Challenges and Solutions in Supply Chain Management: A Case Study of Laburnum Group

This paper evaluates the challenges facing Sapphire energy and AusCotton. It also examines the global issues relevant to strategic sourcing at AusCotton. The paper offers solutions to improve Sapphire's ordering system and inventory management. It also provides recommendations for coping with illegal merchandising from contracted manufacturers.

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Laburnum Case Study
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Table of Contents
Introduction.................................................................................................................................................3
Sapphire Energy current ordering system....................................................................................................3
Quantitative and Qualitative evaluation...................................................................................................4
Improvements in the current inventory system............................................................................................4
AusCotton Company...................................................................................................................................5
Inaccurate demands forecasts and solutions................................................................................................6
Elements of the strategic sourcing process..................................................................................................6
Coping with illegal merchandising from contracted manufacturers.............................................................7
Conclusion and recommendations...............................................................................................................8
References.................................................................................................................................................10

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Introduction
Laburnum group since 1920 have become one of the big companies in Victoria, Australia.
Laburnum is a group of companies with diverse portfolios for home improvement, office
supplies, chemicals, energy, industrial and safety materials, and clothing. Laburnum group main
goal is to provide satisfactory returns to shareholders while addressing their requirements
(Kesavan et al, 2017). This paper evaluates the challenges facing Sapphire energy and
AusCotton. This paper evaluates the Sapphire ordering system and offers measures to improve
them. It also examines the global issues relevant to strategic sourcing at AusCotton.
Sapphire Energy current ordering system
Sapphire Energy is a laburnum group company responsible for the provision of reliable electric
service to customers in various countries such as Ballarat, Bendigo, Sunbury, Shepparton,
Wodonga, and Melton. Sapphire ordering system is competent because it reduces lead time by
assuring customers smooth flow of its products. The company distributes its products using
aluminium triplex cable. Per year the company requires 155000 meters of aluminium cable.
Sapphire contracted Eastern Power Company to be the supplier to reduce lead time. Quantitative
and qualitative method is useful for the evaluation of its ordering system. The company adopts
the economic order quantity method in inventory management (Feng et al, 2018).
The installation cost of the cable is $1.35 per meter. Since the company requires 155000 meters
per year, Eastern power supplies one-twelfth of the annual need monthly. This agreement has
aided in lead time reduction from twelve weeks because of the assurance of regular supply spot
in the supplier schedule. The costs associated with the Sapphire ordering system are carrying
costs $ 1.35 per meter, ordering costs of $ 50, and inventory carrying costs of all items of 10% of
the purchase price. No discounts offered in this system; thus, Sapphire energy has to make an

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order of at least 4500 meters. Placing an order of 4500 meters per month will save the company
from more costs since Eastern Company will cover all expenses.
Quantitative and Qualitative evaluation
For quantitative evaluation, the ordering cost is $ 50, demand 155000 meters, and the holding
cost is 10% of the purchase price, which is $ 13.5.
The economic order quantity= square root of 2*155000*50/1.35
=3388.43 units
The qualitative evaluation takes into account new orders timing. Sapphire Energy orders bulk
amount of 4500 meters per month. The reordering makes sure the company does not suffer
shortages when meeting customer demands. The company makes an order of economic order
quantity of 3388.43 units which help reduce the ordering and carrying costs (Kazemi et al, 2018).
Improvements in the current inventory system
Sapphire current inventory system can be improved by the use of technology to meet the
laburnum group objective. The technology will facilitate communication between the company
and its supplier. The order management technology will ensure that orders made are delivered at
the right time so that the company cannot incur shortages. The technology provides information
suitable to the company such as products available, quantities and locations. The technology
makes the supply chain visible to competitors. Another improvement method is to automate the
shipping process to reduce lead time. Warehouses should be closely located to the company to
reduce carrying and holding costs. These improvements will promote returns by lowering all the
associated costs (Fernie, and Sparks, 2018).

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AusCotton Company
AusCotton is a clothing company for both winter and summer clothes. The company encounters
major global issues in its strategic sourcing such as;
 Expansion of new markets- the company is required to expand its strategic sourcing by
developing base for local supply. This global matter is significant as it enables the
company to expand into the Asian market, raising its revenue (Thorlakson et al, 2018).
 Products diversity-the global supply chain requires AusCotton to diversify its products to
meet the need of people from many different cultures and traditions. Diversity will
increase the sales of the company.
 The contracts made with manufacturers from various countries increase sales as it helps
in pricing products competitively. Sourcing from these manufacturers is also
disadvantageous in case the manufacturer's supplier counterfeit products which damage
AusCotton reputation (Lambert, and Enz, 2017).
 AusCotton collaborates with other companies to help deal with matters of competitive
products like how to price them. Collaboration creates new market segments facilitating
revenue generation (Piboonrungroj, and Disney 2015).
 Suppliers from global markets may sometimes supply superior technology and low labor
costs.

