Weaknesses of the Current Purchasing And Inventory Management Practices at Viverra Motors - Case Study Example

Name: Tutor: Title: Operations Management: Case Study Analysis Institution: Date: Executive summary Operations management is a good topic for discussion in the current business word. These include the issues of inventory, supply and purchase management. The automotive industry is greatly affected by these issues and thus measures need to be put in place to address all the challenges. Viverra motors are no exception to the matter because it faces some solemn challenges. As the purchasing manager at the company, the report is about the exact challenges that the company faces. The report will discus the different purchasing and inventory policies that exists in the company. The weaknesses of the company’s model of operations has also been discussed in details. The report also recommends that the company should change its operations model as well as strengthening the concepts of supply chain and inventory. The report concludes that if the measures are implemented, the company will be able to deal with its operational challenges. Introduction Planning for operations and management of a business organization is a critical aspect of success. Poor planning will lead to loses and collapse of the organization (Gardiner, 2010). In the motor vehicle sale industry, planning is a crucial aspect. This is considering the nature of transactions that takes place. Purchase and supply also forms an important aspect since most customers will require after sale services (McCulloch, 2012). These services will require the company to be well equipped in terms of technicians and equipment. As the new purchasing manager at Viverra motor company, some few challenges have been noted and the general manager needs to be advised accordingly on the matter. The report will thus be based on the area of purchase and supply and how to deal with the challenges affecting the company. These challenges will be addressed in details and recommendations be given to the general manager. Purchasing and inventory management policies and procedures The company has a policy regarding the purchase of spare parts. The company has given autonomy to the four branches to make their own decisions regarding the purchase of spare parts from suppliers. However, one of its policies is to ensure that the company only purchases genuine spare parts from manufacturers or from certified wholesalers. However, when it comes to other goods like lubricants and belts, the dealers are free to purchase them from any other supplier. This may be due to the nature of these goods and their frequent use (Harold, 2008). It is easy to purchase genuine lubricants and belts from any supplier. This therefore brings a difference in the purchasing and inventory management policies and procedures. The policies used for the purchase of spare parts is different from those used for the purchase of lubricants. This is considering the procedures that are involved during the purchase and supply. This is despite the company’s target of purchasing genuine parts and goods. The inventory procedures may differ considering the nature of the goods the company has to purchase (Bliss, 1996). The inventory procedures mainly includes controlling the stocks so as to determine what needs to be replaced and what is in plenty. This involves thoroughly scrutinization of the records and also manual stock taking. In the case of spare parts, detailed reports will be required since some spare parts are imported. The cost of importation may be high and thus it is necessary to have proper records on the availability and use of the spare parts. Others may require special orders from customers. This will therefore mean that proper records are kept so as to make orders at once and reduce costs. On the other hand, lubricants and belts are purchased from any supplier. This is considering that these goods are used on a daily basis and if they are to be ordered periodically, then it may run out of stock while serving the customer. The company has thus noted this issue and such products can be at any time from any supply once they are required. The purchasing procedures for goods also differs considering that some items can only be purchased when they are required (Yadavalli, 2011). This is common with some spare parts that are imported. The spare parts have to be imported from the manufacturer once the client has ordered it. If the spare part is purchased without order, it may end up at the counter for long without being bought which will affect the company’s expenses. This is quite different from lubricants which can even be bought in advance and it will still be used since lubricants are required for use daily. The purchasing procedure also considers that some items are in more demand than others. The procedure for purchasing items from a specific supplier may also take a lot of time due to the quotations and other logistic problems. This is mainly witnessed during the purchase of spare parts. With these considerations, it will be difficult to operate without fast selling goods like oil and belts which are sold on a daily basis. The procedure is also aimed at ensuring that certain goods do not run out of stock and can be bought when they reach a certain level. This is thus the consideration that brings about the difference in the inventory, purchase and supply of goods at the company. Weaknesses of the current purchasing and inventory management practices at Viverra Motors The company uses the just-in-time inventory to order for spare parts and other materials. This method allows the company to order goods or spare parts once they are needed (Barlow, 2005). This is mainly for the purpose of saving costs and avoid wastages in the company. This is due to the expenses involved in the purchase of genuine or original spare parts from the