Challenges Faced by Sapphire Energy and AusCotton: A Cross-Functional Analysis

Laburnum group monitors the performance of the various businesses, especially the energy and clothing sections. The group puts much effort in the monitoring of the energy and clothing sections since the two make the largest share of the overall business. However, the clothing and energy portfolios currently face challenges, which have resulted in the reexamination of the current systems, processes and strategies. The assessment of the difficulties shows that the business challenges arise from the procurement and supply chain management decision. Therefore, the group has engaged a cross-functional group to identify the procurement areas that require possibly attainable improvement.

SUPPLY CHAIN 1
SUPPLY CHAIN MANAGEMENT
Name of student
Name of institution
Name of instructor
Date

SUPPLY CHAIN 2
Executive summary
Laburnum group began in the year 1922 as a cooperative for the Victorian farmers. Over the
years, the group has become the largest company with headquarters in Victoria, Australia.
The group has diversified the operations to cover home improvement, office supplies,
chemicals, energy, industrial and safety products and gears. Laburnum aims at providing
returns to the shareholders while addressing other broader shareholder requirements such as
social, ethical and environmental responsibility.
Laburnum group monitors the performance of the various businesses, especially the energy
and clothing sections. The group puts much effort in the monitoring of the energy and
clothing sections since the two make the largest share of the overall business. However, the
clothing and energy portfolios currently face challenges, which have resulted in the re-
examination of the current systems, processes and strategies. The assessment of the
difficulties shows that the business challenges arise from the procurement and supply chain
management decision. Therefore, the group has engaged a cross-functional group to identify
the procurement areas that require possibly attainable improvement.

SUPPLY CHAIN 3
Table of Content
s
Executive summary.....................................................................................................................2
Introduction............................................................................................................................4
The Sapphire Energy company...............................................................................................4
Quantitative evaluation of the ordering system..................................................................4
Qualitative evaluation.........................................................................................................5
Improvements in the current inventory system...................................................................5
AusCotton portfolio................................................................................................................6
Global issues relevant to strategic sourcing.......................................................................6
Impact of poor capacity forecasts and volatile length and cost of transport.....................6
Elements of strategic sourcing methodology......................................................................7
AusCotton response to allegations of illegal manufacture.................................................8
Conclusion..................................................................................................................................8
Bibliography...............................................................................................................................9

SUPPLY CHAIN 4
Introduction
Laburnum group has engaged the services of a cross-functional group to analyse the
challenges faced by Sapphire Energy and AusCotton. The company faces various challenges
in the two sectors that hinder smooth flow of products to the market. Therefore, the
Laburnum group would require the cross-functional group to develop solutions to the
problems. Sapphire energy faces challenges with the inventory ordering system and would
like the cross-functional team to undertake possible improvements. On the other hand,
AusCotton wishes to solve problems relating to the supply of clothes to the customers in time
to avoid delays and shortages.
The Sapphire Energy Company
The company provides reliable energy to the customers around Ballarat, Bendigo, Geelong,
Mildura, Melton, Sunbury, Shepparton, Traralgon, Wangaratta and Wodonga. The energy
company uses the aluminium triplex cable to deliver electricity. The energy company
focusses on efficient and effective inventory management to ensure the availability of the
cable.
Quantitative evaluation of the ordering system
Sapphire energy uses the economic order quantity method to manage inventory (Mark Pagell,
2018).
Q= √2CD / H
C= ordering cost
D= demand
H= holding cost
The annual demand for the company is 155,000 meters while the ordering cost is 50$ and the
holding cost is (13.5*10/100). Therefore, the quantity equals to 2916.30.
2 ×155000 ×50=15500000

SUPPLY CHAIN 5
15500000 ÷1.35=11481481.48
√11481481.48=3388.43
The quantity economic order quantity amount is 3388.43 units.
Qualitative evaluation
The inventory management method takes into account the timing of making new orders for
the cables (Boag, 2018). The reordering period ensures that the sapphire company does not
incur shortages when meeting the customer demands. The energy company makes inventory
orders when the inventory reaches the set quantity levels to reduce the ordering and carrying
costs incurred (Ishola, 2016). Therefore, the energy company maintains low costs by
avoiding the trend of making many small and random orders. The economic order quantity
level of 3388.43 units signals the point of ordering new inventory to avoid losing customers
to other suppliers who meet the demands with adequate products (Christopher, 2018).
Improvements in the current inventory system
The inventory management system should eliminate the use of assumptions when forecasting
the demand and reordering points (Mandviwalla, 2015). The method used assumed that the
production levels will remain constant and the economic order quantity will indicate the
period of reordering. However, the production could require more units at a certain point,
which the inventory system does not consider. Therefore, in the case of a change in the
normal amount of quantity, then the operations could fail to meet market demand due to less
inventory (Mandviwalla, 2015).
Consequently, the inventory system requires adjustment to avoid assumptions in the ordering
of inputs from the suppliers. The inventory system could improve to adopt a method that
signals orders that match the existing demand. For example, the business could adopt the just-
in-time system that ensures accuracy when making customer orders (Smet, 2018).

