Sugar Stores - Essay Example

SUGAR Introduction Purchasing plays an invaluable role in enhancing the profits an entity like Sugar, a chain of clothing shops. Purchasing should not only be competitive but also economical in this cut throat competitive business. From available information it appears that purchasing for Sugar stores has so far been indifferent causing lots of problems and limitations for maintaining a level of sales in this competitive business of trading in apparels. It is evaluated in this write- up whether centralization of purchasing by Sugar stores would bring in desired results of increased turnover and profitability. A. Current supply or purchasing problems Purchasing for Sugar is not centralized. At the same time the present process of purchasing follows none of the established rules of purchasing for a chain of stores. In fact there is no standardized purchasing strategy. “Purchasing strategy includes long term agreement, product design collaboration, and seamless supply chain process between the trading partners.” (Ling Li, page 63)i. Purchasing at Sugar stores is not even scientifically decentralized as delegated purchasing at Sugar shops does not owe accountability to the management. A mixed sort of purchasing system is being followed wherein individuals take up purchasing responsibility on the basis of their experience and contacts in the market. With the result all those advantages of centralized purchasing like economies of scale and others, as discussed later part of this assignment, are not being attained. Costlier hybrid or mixed style of purchasing system is bound to shrink the turnover and profitability. Cash and Carry style of purchasing, adopted by Sugar stores, means branded apparel are not being sold at Sugar stores. Branded apparels are designed as per the prevalent market and fashion trends. In fact brands set the fashion trend in the market. There is always a scientific process involved in fabrication of branded apparels. Designers introduce styles that become craze during the coming session. These branded styles of garments are fabricated only for those business houses that care for fashion and styles. Increased sales automatically follow such brands. Charles W. Lamb and other (page 309)ii believe that “retailers love consumers’ increased acceptance of private brands.” The styles that attract sales are not available in whole sale stores from where Sugar stores are making purchases. Accordingly the purchasing approach of Sugar is rather negative. Management of Sugar is not interested in taking risks and that is why sales at such stores are a cause of concern. Wholesales stores sell economic brands that are meant for masses and not for classes. Sugar stores can increase volume of sales but certainly not the value of sales. Purchasing through personal contacts does not necessarily ensure that quality clothes are being purchased. As business stands today, Sugar stores cannot even ensure that personal contacts would get economical purchases. On the other hand, there is every possibility that purchases might even get costlier. Personal contacts induce commission payments from supplier to the managers. This will further hike the cost of purchases as no entity would share commission out of its profits. Only purchasing professional at the helm of affairs are required to sort these issues. This is because “one of the most important links in supply chain is one between manufacturer and the supplier.” (Charles W. Lamb and others, page 421)iii. If that link is strengthened by appointing professional purchasers, things would start working favorably. Otherwise, the personal contacts present the risk of compromising quality with lower cost of purchases. That is why sales return is one of the causes of lowering of sales at Sugar’s stores. Missing quality control inspections. “The skill and prudence of the best of purchasing agents may be greatly nullified unless all material received is carefully verified both as to quality and quantity.”(Dexter S. Kimball, page 202)iv. Garments sold at Sugar stores are being returned on the basis of poor quality of garments. This indicates the basic defects in purchasing system of the company. There is no check on quality of purchases. There are no efforts to increase the sales by improving the quality of garments that are being purchased. Goods those do not meet the laid down standards should be returned back to the suppliers. Sugar stores lack even the ability to return the poor quality garments as mostly, as wholesalers generally do not accept returns of goods sold by them. This may also one of the reasons that garments purchased by Sugar stores are not inspected and are straight away displayed for sales. In fact the management of Sugar stores has not set any standard of the quality of garments to be purchased for sales in the stores. The management is simply depending upon the experience, intelligence, and personal contacts of the managers responsible for making the purchases. Low range or choice for customers: It is felt that customers do not find a wide range or variety of garments at Sugar stores. Buyers often like to select garments out a wide variety available at the store. When there is limited range or variety of garments, it is very difficult even for sales staff to hold the customers in the store for a longer period of time. Moreover, “an exclusive fashion boutique is expected to carry designer labels and one off creations for its specific customer target market, whereas middle off the road fashion store would keep predominately mass- produced fashion garments suitable for its wider market.” (Mark Wrice, page 