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Inaccurate demands forecasts and solutions
Inaccurate demand forecasts and unexpected demands have adverse effects such as making the
company manufacture more or low products than the required. Production of more products
makes AusCotton incur more costs from unnecessary expenses and stock-outs due to use of
inventory from the store. The more products manufacture increases holding costs providing
products storage for long waiting for demand. On the other hand, the manufacture of fewer
products makes the company suffer shortages and may lose its customers to other suppliers.
Inaccurate forecasts of markets make the company discard all previous stock as they may not
meet the needs of that market. To address these issues, the company should adopt the right
inventory optimization solution in its supply chain. The Inventory optimization solution makes
use of data from previous orders to build new demand forecasts. Checking the disparities of past
requests and market demands, the company can come up with accurate demand and market
forecasts. To forecast, AusCotton should first analyze needs in current markets and then predict
using the information gained. Inaccurate demand forecast can also happen due to unskilled
management; thus, the company should hire skilled and experienced personnel to create new
demand forecasts (Yan et al, 2016).
Elements of the strategic sourcing process
Strategic sourcing process has several top candidate elements which can be used to improve
AusCotton such as;
 Research- the company should research to gather market information. The company
should priorities research by the adoption of systems which can collect timely and
accurate data about current market trends and demand. By analysis, AusCotton will
gather information about its competitors which they can use to create competitive

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products to beat the competition. Research helps create accurate demand forecasts.
Research help AusCotton Company understands demand patterns and trends and
manufacture products which will meet customers’ needs without shortages (Glas, and
Kleemann, 2016).
 Supplier relationship management and maintenance- to eliminate the challenges
encountered in satisfying market demands, AusCotton have to improve its supplier
relationship management techniques. With a good relationship, suppliers gather accurate
information about the company orders and deliver inputs which meet the order
specifications (Choi et al, 2016).
 Vendor selection- AusCotton should carry out proper supplier selection process to ensure
only skilled, experiences, and ethical vendors chosen. Qualified suppliers are always
committed to delivering supplies which meet the company requirements in time to avoid
shortages.
Coping with illegal merchandising from contracted manufacturers
AusCotton should take the following steps to cope with illegal merchandising from its contracted
manufacturers. The company should first register and acquire a trademark for its intellectual
property. The logo will enable the company to take legal action in case manufacturers go against
the contract terms by supplying counterfeit products. The next step is to hire a qualified lawyer
who will investigate counterfeits and suggest the best action to take. To improve payment, the
company should use local web payment tools by creating an online store. Another step is to
collaborate with local government and other companies. The company have to invest in anti-
counterfeit technologies like blockchain or digital QR code. These technologies will help the
company prevent illegal merchandising and frauds (Vey and Monari, 2018).

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Lastly, the company can make use of holographic codes and other images to help differentiate
between genuine and counterfeit products. Apart from these steps, AusCotton Company can
respond by cancelling contracts with the manufacturers supplying counterfeit products.
Cancellation will prevent contractors from using AusCotton brand name illegally, for example,
prevent manufacturers from producing clothes bearing AusCotton brand name (Wiese, 2017).
This is because manufacturers will lack the required expertise and resources to manufacture
illegal merchandise. To avoid illicit manufacture, the company can make a requirement that all
its contract manufacturers should have AusCotton staff and management in their operation.
Inclusion of AusCotton staff will prevent the manufacturers from engaging in illegal branding of
their products instead will only manufacture AusCotton products (Bajpai, 2019).
Conclusion and recommendations
To improve Sapphire current inventory system, the company should adopt the solutions
mentioned above, such as adoption advanced management technologies and automation of the
supply chains. There are many costs involved in the ordering system, thus to reduce them, the
company should make bulk orders of approximately 3388.43 units in economic order quantity.
AusCotton is facing several global matters such as products diversity and market expansion.
These global matters promote revenue generation through an increase in sales. Laburnum
experience inaccurate demand and market forecasts which can prevent through use of inventory
optimization solution. Inventory optimization involves comparing the diversity of previous
orders (Carter et al, 2015).
The most significant strategic sourcing element which laburnum Group should priorities is
research. The research will enable the company to gather necessary information, such as market
demands and trends. Another aspect is vendor selection and supplier relationship management,

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which will ensure that the chosen suppliers deliver accurate inputs matching the company
requirements. AusCotton contract many manufacturers who can manufacture illegal products. To
avoid unlawful merchandising, the company should acquire a trademark for its products, invest
in anti-counterfeit technologies, and collaborate with local government for protection.
Identification of challenges and providing solutions will improve the performance of Laburnum
Group (Chin et al, 2015).

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References
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