Purchasing and inventory management are essential components of a firm’s operations.
Purchasing and inventory management are essential components of a firm’s operations. Efficient and cost-effective operations of a firm require the uninterrupted availability of supplies, raw material, finance etc. Purchase and inventory processes work together to produce the end product as per the demand. This is the reason; these two processes are considered critical for the success of a business operation as evaluated here in the context of Brisbane Outdoor Power Centre. Here, in this report an operational issue of the company is discussed along with an analysis of its current purchase and inventory processes. Analyses lead towards the need of restructuring both the processes as discussed in this report along with effective operations management techniques and policies. The report also includes recommendations along with an action plan to restructure company’s purchasing and inventory processes with the help of supply chain integration.
Purchasing and Inventory at Brisbane Outdoor Power Centre. 4
Organization Background: 4
Current Purchasing and Inventory Management Processes: 5
Advantages and Disadvantages of Currently Used Processes: 5
Restructuring of Purchasing and Inventory Management Processes: 7
Supply Chain Integration. 7
Action Plan: 8
Nowadays it has become important for organizations to manage their business operations with a long-term orientation. Success of a firm today mainly depends on how effectively it manages its operations with an emphasis on cost, effectiveness, profitability, and sustainability (Griffin, 2007). Operations Management includes number of aspects and functions, but purchasing and inventory play a crucial role in making a firm’s operations successful. Purchasing processes directly affect inventory and a company’s cash flow.
It is because, this process refers to a very fine line in between maintaining the inventory needed to manufacture a product or fulfil a customer order. Management of inventory direct a firm towards success or failure (Heizer et. al., 2009).This is the reason it is important to manage purchasing and inventory altogether as discussed here in this report in the context of Brisbane Outdoor Power Centre. Purpose of this report is analysing the given operational problem, and develop a set of recommendations and action plan. Here, focus is give on identifying the nature of the problem, why or how the issues occurred in thecompany, and make justified recommendations to resolve the situation.
Purchasing and Inventory at Brisbane Outdoor Power Centre
Brisbane Outdoor Power Centre success is based on its three retail locations throughout the Queensland city of Brisbane. All its centres are same, but offer different product mixes as per the need of local clients and customers. The company was founded by Donald Saxon in 1985 with its first outlet in Mt Gravatt. As a growing concern, the company soon purchased the Strathpine centre in 2001 and the Ipswich store in 2004 (About Us, 2016). All of its outlets are staffed with proficient people, and they are the in charge of managing each outlets operation on their own.
The company had evolved from a straight forward, ordinary, retail lawnmower business to a successful group of three retail outlets that offered almost each and every garden power tool possible. It is not only known for its wide range, but also for the wide array of brands. Most of its customers are commercial operators. Brisbane Outdoor strong reputation is all because of its reliability, performance, after sales service, knowledgeable staff, readily obtainable supplies, and high quality merchandise (About Us, 2016). The company’s top position in the industry is all because of its quality, assistance, and advice. Its strong reputation even directs its customers to pay premium in comparison to the big box stores in the city.
Current Purchasing and Inventory Management Processes:
The current Purchasing and Inventory Management process of Brisbane Outdoor Power Centre follows decentralized operations. All retail outlets operate independently as managers of all three branches purchase their own tools and equipment. Brisbane Outdoor is making use of decentralized purchasing policy in which each branch in charge was buying their inventory independently without interfering each other. This is the reason; all three outlets do offer different product mixes to meet the local demand.
The company always allowed all its centres to operate as independent businesses, and nothing went wrong. Saxon being the CEO of the whole group was devoted to look after his own branch only. Till now the firm has operated as a fairly loose, decentralized organization based on rationality, generosity and mutual cooperation (About Us, 2016). There were no firmly definite policies and procedures in the company. All its branch managers were trusted and helped the firm to succeed by keeping the firm concern first always.
Advantages and Disadvantages of Currently Used Processes:
Decentralized purchasing process currently used by Brisbane outdoors’s all three retail centres significantly help them to operate as an independent business. All branch managers are able to operate on their own and keeping the firm’s interest first. Decentralization of purchasing and inventory processes facilitates all centres to produce different but unique products as per local needs. The processes used are different but still the company is able to maintain strong reputation in the industry.
In spite of these advantages of decentralization, there are also some disadvantages, which are also essential to be considered by the company in present competitive business environment. Buying inventory independently is actually leading the company towards higher costs and more time to manage inventory at each centre (Griffin, 2007). Purchasing all tools and equipment’s’ independently is also increasing company’s overall cost. By centralizing all centres processes, it would become easy for the company to save its costs as well as time to manage inventory.
Though, there is cooperation in between centres, but still if there is an integration in all centres processes, it would become quite easy for the company to decrease its costs and increase profits. Currently, the company is not managing inventory risk related to seasonal products in an effective manner. As well, different garden requires different power tools. Each kind of power tool or lawnmower necessitates different materials and service parts. Some parts move rapidly, whereas some move slowly (Akindipe, 2014). This in turn also needs maintaining high as well as small inventory, which is not possible to be done effectively with the help of decentralized purchasing and inventory processes (Griffin, 2007).
