create high competition (Christopher, 2016). This study has covered the
issues regarding the company Laburnum Group, which has faced several issues throughout
their supply chain management system. Along with this, few common global issues of supply
chain management have also been discussed to support the answers. Towards the
continuation of this study, the researcher has justified the impact of demand on supply chain
management. At the end of this study, relevant strategies have been provided towards the
mitigation of challenges faced by the company.
Energy portfolio- Sapphire energy:
1. Evaluating the current ordering system:
The current ordering system is provided below, where it can be seen that the company has
been provided less order compared to received order. That means a less capacity has
identified from the given ordering system. Here, EOQ model should be used for reducing the
issue.
EOQ for AWG aluminium triplex cable
Particulars Unit
Meters Amount $
Annual Demand (D) 155000
Current Order Quantity (Q) 12917
Yearly cost for carrying per unit (C') $ 1.350
Yearly cost per order (S') $ 50.00
Total Annual Inventory Cost (Q/2) x C'+(D/Q) x S'
Total Annual Inventory Cost (TAIC 1) $ 9318.75
Economic Order Quantity SQRT(2xDxS')/C
Economic Order Quantity (EOQ) 3388.43
Total yearly Inventory Cost in case of implementing Economic Order Quantity
Total Annual Inventory Cost (EOQ/2) x C'+ (D/EOQ) x S'
Total Annual Inventory Cost (TAIC 2) $ 4574.39
Table 1: Ordering system
(Source: Created by author)
Page | 4

2. Discussing the improved inventory system:
The above table has shown a reserve of $ 4574.39 at the year ended. However, with the
strategy of saving stock the company will be able to increase the saving or reserve amount to
$ 4744.36. Therefore, it is necessary for the company to increase the manufacturing quantity
up to 4500 metres. According to Monczka et al. (2015), increase in production unit will
increase company’s profitability and it reduces the production cost. In this case, Economic
Order Quantity model has been implemented for increasing the reserve.
Estimated annual savings in Inventory costs
Reserve amount extended TAIC 1 - TAIC 2
($ 9318.75 - $ 4574.39)
Estimated reserve amount in Inventory costs $ 4744.36
Table 2: Improvement in ordering system
(Source: Created by author)
Clothing portfolio- AusCotton:
1. Investigating major global issues that will be relevant to the area of strategic sourcing
at AusCotton:
Towards the continuation of this case scenario, as an expert the researcher has found that the
company Laburnum Group has faced several issues in Sapphire energy and AusCotton. Both
companies belong to different industry, but the issues are related to supply chain management
and manufacturing. The Sapphire energy has faced issues regarding manufacturing process,
whereas, the AusCotton has faced the issues regarding supply chain management. Few major
global issues are as follows:
 Supply chain management process is highly affected by the strategic marketing
planning of competitions, when they start providing less costly products in market.
Then the distributors deny taking orders from companies (Yan, Chien and Yang,
2016).
 The changing behaviour of consumer is another global challenge for supply chain
management. Presence of alternate products in market changes the behaviour of
customers. Therefore, it is necessary to have proper knowledge of customer’s
behaviour during distributing products (Christopher, Mena and Van Hoek 2018).
Page | 5

 Technological issues can be considered in this case, because due to innovation of new
technologies, many companies have upgraded their production process and
distribution process and become more faster. Therefore, the companies use old
technology could face serious issues here (Wang et al. 2016).
 Lastly but most important, management related issues like conflict, delay in decision-
making, delay in production etcetera are considerable. On the other hand, inadequate
working condition and environment could be affective on supply chain management.
Therefore, strategies for smooth management process should be adopted (Hugos,
2018).
2. Investigating the impacts of less-than-perfect demand forecasts for AusCotton
products:
Before considering the final supply or distribution, it is necessary to have proper information
about market demand. In this case, the company should not consider any customer request as
default. Moreover, allocation of necessary resources is important to complete the products
before final delivery (Kisomi, Solimanpur and Doniavi, 2016). Moreover, the management
skills of the marketing managers needs to be developed for accurate demand forecast,
because the entire production and distribution process will be depending on that only. Along
with this, the entire process should not be cost effective; that means company should control
their operational expenses for better profit. It is important to deliver right product at the right
time to customers.
In the words of Birou, Lutz and Zsidisin (2016), demand analysis is an important task for
each manufacturing unit for fulfilling the perceived demand of customers. Along with this,
the manufacturers would need to focus on the bargaining power of suppliers for having
uninterrupted production process and supply. According to Emmett and Crocker (2016), a
continuous response from market about changes in demand would lead to reduce the cost of
production and the company would be able to increase the profit. In this case, AusCotton
would need to have proper knowledge and information regarding market demand. Less-than-
perfect demand refers to the finding opportunities within market and creates competitive
advantage for better development of business. Apart from that, it is necessary to have proper
demand forecasting strategies so that information can be gathered.
Page | 6

