Logistics Operations And Retail Management Essay

Question:

Discuss about the Logistics Operations and Retail Management.

Answer:

Introduction

Laburnum Group is established in 1920 and it is considered as one of the largest Australian groups of companies having their main area of revenue is coming from their two companies which are the Sapphire Energy and Aus Cotton. The main objective of this group is to maximize the returns of the shareholders. It is seen recently that the two companies under this group is facing some challenges and inefficiencies which is actually making the top management of this group to rethink their business strategies and the current processes for maximizing the returns to their shareholders. The main area which is considered s the challenge for the group is basically related with the procurement and the supply chain. There is the development of the cross functional team to be deployed for managing and identifying the areas which needs to be improved (Kim and Chai 2017). The study is focusing on how Laburnum Group will be identifying and managing the challenges they are facing recently from their two business portfolios. It is also describing the qualitative and quantitative analysis of the loopholes created and the mitigation of the challenges are needed.

It is observed from the case study that Sapphire Energy has the contract with Eastern Power storeroom who is procuring this cable so that the electric service should be delivered at the different areas of Victoria. It is seen that now Eastern Power actually need around 155,000 meters of cable for providing the best electric service to the customers. The challenge the company is facing is basically the carrying cost of the cable is very high and there is around 1/12th part of the annual cost is paid to the Electric Store room for delivering this cable to Sapphire Energy. There is an agreement to be made with Electric Store for reducing the lead time. There will be no discounts on the volume of this cable to be made and the supplier is indicating that the discount will be offered only if it has the minimum order volume of 4500 meters. It is also seen that the ordering costs is also high which is around $50 and the inventory carrying costs on all the items is around 10 percent of the purchase price which is also high as this will add up and the total price for supplying this cable for the customers gets enhanced which is adjusted in the electric bills.

From the case scenario it is depicted that the ordering costs for the cable is around $50 so the ordering cost is dependent on the annual demand. This tells that of the ordering cost is increased then the annual demand will also increase. This indicates that the customer across the different cities of Victoria have large demand of this cable which the Eastern Store should have to meet it. This is also dependent on the value of economic order quantity. If the economic order quantity increases the annual demand also increases. So in this case the effectiveness of the current ordering system is very high for Sapphire Energy as the ordering costs for this cable is very high. So this depicts that Sapphire Energy has the high demand of this cable for the future which will be maximizing the sales and this results in maximizing the shareholders of Laburnum Group as well.

Ways of improving the current ordering system of Sapphire Energy

The ways of improving the current ordering system is to increase the ordering cost for the cable. The next could be the increase in the annual demand met by Sapphire energy year by year. The annual demand the ordering costs for the cable is directly related with the economic order quantity of that product. This depicts the improvement in the financial performance of Sapphire Energy which I enhancing the revenue of the business for Laburnum Group as well. There is also the improvement of the current ordering system to be made by reducing the carrying cost for the cable. The lower the price of carrying cost per meter for the cable, there is the increase in the annual demand of the cable to be taken place. There is the other way of improving the performance of the current ordering system is basically the reduction in the inventory carrying costs of the cable which is added with the purchasing prices for the cable and this will increase the overall costs of purchasing the cable for the customers (Presley, Meade and Sarkis 2016).

It is important to mention the fact that Aus Cotton a company of Laburnum Group is facing some of the procurement and the supply chain issues by which they could not be able to deliver the products with wide variety to the customers. It is required by the newly hired Senior Vice president of the Supply chain to address the issue of procurement and supply side sources for this company. According to the case scenario, Aus Cotton is much focused on the contract manufacturing where they have to provide huge profit margins to the manufacturers with whom the company is in contracting with. They have to deal with huge number of products with varied ranges which is involving from the seasonal as well the products which are not found in season time, rather than it is delivered to the customers as and when required. So it is the responsibility of the senior Vice president of Aus Cotton to rethink about an approach. The approach which should be taken into consideration should be the approach of strategic sourcing. In accordance with Jacobs, Chase and Lummus (2014) strategic sourcing is defined as the approach which is useful in gathering information and it should be applied in such a way that it should be enhancing the power from the customers to purchase the products or services available to them.

According to the case scenario the major global issues which are linked with the area of strategic sourcing is the consistency in the demand and supply of the products by Aus Cotton. Due to the increasing demand of the products of Aus Cotton, there is always a decreased supply to be taken place as if demand for the product increases, the prices for the products starts increasing and the supply side decreases to a certain level. It is also seen that due to unexpected changes in the volume and length of the product lines developed by Aus Cotton, they could not be able to supply the products on a constant basis by the manufacturers and this leads to delay in the delivery of the products for the customers (Swink et al. 2017). The next global issue could be the inaccuracy and the transparency of the data or information required for the manufacturers to provide it as this will be causing problems in integrating security for the operations of Aus Cotton. There is the need of the information regarding the needs and demands of the target market where they want to enhance their business. It is important for the Senior Vice President to be able to get the required information from the market and the customer trends and analyzing their needs and demands from the products they purchase. The Senior Vice President of Aus Cotton need to analyze and implement the positioning strategy as well for making the products accustomed with the market conditions.

