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

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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).