2.1 Examining the volatility of transport services from manufacturers to distributors:
During the case study analysis, it has been found that the company AusCotton has their own
distribution centres for delivering the products in market. Along with this, it has been
analysed that both air and ocean are used for transporting the products in destination
countries. Apart from that, for delivering the products within the home country, the company
uses land transport. From the view point of Glas and Kleemann (2016), it is necessary to have
all access for delivering the products in destination; uses of all modes of transportation is
necessary for quick and in time delivery. However, Mangan, Lalwani and Lalwani (2016)
have stated in opposed to that companies might face challenges due to natural calamities and
that disrupt the overall supply chain system.
In this case, the case study company AusCotton might face such situations during the time of
delivery. However, keeping those issues in side, business should focus on proper delivering
system not on the problems. However, companies should have alternate solutions to mitigate
the issues. Therefore, it can be stated that the current delivering system of the chosen
company AusCotton is not volatile, because the company has alternate process for delivering
the products in destination market. Therefore, the company has become proficient enough to
supply loads of products in different countries.
2.2 Strategies to be used to mitigate the issues of the organisation:
As per the analysis of the case scenario, it has been found that the company does not have
much serious issue for delivering their products. However, due to some uncertain situation,
the company should have some pre-determined plans so that issues can be mitigated. In the
words of Oelze et al. (2016), keeping record of accomplishment is necessary to have the
actual progress of current delivery system. In this process, the manufacturing company would
be able to record all possible challenging facing during the supply of products. That means
those records would be used for developing new strategies and updating existing strategies.
The development of strategies can be taken place with practical information from delivering
system. However, there are more strategies could be taken for mitigating the challenges:
a) A continuous monitoring process and department should be allocated for monitoring
the ongoing delivering system. The department would be responsible for keeping
records of each situation in entire delivering process.
Page | 7

b) A pre-analysis is necessary before placing the delivery system. This might clear a
portion of challenges and the company might face fewer challenges in supply of
products (Emmett and Crocker, 2016).
c) After getting the record from monitoring department, the managers should re-monitor
that if the department missed something. This will have a perfect scrutinizing process
in supply chain management of the company AusCotton. Along with this, the
company would be able to reduce the extra costs from delivery process.
3. Elements of the strategic sourcing methodology for improvement at AusCotton:
In this case, the company AusCotton should monitor the factors, which are necessary for
making strategies for business development. That means internal and external factors of
business should be considered here. Apart from that, analysis of supply chain of competitors
and market analysis are necessary for better strategic development. According to Kisomi,
Solimanpur and Doniavi (2016), factors effecting company’s decision-making process are
important for reducing the risk factors in business; otherwise, the implemented strategies
would be failed. On the other hand, the top management should discuss the framed strategies
before implementation to identify any issue. This might reduce the miscellaneous costs of
strategic development.
In the previous section, the researcher has stated that AusCotton should implement re-
monitoring process for better evaluation of current supply chain management. However,
AusCotton should focus on the development of current supply chain management, because
market competition is increasing and all strategies should be more developed. In this support,
Wang et al. (2016) stated that towards the development of supply chain management the
companies should have R&D on supply and recognise any competitive advantage. The crux
consideration should be on final strategic implementation.
4. Respond to the assertions that some of the manufacturers are involved in producing
illegal merchandise to end competition:
Towards the development of business in home country and host country, a company should
focus on all activities of their competitors, because competitors might take illegal steps to
down business. In this case, companies might take few legal steps to secure own business
practices (Christopher, Mena and Van Hoek, 2018). In this case, the company AusCotton
could take the following steps against illegal merchandising and competition:
Page | 8

 AusCotton should apply for trademark or relevant licensing for their business names
and products, so that other competitors cannot copy that. Therefore, awareness is
necessary among the employees of the company.
 Along with this, the company should implement intellectual property defence against
any other illegal merchandise and competition.
 On the other hand, AusCotton should have a continuous monitoring process on their
products and business activities, so that any illegal factor should not farm the
business.
Conclusion:
The overall study has stated the necessity of supply chain management and its development
process. Towards the continuation of this study, the researcher has stated the discussed
critical situations and challenges within Sapphire energy and AusCotton. Based on the
challenges, relevant solutions have been provided to mitigate the issues. Along with this, the
researcher has stated possible EOQ standard to control costs and increase profit in business.
The impact of less-than-perfect demand has been critically stated throughout the study. At the
end of the study, few legal steps have been stated to protect company’s image from illegal
activities and competition.
Page | 9

Reference list:
Birou, L., Lutz, H. and Zsidisin, G.A., (2016). Current state of the art and science: a survey of
purchasing and supply management courses and teaching approaches. International Journal
of Procurement Management, 9(1), pp.71-85.
Christopher, M., (2016). Logistics & supply chain management. Pearson UK.
Christopher, M., Mena, C. and Van Hoek, R., (2018). Leading procurement strategy: driving
value through the supply chain. Kogan Page Publishers.
Emmett, S. and Crocker, B., (2016). The relationship-driven supply chain: creating a culture
of collaboration throughout the chain. Routledge.
Glas, A.H. and Kleemann, F.C., (2016). The impact of industry 4.0 on procurement and
supply management: A conceptual and qualitative analysis. International Journal of Business
and Management Invention, 5(6), pp.55-66.
Hugos, M.H., (2018). Essentials of supply chain management. John Wiley & Sons.
Kisomi, M.S., Solimanpur, M. and Doniavi, A., (2016). An integrated supply chain
configuration model and procurement management under uncertainty: a set-based robust
optimization methodology. Applied Mathematical Modelling, 40(17-18), pp.7928-7947.
Mangan, J., Lalwani, C. and Lalwani, C.L., (2016). Global logistics and supply chain
management. John Wiley & Sons.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., (2015). Purchasing
and supply chain management. Cengage Learning.
Oelze, N., Hoejmose, S.U., Habisch, A. and Millington, A., (2016). Sustainable development
in supply chain management: The role of organizational learning for policy
implementation. Business Strategy and the Environment, 25(4), pp.241-260.
Wang, G., Gunasekaran, A., Ngai, E.W. and Papadopoulos, T., (2016). Big data analytics in
logistics and supply chain management: Certain investigations for research and
applications. International Journal of Production Economics, 176, pp.98-110.
Page | 10

Yan, M.R., Chien, K.M. and Yang, T.N., (2016). Green component procurement
collaboration for improving supply chain management in the high technology industries: A
case study from the systems perspective. Sustainability, 8(2), p.105-151
Page | 11