SUPPLY CHAIN 6
AusCotton portfolio
AusCotton is a global manufacturer of winter and summer outdoor sports clothing. The main
winter clothes include outerwear such as windbreakers, footwear, fleece and ski jackets. The
summer wear includes shorts, shirts, windbreakers, hydration systems and footwear. The
business has headquarters in Geelong but does business through retailers in Australia, New
Zealand, Europe and North America. Additionally, the company has established as a well-
known internet retailer. Despite the success, the business is facing challenges in the
operations that require an expert’s assessment to provide solutions.
Global issues relevant to strategic sourcing
The global issues presented to the company by the sourcing system include increased costs of
supplies (Nigel, 2013). The increase in costs arises from the hidden charges that exist in the
conversion of foreign currency. The global sourcing requires AusCotton to convert currencies
to match the country of purchase. Therefore, the company faces conversion fees charged by
the banks, which increases the total procurement expenses (Wagner, 2018).
Other issues experienced by the company include discrepancies in quality due to cultural
differences. The different cultural standards cause a challenge in the way people understand
quality due to different languages and approaches to quality. Therefore, AusCotton faces
difficulty in acquiring the exact quality of supplies (Suzanne de Treville, 2016).
Impact of poor capacity forecasts and volatile length and cost of transport
AusCotton faces various challenges due to inaccurate demand forecasts and variable lengths
and costs of transport. The challenges include the failure to meet the customer expectations
with timely deliveries. Additionally, the company suffers losses since the customers cancel
orders due to delays in delivery (Olsen, 2018). However, the business could solve the
problem by opening up more outlets and franchises to get close to the customers.

SUPPLY CHAIN 7
The other impact includes the failure to reach the market early before competitors. AusCotton
experiences challenges of inability to introduce new products to the market early for the
customers to purchase. Therefore, AusCotton faces difficulty in beating the competition in
the global market. The company should use privately owned transport systems to ensure that
the products reach the market in the required time (Juneja, 2018).
Moreover, AusCotton should introduce information systems to enable quick communication
with the market and retail outlets. The information systems collect useful data about the
market demand and communicate with the production sections. The production departments
respond to the information by producing accurate amounts of outputs (Ishola, 2016).
Furthermore, the information systems make accurate future demand predictions that allow the
maintaining the output at a level that adequately meets the market demand.
Elements of strategic sourcing methodology
AusCotton should improve the supplier relationship management and maintenance to
eliminate the challenges faced in the meeting market demands (Boag, 2018). The
maintenance of supplier relationships will ensure equal efforts towards meeting market
demand. The suppliers collect market information and supply inputs that meet the required
quality and quantity.
On the other hand, AusCotton should prioritise vendor selection activities. Vendor selection
activities ensure that only qualified and ethical suppliers deal with the company (Juneja,
2018). The vendors who qualify the selection should show the commitment to supply inputs
that match the required output to avoid market shortages. Furthermore, vendor selection will
allow AusCotton to maintain a group of suppliers who will deliver timely to the retail outlets
and avoid shortages.
The other element that the company should prioritise is market information. AusCotton
should develop systems that collect timely and accurate information from the market (Ishola,

SUPPLY CHAIN 8
2016). The information will help AusCotton to identify the market demand and trends.
Therefore, the company will have information about the competitors introducing competing
products. AusCotton could respond to the competitor information by delivering products
quickly to the market to beat the competition. Furthermore, market information will help the
company to understand the demand patterns and produce products that accurate satisfy the
customer needs. Therefore, the business will not experience shortages in the retail outlets
located in distant regions (Nigel, 2013).
AusCotton response to allegations of illegal manufacture
The company should respond to the assertions by cancelling the manufacturing contracts
(Mandviwalla, 2015). The cancellation will ensure that the contractors cannot use the
AusCotton brand illegaly. Additionally, the cancellation will ensure that the illegal
manufactures lack the necessary expertise and resources to produce clothes bearing the
AusCotton brand.
On the other hand, the company should make a requirement that the contracted companies
include AusCotton staff and management in operations (Smith, 2018). The inclusion of the
staff will help to ensure that the contracted manufacturers do not engage in the illegal
branding of products. The management and staff will inspect the operations and report any
illicit activities. Therefore, the contracted companies will only stick to the production of
AusCotton products.
Conclusion
With the improvement suggestions provided by the cross-functional teams, laburnum group
will increase the operations in both sapphire and AusCotton. The solutions will enable
Laburnum group to have better procurement plans that meet the customer demands.
Improving the procurement system will allow the business to avoid wastage by producing

SUPPLY CHAIN 9
more products that demanded. On the other hand, the business will prevent shortages by
having accurate input that matches the necessary output.
Bibliography
Boag, P., 2018. Customer Journey Mapping: Everything You Need to Know. [Online]
Available at: https:www.sailthru.com
[Accessed 14 May 2018].
Christopher, D. M. L. A. P., 2018. Review of Assessment Approaches in Stability Operations.
In Assessing Locally Focused Stability Operations. S.l.: Rand Corporation.
Ishola, T., 2016. Principles of Purchasing and Supply. S.l.: National Open University of
Nigeria.
Juneja, 2018. Management Study Guide. [Online]
Available at: https://www.managementstudyguide.com
Mandviwalla, M., 2015. Fox School of Business. [Online]
Available at: http://www.community.mis.temple.edu
Mark, B. F., 2018. Journal of Supply Chain. Wiley Online Library.
Nigel, A. B.-J. J., 2013. Operations Management. 7 ed. Madrid, Spain: Pearson.
Olsen, E., 2018. Strategic Implementation. [Online]
Available at: https://www.onstrategyhq.com
Smet, A. D., 2018. The Agile Manager. McKinsey Quarterly China.
Smith, G. A., 2018. Journal of Supply Chain Management. Wiley, 54(4).
Suzanne de Treville, T. B., 2016. Journal of Operations Management. Elsevier.
Wagner, D. B. A., 2018. Supply Chain Management; An International Journal. Emerald
Publishing.

SUPPLY CHAIN 10