114)v. This practice is not being followed at Sugar stores. B. Centralized Purchasing There is a belief that centralization provides “the means for strengthening the purchasing organization and for establishing clear purchasing policy.” (I. Donald Snook, page 143)vi Centralization of purchasing in a business of apparel trading needs certain issues to be addressed or settled so that defects in the present purchasing system are cured once for all. Organizational Structure The first of the issues is about the organizational structure of Sugar chain of stores. The present purchasing structure needs to be changed as major chain stores in apparel trading do not have a vertical integration of purchases. Under centralized system each store forwards its demand well in advance, say before the start of a season, to centralized purchasing department. Based on these requirements of each of these stores, centralized cell will formulate a policy and decide about the quality and quantity of garments to be purchased for the entire company. This will certainly bring in uniformity in display of garments and establish a particular standardized pattern of display at Sugar stores. Cost factor Purchasing becomes costlier under decentralized process due to low level of bidding and use of single source of supplies. “The bargaining power of buyers derives from their access to regional and global networks of suppliers and their huge volumes.” (Ellen B. McCullough and others, page 152)vii.There will always be low range of garments with single or very few sources of supply. This is one of the basic reasons for low sales in Sugar stores. Once the designs, sizes, and quality of garments to be purchased for all the Sugar stores is settled, the centralization can take advantage of economies of scale to reduce the cost further. Purchasing Activity under centralized purchasing leads to innovations like introduction of a reputed designers’ work in a specific section of each store. This will lead to more uniformity and customers’ attraction towards Sugar stores. In fact if garments stores attain specializations like for women wears, men wears, children wear, or pregnant women apparel stores etc., the stores get a specialized clientele and the chances of increasing the turnover become bright. All this is possible under adoption of centralized purchasing system. Business control The key to success of any business lies in its control. When a number of authorities are responsible for purchasing, the misuse of power is imminent. The internal layout of each store become different from the other as it all depends upon the display of garments meant for sale. There is possibility of corruption and nepotism creeping into the normal activities of the business as more than one power center gets established. Unethical business activities get encouragement in order to boost sale, and this may affect the reputation and goodwill of the business. There is only one power center under centralized purchasing system and related weaknesses of use of unethical business tactics, corruption, and nepotism evaporate automatically. Inherent advantages/ disadvantages of centralized purchasing Centralized purchasing is like seeking uniformity in diversity. Centralized purchasing department “department identifies potential suppliers, negotiates contracts, and implements the purchasing power. The advantages of centralized purchasing include greater purchasing specialization, buyer’s influence, and quantity discount due to large volume purchase. Increased quantity created by combining orders also means obtaining better service, ensuring long term supply sources, and developing new supplier networks. The larger quantity centralized purchasing tends to have a fewer order.” (Ling Li, page 64)viii That does not mean centralized purchasing is that sweet pill that consuming it would bring in all the positivity. In fact centralized purchasing power can also be misused as the central department never remains in touch with ground realities. Centralized purchasing has disadvantages of “purchasing personnel becoming too narrowly specialized, the distance between users and suppliers increasing, and having executives to economize any way possible not understanding how the costs are aggregated.”(Nancy Y. Moore and others, page 94)ix. Under such circumstances a hybrid purchasing system will bring in optimum style of functioning at Sugar stores and bring in increased turnover. “When purchases are fairly similar across the organization, they can be combined for leverage; a more centralized approach is favored. Conversely, if purchases are different across business units, an argument could be made for decentralization.” (Robert M. Monczka and others, page 167)x Conclusion The decentralized purchasing power centers of Sugar stores are being misused by the management. With the result purchasing is infested by low quality and less range of garments being displayed at its stores. There are frequent sales returns lowering the turnover and increasing the cost of purchases. These problems can be sorted out to an extent by adopting centralized purchasing system. But even the centralized purchasing system has its own peculiar weakness of distant between authority and ground realities. Accordingly a hybrid purchasing system, adopted to sort out specific weaknesses at Sugar stores, may sort of the inefficiency creped in due to decentralized purchasing powers. The basic rule for increasing turnover at Sugar stores is the satisfaction of customers visiting the stores. This is possible only with display of quality as well as a high range of apparels. Word Count: 1908 References Read More