Procurement and Supply Chain Management for Sapphire Energy

Question: Discuss about theProcurement and Supply Chain Management for Sapphire Energy. Answer: Introduction The Laburnum Group is a major company with diverse business under one fold. The company is keen on its performance which ensures that all stakeholders are contented. However, time to time organizations are faced with issues that may be affecting their processes. Part of entities under Laburnum, particularly energy and clothing, are currently impacted by challenges and inefficiencies which have brought about the need to re-evaluate the systems. This report aims to provide adequate evaluation and analysis on the businesses and the relevant factors involved. Sapphire Energy Sapphire Energy and Eastern Power have quite a functional business relationship. Eastern Power shows financial strength and capacity to deliver on the arrangements. The system displays a good degree of reliability but the system can achieve much more. The reduced lead time is instrumental in enhancing the performance of the company (Treville et al, 2014). Customer lead time is essential for continued business relations. Reduced material lead time is important to the operations of Sapphire. The current system has regular production schedules which increases efficiency through reduction of the lead time (Christopher, 2016; Stadtler, 2015). The shipping system is effective in delivery of products. The costs associated are relatively standard for quality shipping. Procurement of the products in the established quantity has saved the company on carrying costs which makes the system sufficient. The Eastern Power storeroom size is essential in achieving this. Inventory holding costs are higher with less space utilization. This shipment of material reduces cycles required. Subsequently, this reduces the total ordering costs of the whole inventory. It is also important to be aware of the minimum order quantities albeit the orders of Sapphire are above. Without the discounts, purchases made in minimum order quantity helps in cost saving. The system is more effective with appropriate tracking of the inventory movements (Wisner, Tan Leong, 2014). Recommendations for Improvement There are some aspects that can be done to the system to enable improvement and better operations overall. The company should prioritize store keeping units (SKUs). These should conform to the objectives of the company and have the necessary class size to maximize investment. The SKUs should be repeatedly evaluated to ensure the company ahs adequate SKU intensity. The purchase of the cables should be done when customer lead times, acquisition lead times and order quantity relationships are suitable helps reduce inventory. The acquisition capacity should nevertheless surpass the demand (Hugos, 2018). Communication is of utmost importance. Clear and consistent communication with suppliers through the process should always be emphasized so that expectations of the customer are always met. Effective information systems should be applied to further reduce lead times (Hugos, 2018). This will automatically increase efficiency. Joint procurement procedures can be utilized to purchase products to help reduce unit purchase costs. This reduces the annual purchase transactions and cycle stock inventory. Cross-docking is also a vital strategy that can be applied in the case. Terms of payment between Sapphire and Eastern Power should be extended to improve the effectiveness of working capital (Shih et al, 2012). Calculations Economic Order Quantity: sqrt (2*155000*10/1.35) = 1515.4 Annual ordering cost: 155000/1515*50= $5115.5 Annual holding cost: 1515/2*1.35= $1022.6 Number of orders: 155000/4500=34 Total cost= (4500/2)*1.35+(155000/4500)*50 =3037.5+1722.2= 4759.7 AusCotton Strategic sourcing is key in supply chain management (Cox, 2015). The process evaluates methods, procedures and sources in maximization of the value of the business. Strategic sourcing entails negotiations, assessment of supply transactions and analysis of purchasing budget (Monteiro Birkinshaw, 2017). This process is sometimes impacted by some global factors. One global issue that is impacts strategic sourcing is the political environment. Political instability poses a huge threat on strategic sourcing by supply chains operating on the global stage. Politics plays a major role in the productivity and quality of sourcing. Calm in politics ensures that there are no sourcing delays, change in sources and routes for moving the supply. The opposite occurs when there are political tensions around the world. Volatile political situation destroys strategic partnerships and threatens global sourcing strategy (Eltantawy, Giunipero Handfield, 2014). Global economy is major factor in strategic sourcing. A stable economy ensures that there the financials are consistent and supply chains gain value form their investment. Conducive global financial climate promotes global businesses. This allows strategic sourcing by companies globally. Instability brings the aspect of risk in global sourcing. Fluctuations of the currency exchange rates affects the business as money has to be exchanged between nations in the global market. Strategic sourcing in this case is enhanced through management of information on currency values (Lasserre, 2017). Global companies have to abide by code of business ethics. In strategic sourcing, this code is very relevant. In global sourcing, supply chains need to operate with transparency and accountability in their activities. There are laws that govern how trade is conducted. It is crucial for businesses to ensure