MGT540 Case Study Analysis Veroxide Group (VG)

Case Study Analysis Veroxide Group (VG)

Introduction

As per the given case study, Veroxide Group (VG) is a manufacturing company that offers pharmaceutical products such as prescription drugs and human vaccine. Presently, they have been operating a number of manufacturing sites in Berne, South Africa, Pretoria, United Kingdom, and Leeds. As per the last year records, they invested 3.9% more in their R&D (Research and Development) and this caused 17.3% rise in sales. However, they take the certain initiative in order to accelerate the production of ‘Zentonex’ with the assurance of the supply of ‘Onolun’. Here, the study analyses the case scenario and identify the major issues. In the end, some possible solutions would be provided that help to resolve the issues.

Analysis of the Case Study

According to the given case scenario, the production buying operation of VG is located in Leeds, and on another side, the R&D has separate buying functions. The company experiencing a little communication gap between two buying functions, as the director of R&D declared that he is the custodian of budget. However, here, the case scenario is centralized for the production of their product ‘Zentonex’. In order to manufacture the product ‘Zentonex’, they require a sufficient amount of a special chemical ‘Onolun’. They build their procurement system and set their forecasted production scheme for this particular product. In order to be more precise, the production of ‘Zentonex’ requires 2 tonnes of ‘Onolun’ in every 3 months to meet their forecasted production scheme. The prime supplier of VG for this chemical is Gardners Ltd which is the regular supplier of R&D for the last five years.

Issue Identification

The prime issue that has been found that there is a communication gap between the production buying function and R&D buying function. Gardner has been supplying the special chemical to the R&D. On the other side, the VG buying director Anne Fortescue decided to produce the product ‘Zentonex’ ion their Pretoria location. Presently, the prime supplier has three major competitors who have been located in France, Canada, and Brazil. Due to the communication gap and different buying functions, Anne is unaware of the supplying capability of Gardners. Thus, Anne commissioned a report to Gardners by stating that they require 3 suppliers of ‘Onolun’ that can provide sufficient stock of producing ‘Zentonex’. The suppliers need to ensure the quantity and quality that VG asked for. Moreover, Anne suggested Gardners invest £500K in new plant and equipment. Here, there is a risk in building a new supply chain and inventory management. VG signs a contract with Gardners and ensures to incorporate effective supplier development program. Gardner cannot withdraw this contract as they know that there are 3 key competitors in the market. Gardners has to accept the suggestions despite knowing the possible risks.

Recommendations

Considering the above case scenario and associated risks, a number of possible solution can be provided. It is suggested that they should stop involving reactive supplier development approaches (Booth 2014). In contrast, it should incorporate a strategic supplier development approach in its procurement system. The prime four activities of strategic supplier development approach are—

• Hands-On Approach: Direct involvement in supplier’s operations
• Measurement Approach: They should run a process for on-going detailed assessment and feedback
• ‘The Stick’ Approach: The poor performance should be penalized in order to improve the efficiency further
• ‘The Carrot’ Approach: They should reward performance in order to motivate further (Mena et al. 2014)

The above-mentioned approach helps to ensure that the new supply chain and inventory management will run with proper assessment and effective involvement.

Besides, it is suggested that they should incorporate effective procurement communication plan in order to reduce the communication gap (Shu et al. 2017). This indicates that the internal stakeholder communication should be effective to improve awareness.

Conclusion

The case mainly based on the new operation for the production of ‘Zentonex’ with the special chemical ‘Onolun’. VG and its prime supplier Gardners signed a contract for the supply of this special chemical with sufficient quantity and standard quality. It can be concluded that the new supply chain and inventory management is complex due to the presence of certain risks. The suggested ways such as the incorporation of strategic supplier development approach in the procurement system and effective procurement communication plan would help the respective company VG to establish effective supplier development program.

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Reference List

Booth, Caroline. 2014. Strategic Procurement: Organizing suppliers and supply chains for competitive advantage. Kogan Page Publishers.

Mena, Carlos, Martin Christopher, and Remko Van Hoek. 2014. Leading procurement strategy: driving value through the supply chain. Kogan Page Publishers.

Shu, Lei, Feng Wu, and Lap Keung Chu. 2017. "Risk-averse procurement strategy under large-scale promotion online considering the strategic customer." Computers & Industrial Engineering 112: 576-585.