Supplier Sourcing Strategy and Counterfeit Goods Investigation

The assignment requires Auscotton to assess its supplier sourcing strategy, identify potential suppliers, and investigate claims of counterfeit goods production. It involves reevaluating the company's affiliation with suppliers, bringing in new suppliers, and taking measures to prevent collusion. The study recommends a detailed investigation into allegations of counterfeit goods production, which may form the basis for violating contracts and reevaluating supplier relationships.

Running head: PROCUREMENT AND SUPPLY CHAIN REPORT
Procurement and Supply Chain Report
Name
Institutional Affiliation

PROCUREMENT AND SUPPLY CHAIN REPORT 2
Abstract
Due to the exponential population growth that has been witnessed in the world, many
countries are demanding more power and energy to achieve the process of industrialization.
The number of the people, homes, industry that need power has over time increased and this
has made government and corporate entity to explore different ways of supplying the
demand. With the high demand for power, the power generating company has laid down
strategies to ensure power the high demand is met. Many countries especially the third world
countries are keen on the process of industrialization and therefore governments are very
keen to ensure they supply energy to boost the process of industrialization. This study will
focus on a company that has one key portfolio as energy delivering business known as
Sapphire Energy. This paper will seek to assess the company systems that are currently used
in ordering the electrical power. The main objective of this study is to explain strategic and
policies employed by management when running this two portfolios. In addition, the report
will give a snapshot of how sapphire energy depends on the supply chain management to run
their operations.
Introduction
Laburnum Group of the company was started in 1920 as Victorian farmers’
cooperative. Over the years, Laburnum Group has emerged to become one of the largest
listed companies in Victoria, Australia (Denham et al., 2007). The group prides itself on
providing significant returns to its shareholders. Sapphire energy and Au cotton clothing
portfolio, in particular, are of strategic interest to Laburnum since they constitute the largest
share of the business. These two portfolios have been faced by inefficiencies and
management has decided to re-evaluate the systems and explore ways in which they can
improve the current systems, process, and strategies across different products categories.

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Sapphire energy and Auscotton are the largest profit-making divisions (Robins, 2007).
Currently, the two division are facing several operational challenges in the department of
procurement and supply management. This study will seek to evaluate the problem and
suggest a possible solution.
This study will conduct an assessment of both energy and clothing portfolio of
Laburnum Group to demonstrate how procurement and supply chain management has led to
inefficiencies and loss of revenue to the company. In addition, the study will explore the
ways in which to improve the efficiency of the procurement processes.
Sapphire Energy
Sapphire Energy is one the biggest revenue generating a portfolio. Sapphire provides
electric services for its customers who are located near Ballarat, Bendigo, Geelong, Melton,
Sunbury, Shepparton, Traralgon, Wangaratta, and Wodonga (Behnke, 2016). Eastern Power
storeroom is the company that is contracted to supplies Laburnum with cables. This cable is
mostly required for routine service work. One of the materials that are extensively used to
provide this services is the 1/0 AWG aluminum triplex cables, that transmit electricity from
the energy line to their meter loops (Regalbuto, 2009). Eastern power storeroom as the
procuring entity of the sapphire needs 155, 000 meters of this service cables. This is because
these cables are only used at routines service work. These cables are installed in a period of 5
working days. The current arrangement between the Eastern power storeroom and the
Sapphire management is that Eastern management must take one-twelveth of its annual needs
every month (Regalbuto, 2009). This agreement arrived so that management could reduce the
lead-time by ensuring the company is a frequent spot in the supplier's production schedule.
Interestingly, customers are not offered a quantity discount on these cables; however, the

PROCUREMENT AND SUPPLY CHAIN REPORT 4
suppliers insist that minimum order quantity is 4500 meters. The Eastern power storeroom
has a warehouse of the capacity of 90; 000 meter of 1/0, AWG aluminum services cables.
The effectiveness of the Current Ordering System
The current ordering system has several loopholes that have led to inefficient
inventory management. For example, each shipment costs & 50 with an additional 10%
inventory charge on the shipment. The company has agreed with the supplier to be providing
a minimum order of 4500 meters that usually take 5 days to implement those cables
(Richmond, 2014). Sapphire energy, therefore, needs to decrease its inventory cost as &
1.35/meters is the carrying cost, which is not practical, and if the quality of carrying units will
be reduced then the cost will reduce. In addition, order per shipment charge is & 50 so if the
minimum order meter increases to 9,000 meters then the shipping charge will reduce as well
and this will reduce the carrying cost (Richmond, 2014). If sapphire energy implements this
policy then they can reduce some of its costs. Additionally, if they sapphire energy introduces
discount then their sale volumes will increase which will reduce the carrying cost.
How can the current system be improved?
Technology is an excellent way for improving business in an increasingly competitive
business environment. Phones, Skype, and email are excellent ways to communicate with
customers (Executive, 2015). One way of improving the current ordering system at Sapphire
is through the introduction of an online ordering system. Online ordering system introduces
an interface where customers can interact with the company directly (Monczka et al
2015) .One of the major advantages of online ordering system is that wholesale customers are
able to order online and directly. This will save valuable time for the sales department. In
addition, it will facilitate top management to supervise final stage of the sales processes and