manufacturer. The manager of the company had expressed concern over the storage of the spare parts and as such it would be quite challenging for the company to purchase spare parts in advance and yet it does not have the capacity to store all of them . This may easily lead to losses or extra expenses for hiring a warehouse for the storage of the goods (Daugherty, 1994). The taxes involved are also the reasons why the company adapts the system. It may become quite challenging for the company to pay high taxes for purchase and yet it cannot sale the spare parts. However, despite these, the company using the method of inventory, it still has a lot of disadvantages and it ay further affect the company due to the new acquisition that will require more space for the storage of spare parts. This method has a weakness in terms of dealing with emergency situations. When a customer needs to fix certain parts of his car immediately, it is always a challenge for the company as it has to order the spare parts fro the supplier before proceeding with the exercise. This has resulted to lost opportunities for the company as customers may opt to seek the services elsewhere. This results to loss of revenue to the company. This will also affect the new acquisition as it means more customers will have to be served considering the increase in population (Yasuhiro, 2000). If several customers comes with such needs, then it will present a big challenge to the company. The current global economic situation is also not promising and as such most manufactures have laid down several workers. This means that production has to go down compared to the previous years. This makes it difficult for the company to get enough spare parts to serve the customers when it is ordered at a certain time. This shortage will also affect the new initiative as more people will require spare parts and yet it can not be enough during one order. This is also a weakness of the company’s inventory and purchase system which requires improvement. The company has made a good move in allowing all the branches to be autonomous and make their decisions regarding purchase and supply. However, the branches depend on one manufacturer to supply the spare parts and other goods. This has created a lot of problems for the company in some instances. At some point, the company may have run out of stock but on ordering at the manufacturer, the stock has also been depleted. This causes a lot of inconveniences to the customers who do not understand the situation. The customers are thus forced to wait for some period of time before they get the required spare parts. The company also relies on spare parts from Japanese manufactures since they are the most reliable and genuine. Some of the spare parts are only bought from the manufacturer in Japan. The company thus suffered great loses due to uncertainty and the manufacturer could not be able to deliver the spare parts. This was during the earthquake in Japan that paralyzed the operations of most manufacturers. This system is thus not reliable and it may end up affecting the new venture due to increased number of customers. How supply-chain and inventory management concepts can help Llew Gwych reduce investment and space requirements whilst maintaining adequate service levels The supply chain and inventory management concepts are mainly used for the purpose of Managing complex and dynamic supply and demand networks (Scarf, 2002). These concepts could be applied to the company for the purpose of managing the issues regarding, purchase and storage of the goods and spare parts. This will fully benefit the customers as well as the company and thus promoting its growth and solving the problems expressed by the general manager. One of the main concepts of supply chain and inventory is production. The company does not produce the spare parts but it purchases them. The concept of production covers the areas of warehousing and storage which is a concern to the general manager. Some approaches used in the warehousing of goods could ease the problems of storage. The company should adopt a stock keeping unit whereby all the spare parts serving the same function are kept together. This will reduce the wastage of space as well as making it easy to determine when the spare parts require new order. This will also enable the company to know the rates of purchase of the spare parts and when to replenish the stock. Inventory is also another concept of supply chain management. Several factors are placed into consideration for the purpose of management (Buxey, 2006). Seasonal inventory is a concept where a company purchases goods depending with its requirement at particular seasons. It is evident that the company will always supply certain types of spare pars depending on the season. This concept will thus enable the company to achieve its goals as well as addressing the concerns by the manager. The company should thus purchase spare parts depending on the season. The spare parts bought should be able to serve the particular season. After the season has ended, a lot of space will be available in the warehouse to accommodate the stock for the new season. This will reduce wastage as their will be no chances of spare parts that are not relevant piling and yet they cannot be purchased at that particular season. This will also be useful in determining the number of spare parts to be bought and thus avoid wastage. The company will also be able to save cost of operations and maintain of its facilities. Transportation is also a concept that is important in the process of managing supply chain and inventory. The means of transport will play a major role in the rate at which the goods will reach the clients as well as ensuring that the cost is not high enough for the organization (Emde, 2012). The company always imports genuine spare parts directly from the manufacturers oversees. The main method