Current purchasing and inventory management processes

Discuss about the Brisbane Outdoor Power Centre and Three Branches.

Brisbane outdoor Power Centre has evolved from run of the mill, one single retail store to the thriving business consisting of three stores. The stores have become huge hit among customers and customers prefer to buy from these stores even they know they are paying little extra for it. It is because Brisbane outdoor power center is known for its knowledgeable staff and deep consultancy it provides to its customers. It has excellent after sales and products of high quality, which makes it very popular among consumers. However, all the stores are operated independently in managing their inventory and purchasing. This results in inefficiencies in the system and there is huge scope of involvement. Founder member, Mr. Saxon has quite non-interference approach as long as the all the stores are running in profits. With the change in Management, i.e. Ms. Green overtaking all the Brisbane power center business, she has a different approach. She was quick to spot the downside of the existing system.

The case study presents that Brisbane Outdoor Power Centre was established as a one center company that expanded in three retail outlets. The first store of the company was making profits and therefore, the company acquired two more stores. However, there are certain loopholes in the purchasing and inventory management system of the company (Turkyilmaz, 2015). The process of purchasing and inventory management is not horrible. However, there is definitely a scope of improvement.

The current purchasing management processes are not matured as all the retail outlets have their own processes. It is possible that all the retail outlets are reaching out to common set of suppliers, but in an independent manner and as a result the company is not able to get the best deal from suppliers (Rogers, 2013). The current purchasing management processes of the company could be improved to have a common system. It would reduce the overall negotiation effort of the company and consequently the purchasing system would be systematic in the company.

There also exist various gaps in the existing inventory management system of the company. The company has decentralized inventory management system, wherein all the stores take their own decision about the inventory management. The safety stock also differs across different stores and this reduces the overall efficiency of the organization. The decentralized method of inventory management system is a old and traditional method. The three inventory managers of three different stores have their own calculations about the stock in hand and the order to be placed. This is not a good inventory management practiced as it leads to completely different, independent and exclusive inventory management systems of three stores.

Comparative advantages and disadvantages of the currently used processes?

There are various advantages and disadvantages of the currently used processes of purchasing management system and inventory management system. It is important that Ms. Green should be able to take the benefits of all the advantages and overcome all the disadvantages in the system. The specific advantages and disadvantages in the current system can be discussed as:

Managing one store by the local management will result in quick decision-making and also the time to procure will be less (Konur, 2016).

Customer grievances can be handled in more effective way by each store if they are handling independently. Customer returns, replacement will take little time and each customer will get a personnel attention of the measurement which is very good for any business.

The independent control can create a sense of ownership among all the employees and this could be difficult to achieve in a centralized system.

There are many disadvantages of the current purchasing and inventory management systems. Few of them are as follows:

It simply adds to the cost of inventory management and purchasing management as all the stores have to manage this locally at their end.

It reduces the chances of any negotiation or bulk discounts. Due to the independent inventory management and purchasing processes of the stores, the stores can never actually cut a deal from the suppliers.

Different retail stores can have different goals and focus on different values. It is possible that one store is focusing on having diversified products while other is focusing on providing high quality material to customers. Different values will lead to different experience in different stores (Ellram & Weber, 2013).

It is possible that every store is lacking the inventory management expert and inventory is maintained based on intuitions without any real basis. Also, if all the retail stores are having the inventory experts, then the Brisbane Outdoor Power is paying salary to same type of skilled guy 3 times. Same inventory expert can manage the inventory for all the 3 stores. 

There is a scope of lot of improvement. The company can use the principles of Total Quality Management, Lean Management, Six-Sigma and Just in Time inventory management to have an effective system in place (Sinha & Garg, 2016). Some of the inventory management concepts that the company should use can be discussed as:

The objective of the company should be to have optimal safety stock in all the three centers. It can be done if the company can have a centralized system with the use of Just in Time inventory management concept (Awudu & Zhang, 2012). With the JIT concept, the company would be able to minimize the inventory handling cost.

Supply-chain and inventory management concepts to be used ?

There are many techniques that address TQM in organization. One such technique is Six Sigma. Six Sigma is all about process improvement and defect reduction by measurement based techniques and tools (Yazdani, 2016). There are two methodologies in Six Sigma i.e. DMAIC and DMADV. DMAIC stand for define, measure, analyze, improve and control. This focusses on enhancing the current set of processes. The DMADV stands for define measure, analyze, design and verify. It is focused on making quality new processes of Six Sigma level. It identifies and removes all the defects, bringing the count to 3.4defects per million opportunities.

With the focus on Total Quality Management, this plan must consider quality as the basic component of the whole ecosystem. Another principle is continual improvement (Sinha, 2016). This revolves around meeting all the expectations of stakeholders by becoming more competitive and effective through analytics and strategic steps. But before making a judgment call, an organization needs to have data regarding the performance. For this, TQM needs to collect relevant data, analyze it and help the decision makers to make predictions and forecast the future trends. Another principal is to maintain communication across all the hierarchies of organization (Babatunde, 2015). Communication is essential to boost employees’ morale and motivate them to bring out the best to achieve high quality results.

It is important that the reorder points should be defined based on a consolidated data of all the stores. According to this strategy, inventory will be replenished as soon as the level just reaches the safety stock level (Rossin, 2012). Therefore, this approach will allow storing the safety inventory but not allowing the accumulation of excess inventory in the system.

There are many things that can be done by Ms Green to restructure the purchasing inventory functions of the company. All the retail stores should be standardized so that they store the products from similar brands operate on same goal aligned with the organization goals. The goal is that customer experience should be uniform across all the stores.

Another approach is that company can store the material at one of the location, which is having enough space and then replenished the stores based on the requirement from that central location (Sridharan, 2013). This central location could be any new warehouse also but it will incur the cost and the more analysis is required for cost savings and expenses from sing the warehouse. Even if one of the stores can be made to store the material, it could result in increased costs for logistics. Finally, the most essential principle is focusing on the horizontal process. As all the small processes makes large processes and brings the required output, so each employee should be aware of organization’s mission and vision. An organization can also incorporate ISO standards to calibrate the settings. All these principles result in exceeding what the customers and employees have expected.

Recommendations for Ms. Green to restructure the purchasing and inventory functions

It is also recommended that the company and Ms. Green should focus on the theories and principles of Total Quality Management. The process of enhancement includes all the department and employees along with the backward and forward integration. It uses customer satisfaction to achieve long term success (Stadtler, 2015). The improvement of not just process and products is involved but also the culture of organization is aimed to be improved. Quality management system is considered as the successor of TQM.

Conclusion

The above report discuses the case of Brisbane Power Center. As a conclusion, it can be said that Ms. Green has taken a right step to identify the current drawbacks and loopholes in the existing systems. The report highlights that the company has three stores but all the three stores have their own inventory management system. It is recommended that the company should move towards a centralized inventory management system. At the same time, Ms. Green has to ensure that the individual rapport with the customers should not be compromised. The long term objective of the company should be to have effective supply chain management in place that could have a balance between efficiency and responsiveness. The principles of TQM would ensure that the quality is not compromised at the expense of cost.

References

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Ellram, L. M., La Londe, B. J., & Weber, M. M. (2013). Retail logistics.International Journal of Physical Distribution & Logistics Management.

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Yazdani, B., Attafar, A., Shahin, A., & Kheradmandnia, M. (2016). The impact of TQM practices on organizational learning case study: Automobile part manufacturing and suppliers of Iran. International Journal of Quality & Reliability Management, 33(5), 574-596.