The company has a leading position in the industry and it is due to its ability to maintain hassle free purchasing experience based on trust and understanding. Though, this position might not be sustainable in the future, as the company centres’ handle various spare parts of different power tools at a time. If, current processes are not changed about how all branches manage procurement, inventory, and storage of different elements, cost will certainly increase. Continuous increase in company costs in future will be due to the lack of appropriate ways to place the moving parts in such a way that they are easily available to the staff in need (Griffin, 2007).
Centralized purchasing and inventory process would help management to focus on sustainability, which is a vital aspect of business nowadays. Managing operations in long run requires integration in a firm’s purchasing and inventory processes (Ogbo et. al., 2014).
Restructuring of Purchasing and Inventory Management Processes:
With an analysis of the current purchasing and inventory processes used by Brisbane Outdoor Power Centre it is apparent that the company needs to restructure its current processes. Outdoor Power Centre is growing but for effective and sustainable future it is vital to make use of an integrated approach. As a retail establishment, the company require a substantial investment in stock, and effective means to manage that investment.
Saxon’s laissez-faire approach towards business has ensued towards some odd purchasing and inventory management practices. Due to this, major brands of the company even differ at all its stores. The approach used till now has resulted in totally different and separate purchasing and inventory management systems.To deal with the current issues the company really need to restructure its current supply chain (Akindipe, 2014). Concerning this Brisbane Outdoor Power Centre can make use of supply Chain Integration.
Supply Chain Integration
In present era of strong competition among supply chains, the success of a firm mainly depends on its management’s potential to integrate the company’s network of business relationships. Supply chain management is important in this regard as it help firms in integrating key business processes starting from raw materials to end users (Lia et. al., 2006). Integration in between supply chains helpsa firm to combine all its tools, processes, systems, operations etc.An integrated supply chain is an association of customers and suppliers who work together along with the help of management techniques to optimize their overall performance in regard to creating, distributing, and supporting an end product (Naslund&Williamson, 2010).
With an integration of supply chains, all three retail locations would become able to work as participants of a vertically integrated organization. All supply chains are integrated to some level, but in case of Outdoor Power centre all three centres work autonomously, which need to be changed. Integration is crucial among all three branches supply chain with an aim to become able to focus and coordinate the relevant resources of each branch and optimize the overall performance of the company’s supply chain (Krishnapriya&Baral, 2014). The integration process will require the disciplined application of management skills, processes, and technologies to functions like purchasing, inventory, delivery etc.
The company can integrate its supply chain based on functions or processes. With the help of above critical analysis of the company’s situation it is clear that currently it need integration by process (Power, 2005). Integration of processes would help the company management to integrate all their processes and manage heavy investment in stocks effectively (Lia et. al., 2006). In this regard the company would need to integrate different processes of its three retail outlets.
To implement supply chain integration it is vital for the Brisbane Outdoor Power Centre to follow these steps:
Initially, the company management should focus on mapping out baseline relationship and processes in detail. It is an important as well as time-consuming process (Njoku&Alexanda, 2015).
The current system of rewards and endorsements need to be rationalized so it could become compatible with the planned changes and consistent for all internal as well as external members.
Subsequently integration should start on a small scale with the help of a cross-functional team in the leadership of a process champion. This should also include members from both company customers and suppliers. This would be useful to separate the team working on daily operations and enhance the possibilities of early achievement and reduce interruption of nonparticipants until the integration have been methodically validated (Power, 2005).
The company clients and suppliers can also be co-located at each other’s location to facilitate process integration and effective communication.
In addition to this, it is vital for the company management to focus on critical success factors and metrics needed to attain assured success concerning supply chain integration. For successful supply chain integration in between all retail outlets of Brisbane Outdoor Power Centre some of factors which are critical include organizational buy-in, together with full commitment by management. As well, it is also important to develop a clear understanding and enunciation of recognisable profits for all participants (Njoku&Alexanda, 2015).
Before implementing supply chain integration, the management would also need to make every one ready for the change and it is possible only with the openness to changes in work design and structure, consistent with decided stages of process integration (Katunzi, 2011). Another critical success factor in this regard is an effective use of suitable communication technologies, data exchanges, and computability with the company’s strategic mission and vision (Krishnapriya&Baral, 2014).
Additionally, to attain collective goals for all retail stores of the company, it is significant to align their performance measures (metrics) and incentives. Therefore, metrics and incentives need to be defined evidently and judiciously. It is should be mutually agreed and monitored by all relevant participants (Njoku&Alexanda, 2015). Supply chain integration will direct Brisbane Outdoor Power Centre towards a more effective position in the industry by reducing its costs and increasing its overall profits.
On the basis of above discussion, it can be said that today success of a firm mainly depends on how effectively it is able to manage and integrate its supply chain. Supply chain management plays a crucial role in a firm’s success but if there is an integration in all business networks of a firm, it become easy for a firm to manage all its processes and reduce associated risks of too low or too high inventory (Lia et. al., 2006). To handle Brisbane Outdoor Power Centre purchasing and inventory issues it is vital for its management to focus on supply chain integration by processes.
Till now, the company operated with a fairly loose approach, but for reaping substantial and immediate financial and operational gains, it is vital to restructure its current purchasing and inventory processes. By integrating different processes of three retail outlets, the company would be in a better position to manage its heavy investment and attain future sustainability. Successful integration require following all essential critical success factors as well as performance metrics to measure the performance of supply chain integration.
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