Improving Supply Chain Management and Procurement for Laburnum Group

This report provides practical recommendations for improving the supply chain management and procurement process of Laburnum Group, focusing on the case studies of Sapphire Energy and AusCotton clothing. It addresses the challenges faced by these businesses and suggests strategies for better profitability and sustainability.

SUPPLY CHAIN MANAGEMENT AND
PROCUREMENT
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Table of Contents
Contents
Introduction................................................................................................................................4
Background................................................................................................................................4
Objectives...................................................................................................................................4
Sapphire Energy report..............................................................................................................4
Effectiveness of the current ordering system.............................................................................4
Recommendations for improving the current system................................................................5
AusCotton clothing report..........................................................................................................6
Major global issues....................................................................................................................6
Impact of less-than-perfect demand forecast and volatility in cost of Transport services in the
business......................................................................................................................................7
Strategic sourcing process..........................................................................................................7
Response to the assertion...........................................................................................................8
Conclusion..................................................................................................................................8
References..................................................................................................................................9
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Executive summary
This report is based on two individual case studies of Sapphire Energy and AusCotton
clothing (part of Laburnum Group). The clothing and energy portfolios are of special interest
for the group as they are the biggest contributor of the overall business profitability. Lately,
these portfolios are facing inefficiencies and challenges which have encourages top
management to examine the existing process, systems and strategies across different product
categories. This report suggested some practical remedies to overcome business challenges
for better profitability and sustainability of Laburnum Group
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Introduction
Background
As part of Victorian framers cooperative group, Laburnum Group was founded in the year
1920. This group has its presence in various sectors such as energy, products, clothing,
safety and industrial sector. The business of Laburnum Group is based on the objectives of
providing satisfactory return to customers as well as shareholders and it addresses several
requests of shareholders and makes them aware of the business profitability. The essential
part of corporate business strategy requires the group to monitor their performance across
different portfolio of business. The clothing and energy portfolios are of special interest for
the Group as they are the biggest contributor of the overall business profitability. However,
lately, these portfolios are facing inefficiencies and challenges which have encourages top
management to examine the existing process, systems and strategies across different product
categories.
Objectives
This report is developed with the idea of focusing on the case of Sapphire Energy and
AusCotton clothing and to identify profitability through these businesses for the overall
group. Objectives that helped to satisfy the aim of this business report is
 To identify challenges faced by Sapphire Energy and AusCotton clothing
 To investigate factors that are creating impact and influencing business practices of
Sapphire Energy and AusCotton clothing
 To recommend solution through various approaches of growth and profitability
Sapphire Energy report
Effectiveness of the current ordering system
Sapphire Energy is accountable for supplying uninterrupted electric services to customers
around the areas of Bendigo, Geelong, Sunbury and many more major areas. The material
which is majorly used for the service is the 1/0 AWG aluminium triplex cable and this cable
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is responsible for transmitting electricity from distribution poles to meter loops of customers
house. Sapphire Energy buy their 1/0 AWG cable from the Eastern Power storeroom and it
has signed a contract with the Eastern Power storeroom for the regular supply of cable
(Sapphire, 2019). The expected requirement of this cable in the upcoming year would be
155,000 meters.
The current ordering system of Sapphire Energy includes the carrying cost of the cable which
is $1.35 per meter. The current contract was developed to ensure a regular spot for supplier
production schedule. The existing ordering system is considered as ineffective for the
customers because the Eastern Power do not offer quantity discount to its customers. Further
this agreement includes certain clause which makes it more rigid for customers. For instance,
customer had to purchase for minimum 4500 meters of cable in one order regardless of their
need. Further limitation is the storage capacity, Eastern Power storeroom has the storage
capacity of maximum 90,000 meters of 1/0 AWG aluminium service cable. Apart from the
additional carrying cost, each of the order unit comes up with an additional cost of $ 50 that
includes miscellaneous costs like check issuance cost and purchase requisition cost. In
addition to these costs there is inventory carrying cost on all products in stores at the rate of
10% (including tax) and this is applicable on purchase price per unit per year.
Recommendations for improving the current system
Based on the above discussion, it can be identifying that the current ordering system of
Sapphire Energy has multiple flaws; however, it is possible to improve the existing system
with the help of different technique involved in supply chain management. With the help of
supply chain management, it is possible to reduce the cost of cable per unit while managing
better inventory system. The existing ordering system of Sapphire Energy is lacking
effective and efficient supply chain management and it is recommended that the management
should adopted following approaches in order to improve the current ordering system;
 The management need to come up with better inventory management system, for
instance automated inventory management technology can be adopted to get the alert
of when the stock need to be updated. This strategy will help to reduce the 10%
inventory carrying cost.
 In order to reduce the carrying cost per unit, management need to come up with better
logistic plans. For instance cable can be stored at nearby warehouses to reduce the
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carrying cost per unit. Changes in installation days or reducing installation days from
5 day to 3 days can temporarily reduce the carrying cost of cable per unit.