full compliance for continuous improvement in the system. The working conditions of the global companies are also vital to their sourcing (Lasserre, 2017). Regulations are diverse across countries due to difference in industrial standards. The regulations affect sourcing substantially. Companies therefore need to evaluate the circumstance and gain clear perspective on differences. In the case of AusCotton, the differences are vital to understand given they have interests in a number of countries (Eltantawy, Giunipero Handfield, 2014). Impact of Forecasts The forecasts carried out are in some cases inaccurate. As such, there are resulting effects on the business. The companys products can overstay their specified period. This means that changes in season happens while the stores are still stocked for the just-ended season. The other effect is that there may be a shortage in the products while there is still demand. In this case, an example is that summer may come while the stores are still stocked with products developed for winter, or stocks get finished before the season ends (Schmitt Singh, 2012). The volatility that affects the business makes it hard for the companies to follow their strategy. This volatility means that the process gets distorted by the challenge of varying lead times. This situation has the potential of causing much risk. In some situations, however, volatility may work to the advantage of the business. The costs of transport are relatively given that the service requires numerous trips as orders are made. The problem with transport can be partly taken care of through enabling early orders which can then be transported together to avoid numerous trips for deliveries. Early preparation is also effective with volatility and the imperfect forecasts. This will mean fewer disruptions based on these aspects. There period between production and shipping should not be substantial to minimize carrying costs (Schmitt Singh, 2012; Sawik, 2014). Elements of Strategic Sourcing There are elements that need to be reassessed and improved. Risk analysis is one key element. Given the challenges observed from the case, there is need for more assessment of the risks that are presented in sourcing. This will enhance capabilities of the organization in handling risks. It is very crucial to improve on gathering market information. This should provide the company with more insight on the market. In total cost of ownership, there is room for improvement. This should help comprehend better true costs of products and services provided (Presley, Meade Sarkis, 2016). Handling Contract Manufacturers The contract manufacturers are ethically wrong in their actions. Selling of counterfeit and illegal products goes against the business code. This is a breach of trust between the company and the constructors. Given that their efforts are unauthorized and work against the performance of AusCotton, the contract should be terminated. The contract manufacturers are going against the objectives of the company which the contractors should conform to with the contract in place. Change of contract manufacturers is necessary in this situation. AusCotton displays a business model that has been able to fulfill the needs of clients competitively and sustainably. The organization is a premier clothing company in Australia. The success of the model has seen a decline due to the disruptions and challenges. The model needs improvement in sourcing strategy to maximize the profits from the products and services. The sourcing regions are significant towards the business. They regions have affordable and sufficient labor and surplus raw materials (Rajesh Ravi, 2015). The company presents remarkable capabilities in the clothing business. The entity is well established and prominent in a number of continents. The range of products offered across all the distribution centers show that the company is a force to be reckoned with in the market. The range of products and locations show the financial capabilities of the organization (Heckmann, Comes Nickel, 2015). The relationship with contractors leaves a lot to be desired in AusCotton. Contractual agreements are binding and in enforced through rules and regulations of business conduct. Partners need to show integrity and commitment towards the set goals (Heckmann, Comes Nickel, 2015; Rajesh Ravi, 2015). The relationship with contract manufacturers is less than ideal because of their involvement in illegal counterfeits. In Sapphire, the relationship portrayed in the partnership is ideal. This association promotes customer and supplier satisfaction, unlike in AusCotton. Economic order quantity describes the appropriate order quantity that the company should purchase for its inventory. The calculated figure shows that the system that Sapphire employees does not effectively reduce inventory costs. This means that the inefficiencies experienced are resulting in higher costs (Sawik, 2014). Smaller quantity of shipments will mean higher fixed order expenses and less holding costs. There is lesser need for space in Eastern Power and less money in form of cables. This results in more savings. The procurement system in Sapphire incurs additional costs based on the variables. The system requires higher number of orders of lower quantities of shipments to realize cost minimization (Heckmann, Comes Nickel, 2015). References Treville, S., Schrhoff, N., Trigeorgis, L., Avanzi, B. (2014). Optimal sourcing and lead?time reduction under evolutionary demand risk.Production and Operations Management,23(12), 2103-2117. Christopher, M. 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