PROCUREMENT AND SUPPLY CHAIN REPORT 5
ensure that all specification for clients is met (Executive, 2015). This reduces the risk of
leaving out crucial details. There are several advantages that will accrue to the firm if they
implement online ordering system. Firstly, this will saves on times. This is because over the
phone the phone is fast and efficient than the current ordering system that is time-consuming.
Secondly, online ordering system minimizes the chances of human error. There have been
several complains raised by the customers stating the current ordering system registers
numerous human error (Christopher, 2016). Thirdly, online ordering system consolidates
real-time information across multiples channels, which compared with the current ordering
system, is far much better. Fourthly, online ordering system customizes the experience for
each client.
Clothing Auscotton
In the clothing industry, replicating any products label is illegal under the entire
jurisdiction. As cotton manufacturers are spread around the globe, due to their large and
consistent demand in the market. Due to this extensive market, Auscotton has outsourced
manufacturers to produces illegal products to sell to the gray markets channels (Meyer,
MacDonald & Kiawu, 2008). However auscotton market can turn around this challenges by
widening of suppliers base by developing variety for their suppliers with the proper product
specification.
Laburnum group is a leading clothing lines in Australia, lately, they have been faced with
numerous challenges with their supplier that has tremendously reduced its market value. In
my view, laburnum group is facing a risk in the execution of its strategic plan, which has
resulted in a problem with the negotiation of the company with the suppliers (Huo, Han &
Prajogo, 2016). The main challenge faced by laburnum group is analyzing the inventory costs
of Sapphire energy and to find out a solution to decrease costs through their transport system

PROCUREMENT AND SUPPLY CHAIN REPORT 6
and their management clauses between their agreement between suppliers and themselves
(Christopher, 2016). However, both sectors (clothing and energy) are currently faced with
major problems with the purchasing and supply chain system. The current ordering system
has failed to give any discount to Laburnum group, this is attributable to high prices in
carrying a cost, and sapphire energy have faced a decline in their profit margin.
The strategic positioning of the Auscotton and its global business environment has given
Auscotton a competitive edge over its competitors. Despite its global strategic positioning,
Auscotton faces major global issues with respect to areas of strategic sourcing (Shatu, 2014).
However, the transportation issue is the problem and it is imperative for management to
reevaluate supplier relationships. Presently, the lead times are between 4-12 months (Bedi &
Cororaton, 2008). This has produced outstanding performance in the past; however, the
company is experiencing sluggish growth due to constraints in transportation sector
There are several effects of less-than-perfect demand forecast of Auscotton products
and of unpredictability in the cost of transport; services used services to distribute its products
from manufacturers to distribution centers. There are several measures management can
adopt to mitigate these problems (Shatu, 2014). Auscotton has experienced shortages in
produces due to the demand forecasts currently used. For the company to utilize the contracts
with manufacturers, they switch products from one to another due to various reason.While
this may not causing shortage themselves, the transportation cost and service are. However, if
management project better, they could better utilize certain manufacturers for certain
products all year along, rather than changing with the seasons. This study recommends that
the stock should be revised to meet the demands ( Monczka et al 2015).
There are several steps that management can make to improve strategic sourcing process
at Auscotton. This study recommends that Auscotton should improve by assessing the supply

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market. It is imperative for the company to single out all potential suppliers, including those
not listed on the supplier list. Developing strategic suppliers helps suppliers foster and build
supplier relations and give the top management an opportunity to evaluate whether the
supplier has the capacity to me the terms of the contracts (Xing, Qian & Zaman, 2016)..
Lately, there are assertions that have come up that some contracted producers are colluding to
producing counterfeit goods that end up competing with branded products of Auscotton
(Sørensen & Bochtis, 2010). If this is the case then, then this study recommends that the
company should convene a meeting with the manufacturers to delve and investigate the
claims deeper. Through a detailed and thorough investigation, Auscotton can now then
establish the truth of these allegations. Given the parameters of the contract, this might form
basis of violating the contract. This will give Auscotton the opportunity te reevaluate the
affiliation with this supplier or bring in other suppliers they investigated from the sourcing
strategy.

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