AusCotton clothing report
Major global issues
AusCotton is a renowned manufacturer of winter and summer outdoor sports apparel, running
its business in various countries like Australia, New Zealand and North America. These are
principle countries from where AusCotton is running their business across the globe. As part
of the unique business strategy, AusCotton established them as a popular internet retailer of
the entire product line. At present, AusCotton run their business in collaboration with
contract manufacturers from Indian, China, Taiwan, Vietnam and India because of the low
cost manufacturing opportunities in this country. Depending upon the type of apparel being
manufactured and the complexities for along with the supply of necessary raw material, the
average manufacturing time is anywhere between 4-12 months. As a part of their distribution
strategy, the company own and maintain eight distribution centre located in different
geographical part of the globe to ensure the delivery of manufactured products across the
globe on a daily basis. However with emerging global competitions, this company is
experiencing certain global concern which includes the following
 A number of new competitors which have emerged in recent years are offering
products at very low margins leading to highly competitive market in clothing and
apparel industry.
 Another major concern for the company is their inefficient demand forecast that failed
to calculate and forecast the length, consistency and cost of transportation, resulting
stock out of demanding products at retail stores.
 Lack of guidance regarding the supply chain process is visible within the company
 There are instances when contract manufacturers of AusCotton have manufactured
illegal fake products and sold them through gray market channel.
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Impact of less-than-perfect demand forecast and volatility in cost of
Transport services in the business
Li et al. (2017) suggest that in order to become competitive in global market, it is significant
for business organisations to cope up with unique and efficient inventory management
process. The less-than-perfect demand forecast for the product is often leading to stock out
situation which is negatively impacting the global business of AusCotton. As retail outlets are
struggling to supply product to customer due to unavailability of stock, profit margin of the
business is going down. On the other hand vagueness in the length and cost of transportation
service is leading to unnecessary expenditure in the business.
A wide range of tools can be used to identify customer demands such as traditional statistical
approach to neural network, data mining and many more. These tools are capable of
estimating future demand of products or customers. According to Witten et al. (2016) data
mining is an analytical process which helps to explore data (generally large amount of data)
to identify consistent pattern of systematic relationship between variables and then validate
findings through the application of detected pattern to new division of data. Therefore,
AusCotton need to transform their demand forecasting process into a fully automated system
from semi automated system to eliminate the demand forecast challenges. In order to reduce
transportation cost it is recommended that AusCotton must introduce warehouse services
where they can stock their product near to supply point.
Strategic sourcing process
Based on the supply sourcing model there are six elements and those are forecast & planning,
analysing market/ Evaluate suppliers, Develop, revise and executing strategy, implement
contracts and managing suppliers, manage commodity and sharing knowledge (Monteiro &
Birkinshaw, 2017). Among these elements forecasting and planning, analysing market or
suppliers, sharing knowledge and developing, revising and executing strategies are significant
elements for the development of AusCotton. Forecasting and planning will help AusCotton to
identify the customer demand, market trend, right process of manufacturing along with right
manufacturing approach.
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Response to the assertion
Cracking down on counterfeits can be challenging for luxury brand like AusCotton as
contract manufacturer have the accessibility of producing copy products using the same
material and technique of the original brand. However, it is recommended for AusCotton to
use non-disclosure agreement. Under the non-Disclosure Agreement, the receiving party are
legally bound to maintain the confidentiality of information shared by the disclosing party, be
it data, information, material knowledge or design (Bharadwaj, 2016). AusCotton under this
agreement can penalised contract manufacturer if they found guilty of disclosing or misusing
information shared by AusCotton
Conclusion
This report provides brief introduction about Laburnum Group and discussion various
concerns that this group is facing across their major portfolios. This report provides
information regarding Sapphire Energy and AusCotton clothing and various challenges that
these part of business are facing. Based on the business concern, this report provided some
practical recommendations which are effective and efficient in nature and capable of ensuring
profitability and growth of Laburnum Group in long run.
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References
Bharadwaj, A. (2016). Safeguarding confidential business information is not anti-
competitive. Journal of reflective writing, 7(3), 90-98
Li, X., Pan, B., Law, R., & Huang, X. (2017). Forecasting tourism demand with composite
search index. Tourism management, 59, 57-66.
Monteiro, F., & Birkinshaw, J. (2017). The external knowledge sourcing process in
multinational corporations. Strategic Management Journal, 38(2), 342-362.
Sapphire.com, (2019). Solar power solutions, [Retrieved from
https://www.eessw.com.au/sapphire_solar , on April 13, 2019]
Witten, I. H., Frank, E., Hall, M. A., & Pal, C. J. (2016). Data Mining: Practical machine
learning tools and techniques. Morgan Kaufmann. 6(3), 56-87
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