Laburnum Group Supply Chain Management: Evaluation Of Current Ordering System In Sapphire Energy And Auscotton
Task:To help address some of the procurement and supply chain issues facing AusCotton, you have recently been hired as the new Senior Vice President of Supply Chain. You have taken time so far to visit the company’s global facilities and to become aware of the situation, problems, and concerns that are faced by the company. You are asked to address the following questions:
- Based on your knowledge of the global business environment and the positioning of AusCotton with regard to its markets and supply sources, what do you think are some of the major global issues that will be relevant to the area of strategic sourcing?
- What are the impacts of less-than-perfect demand forecasts for AusCotton products, and of volatility in the length and cost of transport services used to move its products from contract manufacturers to distribution centres? What should be done to mitigate these problem areas?
- What elements of the strategic sourcing process do you feel are the top candidates for improvement at AusCotton, and why?
- How would you respond to the assertion that some of your contract manufacturers are involved in producing illegal merchandise that ends up competing with the branded merchandise of AusCotton?
This laburnum group supply chain management introduces the Laburnum group of companies and its component companies Sapphire Energy and AusCotton which are the power and textile based companies respectively. It provides an evaluation of the current ordering system in Sapphire Energy and also provides steps to improve them. This laburnum group supply chain management also discusses the major global issues that the company is facing and offers suitable strategies to address them. Additionally, this laburnum group supply chain management also examines the strategic sourcing processes that would be ideal to the AusCotton and also asserts steps to mitigate the problem of counterfeiting.
Laburnum group management report
The current ordering system of Sapphire Energy within Laburnum group is quite capable. The cost of cable for installation in the Eastern Power is 1.35 dollars per metre. The Eastern Power Company partakes one-twelfth of its annual needs each month in order to reduce the lead time by assuring a regular spot in the supplier production schedule for Sapphire Energy. The agreement between Sapphire and Eastern will enable the company to save the lead time by eleven weeks (Fayezi and Zomorrodi, 2016). This reduction in the lead time and discounts not being given will generate indirect revenue for the company guaranteeing customer satisfaction. The cost of each cable shipment associated with ordering of the product is 50 dollars including cost of making, procurement request among others which provides the company with the upper hand to integrate the additional cost with the loss of minimum 4500 metres of cable having a minimum threshold for order of the cable and additional cost will help sapphire to bear no other costs as eastern will making the payments for all the expenses (Lee, Padmanabhan, and Whang, 1997). This move will profit the company and thus making its ordering system useful.
There is much scope to improve the current system within Sapphire, however as discussed in this laburnum group supply chain management. The company can integrate the demand of the cable seamlessly through order management system technology which will communicate smoothly between the suppliers and the company's systems. The technology can also enable real time feedback to the suppliers and make the supply chain visible to other competitors. Basically, the system and the supplier should both be able to access the same inventory, catalogue, and process regarding order fulfilment. This will help the company to see what items are available in the inventory, their quantities and the locations of the products (Stank, Autry, Daugherty, and Closs, 2015). The company can automate the shipping process to reduce the lead time even further and instil a sense of brand loyalty and likelihood for its customer for recurring purchases. The warehouses for storing products must be well located ensuring the reduction in main distance market for the company's product and save time to ship the product to the customer. This will increase brand reputation and also increase revenue in the process (Lee, Padmanabhan and Whang 1997). The company should be able to accept returns for the damaged products and refund its customer for upholding the integrity of the organisation.
The major global matters relevant to AusCotton in the area of strategic sourcing are –
- • Diversity in the types of products can lead to the sale of the product into various markets specific to their culture and traditions. The diversity will enable the company to sell more products into the European markets where the demand for Asian ethnic apparel is more.
- Expansion of the company into new markets will lead the company to develop a base for local supply; this will be strategically advantageous to the company as it will result in eventual expansion into Asian market thus increasing the Revenue (Lambert and Cooper, 2000).
- Suppliers may offer superior technology or low labour cost in products to the company outside their own market.
- The contract manufacturers in China, Taiwan, and other Asian countries will help the company to price the products competitively which will increase the sale of the product in Australian and European markets.
- The sale of counterfeit items by the contract manufacturers is damaging the revenue structure of the company and also the reputation of the company in terms of quality. In order to address the issue, the company can employ the manufacturers permanently with consistent wages and place them under agreements to solve this issue.
- The company collaborates with new companies or established companies to address the issue of competitive products and aggressive pricing of similar products. The collaboration will lead to the creation of new segments and will increase the revenue generation.
Inaccurate demand forecasts and unexpected variations are leading the company to manufacture more products than required; this is resulting in stockouts of the products in the retail stores and unnecessary expenses being made to the manufacturers. This also impacts the expenses of the company which it needs to make on developing new products. Since the number of products is already high in the retail stores, therefore, the products are not selling entirely and have to be sold in clearance sales or take unnecessary space in the company’s inventory (Fisher, 1997). Also in some cases due to inaccurate forecasts of the market, the previously manufactured styles go out of trend and then a company has to discard all the previous stock affecting the economy of the organisation.