Impacts of less than perfect demand forecasts for Aus Cotton

The impacts of the less than demand forecasts for Aus Cotton are depicted below

Poor Quality Customer Service- With the less than perfect demand forecasts for Aus Cotton indicates that there is poor quality of service to be given to the customers. The customers will not be getting the products consistently and also at the right time which results in delay of delivery for them. The less than perfect demand forecasts also reduce the reliability of the customers towards Aus Cotton.

Lack of volume of products manufactured- It is seen that due to the less than demand forecasts the prediction for the products manufactured will become less and it does not meet the expectations of the top management of Aus Cotton which result in loss of customers for the company.

Urgent Increase in Carrying Costs- It is seen that if the demand forecasted is less, then there is an increase in the transportation costs for the products takes place if the customers urgently require the products (Fernie and Sparks 2014). So there is an increase in the cost of the transport services used for moving the products from the contract manufacturers to the distribution centers.

Ways of mitigating the issue of Aus Cotton

It is important that for mitigating the issue of less than perfect demand forecasts the company should be using the local manufacturers in Australia who can be able to manufacture the summer and the winter lines products for this company (Stadtler 2015). This will help in reducing the overall cost and profit margin of the company increases. The impact in the volatility in the length could be mitigated by manufacturing the products after the evaluation of the needs and demands of the customers and analyzing the market conditions. The cost of transport services used for moving its products from contract manufacturers is mitigated by increasing the volume of distribution centers and from sourcing the local manufacturers rather than making contracts with the outside manufacturers.

The elements of the strategic sourcing process which will be the top candidates for Aus Cotton are depicted below

Category Selection- It is important that Aus Cotton need to define and identify the sizes and the current quantities used as this is linked with the supply side.

Supply Market Evaluation- It is useful for strategic sourcing to be implemented that, there is the analysis of the potential suppliers involved with Aus Cotton in order to compete and develop strategy according to them (Monczka et al. 2015).

Selection of Sourcing process- It is essential in the selection of the sourcing process so that the product specifications are cleared for the senior vice president of Aus Cotton.

Negotiating with the Manufacturers- The Senior Vice President should be negotiating with the contract manufacturers that they will be reducing the profit margin and be able to deliver different range of products without any delay.

Evaluation of the assertion for Aus Cotton

The senior Vice President would respond to this fact that ethics in doing business is really essential for the sustainability of the business of Aus Cotton. As the senior vice president of Aus Cotton I would be prioritizing the contract manufacturer who are doing illegal business with us and would not be making them as our partners as legal obligations can hamper the reputation of Aus Cotton in Australia.

Conclusion

It is concluded that the company Sapphire Energy and Aus Cotton of the Laburnum Group will be able to find out the solutions t the supply chain and procurement issues they have it (Christopher 2016). It is evident that the strategic sourcing approach is taken for Aus Cotton to mitigate the supply chain management issue. Hence, the challenges faced by both Sapphire Energy and Aus Cotton need to evaluate it for the better business in future for them.

References

Christopher, M., 2016. Logistics & supply chain management. Pearson UK.

Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.

Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.

Mangan, J., Lalwani, C. and Lalwani, C.L., 2016. Global logistics and supply chain management. John Wiley & Sons.

Cooper, R., 2017. Supply chain development for the lean enterprise: interorganizational cost management. Routledge.

Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European Journal of Operational Research, 233(2), pp.299-312.

Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.

Swink, M., Melnyk, S.A., Hartley, J.L. and Cooper, M.B., 2017. Managing operations across the supply chain. McGraw-Hill Education.

Presley, A., Meade, L. and Sarkis, J., 2016, July. A strategic sourcing evaluation methodology for reshoring decisions. In Supply Chain Forum: An International Journal (Vol. 17, No. 3, pp. 156-169). Taylor & Francis.

Eltantawy, R., Giunipero, L. and Handfield, R., 2014. Strategic sourcing management’s mindset: strategic sourcing orientation and its implications. International Journal of Physical Distribution & Logistics Management, 44(10), pp.768-795.

Kim, M. and Chai, S., 2017. The impact of supplier innovativeness, information sharing and strategic sourcing on improving supply chain agility: Global supply chain perspective. International Journal of Production Economics, 187, pp.42-52.

Eltantawy, R., Giunipero, L. and Handfield, R., 2014. Strategic sourcing management’s mindset: strategic sourcing orientation and its implications. International Journal of Physical Distribution & Logistics Management, 44(10), pp.768-795.

Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.

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