of transportation is shipping and transportation by air. Some delays may result in goods pilling in the warehouse due to arrival at once. This creates problems for the company. An efficient means of transportation which should be by air or shipping will also contribute to solving the storage problem. On the other hand information is also an important concept of supply chain management. Information is basically for the purpose of coordination of the activities in the company. The company will benefit from this concept by developing an efficient means of coordinating daily activities that will enable the manager to make wise decisions (Munson, 2010). On the other hand information will provide an important aspect of planning and forecasting the market trends which will facilitate the growth of the company. Recommendations to Llew Gwych with respect to structuring the purchasing and inventory functions for the Viverra Motors dealership network. The company has a lot of growth potential considering the availability of the market and the support the company receives. The company also has a good reputation due to dealing with genuine motor vehicle spare parts. This is a positive sign for the company that will promote its growth and development. However, despite this, the company may be faced with problems in the purchase and storage of goods. It is therefore important for the company to adopt several recommendations which includes developing an efficient information and communication system. This will be useful in obtaining the information about the market trend, the customer requirements and the supply chain. The efficient information system will thus enable the manage to make the right decisions regarding to when the spare parts should be purchased, the type of spare parts to be purchased and the amount of available space in the warehouse. The information will also be useful in determining the situation of the suppliers as regards to the availability of the spare parts. The company should also increase the number of technicians so as to increase the rate at which the customers will be served. This is considering the wide customer base. This will deal with the issues of delays and thus causing more spare parts to remain in the warehouse. The faster the customers are served, the higher the rates of use purchase of the spare parts and thus creating space. The inventory system of the company should also be changed so that it can meet the storage demands as well as the needs of the customers. The inventory will help the manager make decisions as to when the spare parts should be bought or when not to. This will eliminate wastage as well as ensuring that adequate space is available for the newly ordered spare pats. The means of transport should also be reviewed to facilitate a more efficient one. On the other hand the just in time model should be incorporated with another model so as to deal with the weaknesses in the model. These measures will definitely solve the challenges being faced by the company in terms of purchase, supply and inventory. Conclusion In conclusion, Viverra motors have a wide base of customers due to its suitable location. The company also benefits from the services it offers to the clients. The company‘s policies of using only genuine spare parts has positive impact on the customers. Just in time model of operation is the one used by the company for the purpose of serving its customers. This method however, has several disadvantages which has affected the company in several ways. The storage facility of the company has been affected which has caused major concern to the management. On the other hand, some customers have not been fully severed due to the weaknesses in this system. Some management concepts have been proposed for use by the company and it will eliminate the challenges if fully implemented. This will save the company a lot of costs and expenses related to storage. The company should also adopt a different model to complement the existing model so as to ensure it succeeds in its operations. References Gardiner, D 2010, Operations Management for Business Excellence, 2nd edn, Pearson, NZ. McCulloch, R, et al, 2012, Your Business Degree, Pearson Australia. Buxey, G, 2006, Reconstructing inventory management theory International Journal of Operations & Production Management26. 9 996-1012. false Scarf, H, 2002, Inventory theory, Operations Research Scholarly Journals186-191. Munson, C, et al 2010, Incorporating quantity discounts and their inventory impacts into the centralized purchasing decision, European Journal of Operational Research, ISSN 0377-2217, Volume 201, Issue 2, 581 – 592. Harold, E, et al, 2008, Developing purchasing foundation, Journal of Supply Chain Management, ISSN 1523-2409, 04/2008, Volume 44, Issue 2, pp. 17 – 27. Bliss, H, 1996, Inventory Management: Know How, National Association of Cost Accountants. NACA Bulletin (pre-1996), 08/1951, Volume 32, Issue 12, p. 1474. Barlow, R, 2005, Secrets to smart inventory control Healthcare Purchasing News, ISSN 0279-4799, Volume 29, Issue 3, p. 10. Yadavalli, S, et al, 2011, Strategic inventory management for disaster relief, Management Dynamics, ISSN 1019-567X, Volume 20, Issue 1, p. 32. Daugherty, P, et al, 1994, Just-in-time Functional Model, International Journal of Physical Distribution & Logistics Management, ISSN 0960-0035, Volume 24, Issue 6, pp. 20 – 26. Yasuhiro, M, et al, 2000, Bicriteria sequencing for just-in-time mixed-model assembly lines, International Journal of Production Research, ISSN 0020-7543, Volume 38, Issue 15, pp. 3451 – 3470. Emde, S, et al, 2012, Optimally loading tow trains for just-in-time supply of mixed-model assembly lines, IIE Transactions, ISSN 0740-817X, 02/2012, Volume 44, Issue 2, pp. 121 – 135.[[missing key: loadingAnimation]]The full text may take 40-60 seconds to translate; larger documents may take longer. Read More