In order to address the inaccurate demand forecast issue in this laburnum group supply chain management, it is required to find the right inventory optimisation solution. Inventory optimisation solution uses the disparity between the forecasts and the orders for restocking the inventory and uses the previous inventory data to create a new forecast of the upcoming market trend (Christopher, Peck and Towill, 2006). AusCotton needs to forecast at the customer level meaning it should adequately analyse the current market conditions and based on that it must forecast the demand for the existing product or creation of a new one. It also needs the right management to create forecast data for demand. Inaccuracy can often happen due to human errors or negligence. Therefore right people must be hired to do the job of forecasting.
The elements for strategic sourcing process includes –
- Research – the main focus of research should be gathering data about AusCotton. The data must be then analysed, and a proper framework should be built. This element of the strategic sourcing also involves making categories such as direct or indirect, import and export and materials or services among others (Frohlich and Westbrook, 2001). this is necessary in order to compare the expenses of the company
- Analysis of the supplier market – the analysis involves analysing the supplier market to find the right suppliers and also determine the scope of the market based on the data gathered during research. The analysis of the supply market is necessary in order to identify the supplier which can supply to each category.
- Analysis of the current sourcing structure – Benchmarking must be done for the suppliers, and the products and identification of the gaps within knowledge must take place by the company. This step is necessary in order to analyse the deficiency in the current sourcing process (Williamson, 2008).
- Selecting of the strategic sourcing strategy – Various tools and methodologies must be applied to choose the ideal sourcing strategy.
- Implementation of the strategy – The successful suppliers, must be notified, and demand must be fulfilled over time.
- Sustained improvements – this step involves the identification and reflection on the selected strategic sourcing process and increases the demand momentum of the company.
The company needs to find ways to cope with illegal merchandising by some contract manufacturers. The following steps can be taken to cope with illegal merchandising –
- The company can register its trademark in the market of the contract manufacturers, this will protect their intellectual property, and the company can actually take legal action against the counterfeit products.
- AusCotton should hire a good local lawyer who is competent, trustworthy, experienced and indispensible (Ferrin and Plank, 2002). The lawyer will help the company to investigate counterfeiters and also suggest strategic moves against them.
- The company should open its official online store which is supported by the local web payments tools. This move will help the company with good payment support options and will not increase the valuable customer base.
- It should try to collaborate with the local government and other e-commerce companies.
- It should invest in anti-counterfeit technologies such as blockchain or digital QR code to prevent illegal merchandising and other frauds.
- AusCotton needs to update its model as soon as possible.
- It should use holographic codes and other product images in the product for the customers to differentiate between genuine and counterfeit items.
This laburnum group supply chain management concludes that the current ordering system of Sapphire Energy within the Laburnum group of companies is mildly effective and needs to improve the system through advanced management technologies and automate the supply chain of the company. It also provides insights on some of the global issues that AusCotton is facing and proper strategic sources to deal with them. Additionally, this laburnum group supply chain management also discusses the impacts of inaccurate demand forecast, counterfeit products by some manufacturing suppliers on the company's overall performance. Laburnum Group supply chain management assignments are being prepared by our scm assignment help experts from top universities which let us to provide you a reliable assignment help australia service.
Christopher, M., Peck, H., and Towill, D., 2006. A taxonomy for selecting global supply chain strategies. The International Journal of Logistics Management, 17(2), pp.277-287.
Fayezi, S. and Zomorrodi, M., 2016. Supply chain management: developments, theories, and models. In Handbook of Research on Global Supply Chain Management(pp. 313-340). IGI Global.
Ferrin, B.G. and Plank, R.E., 2002. The total cost of ownership models: An exploratory study. Journal of Supply chain management, 38(2), pp.18-29.
Fisher, M.L., 1997. What is the right supply chain for your product?. Harvard business review, 75, pp.105-117.
Frohlich, M.T. and Westbrook, R., 2001. Arcs of integration: an international study of supply chain strategies. Journal of operations management, 19(2), pp.185-200.
Lambert, D.M., and Cooper, M.C., 2000. Issues in supply chain management. Industrial marketing management, 29(1), pp.65-83.
Lee, H.L., Padmanabhan, V. and Whang, S., 1997. Information distortion in a supply chain: the bullwhip effect. Management Science, 43(4), pp.546-558.
Lee, H.L., Padmanabhan, V. and Whang, S., 1997. The bullwhip effect in supply chains. Sloan management review, 38, pp.93-102.
Stank, T., Autry, C., Daugherty, P. and Closs, D., 2015. Reimagining the 10 megatrends that will revolutionize supply chain logistics. Transportation Journal, 54(1), pp.7-32.
Williamson, O.E., 2008. Outsourcing: transaction cost economics and supply chain management. Journal of supply chain management, 44(2), pp.5-16.