The paper 'Laburnum Supply Chain Management ' is a great example of a Management Case Study. Laburnum group is one of Australia's largest listed companies with diverse business portfolios. The firm has a wide business portfolio which makes it vital to constantly monitor its corporate strategy decisions. The energy and clothing portfolios have been having the largest share of the overall business. These portfolios have been facing inefficiencies and challenges which make it vital to examine the current systems, processes, and strategies across the different product strategies. Based on the recent assessment of their clothing and energy business, the main source of inefficiencies is based on supply chain management decisions.
As the new inventory controller at Sapphire energy, this report will evaluate the effectiveness of the current ordering system and give recommendations on how it can be improved. The second part of the report will help address some of the procurement and supply chain issues facing AusCotton, having been recently hired as the new Senior Vice President of Supply Chain. Sapphire Energy Current ordering system and how to improve it Having an inventory model to calculate the optimal order quantity is required in Sapphire Energy.
The current ordering system lacks the Economic Order Quantity (EOQ) (Eroglu & Ozdemir, 2007). From the calculations in the appendix, it is clear that there is a difference between what is ordered and what should have been ordered. In fact, the difference on the current ordering, and what should have been ordered is 6,890 feet of power cable. For peak effectiveness, the business is required to make order 14 times in a year. Using the current ordering system, the company is taking orders for 41,625 feet of cable in every month.
This is despite the fact that the optimal number of cables in every month is 34,735 feet. This shows a huge difference in costs amounting to $23.61 annually showing lack of efficiency. The expected time between orders is also an indication that there is a lack of efficiency. The company has 260 workdays annually based on the 5 normal workdays. This shows that it is possible to attain less than 18.6 days as the time between orders which is more efficient.
The current time between orders is 21.7 days which are less efficient as shown in the appendix. By analyzing the current inventory system used by sapphire energy and comparing it with the calculated values, it is evident that the current system needs to be improved. It is clear that the current ordering system can be more effective. The current system can be improved by making the optimal number of units to be 34,735. This will make it possible to meet the annual demand which is 499,500. The company can change the number of orders that they make each year to be 15.
This will make it possible to have an annual order of 521,025 feet as shown in the appendix. The use of EOQ is very vital especially when looking for minimum costs. This will help the business to come up with the most cost-effective quantity to order. To ensure an increase in inventory turns, it is advisable for the energy business portfolio to reduce the order costs. The use of e-procurement will help in reducing the costs associated with ordering.
In addition, there is a need to enhance forecast accuracy which can help in reducing the lead time (Christopher, 2016).
Bowersox, D. J., Closs, D. J & Cooper, M. B 2002, Supply chain logistics management (Vol. 2). New York, NY., McGraw-Hill.
Christopher, M 2016, Logistics & supply chain management, London, UK., Pearson.
Ellram, L. M., Tate, W. L., & Billington, C. 2004. Understanding and managing the services supply chain. Journal of Supply Chain Management, vol. 40, no. 3, pp. 17-32.
Eroglu, A & Ozdemir, G 2007, An economic order quantity model with defective items and shortages. International journal of production economics, vol. 106, no. 2, pp. 544- 549.
Holcomb, T. R., & Hitt, M. A 2007, Toward a model of strategic outsourcing. Journal of operations management, vol. 25, no. 2, pp. 464-481.
Stadtler, H 2015, Supply chain management: An overview. In Supply chain management and advanced planning, Berlin, Springer.