Nesa's Bar - Case Study Example

Nessa’s Bar Case Study Identify and analyse the major procurement related problems outlined in the case study The major procurement problem is that all three partners are involved in buying and all are getting materials from different suppliers for various reasons. This is the root cause, which is resulting in various other problems. Secondly, the products are being bought from suppliers based on price and availability only, which means the other factors such as quality of products, does not fall in the selection criteria. Third, since products are bought based on their availability and prices, therefore, low value goods are procured, which requires much time and effort. Fourth, since all three partners are involved in buying from different suppliers, therefore, sometimes the products are being ordered twice. The problem that is rising at the end of suppliers is that suppliers are not sure whether they will repeat the business with Nessa’s Bar in the long-run or not. Because of this reason, suppliers are not giving priority treatment to Nissan’s Bar. Timely payments are not being made to suppliers therefore; one of the major suppliers has ended its operations with Nissan’s Bar. The payment issues are appearing because of improper payment management system and it is evident from the fact that sometimes the purchase order number is missing from invoices and sometimes, the invoices are not matched with goods that have been received. Nessa’s inventory management system is not being looked after carefully. No one is keeping the record of things in the stock room, which directly creates the problems. The things are being procured without considering their need. Food wastages and disposals are increasing because they are either expired or gone bad. The newly hired staff is not properly trained and an orientation is given by one of the three partners. Moreover, because of the lack of written procedures, the staff never gets aware of the formal procedures of various things. 2) Describe what improvements you would recommend and their likely benefits From the identified problems, I have analysed that complete supply chain management process of Nessa’s bar needs improvement. Following are solutions to the various problems mentioned above. First, all partners should not be involved in the procurement of goods and it should be a sole responsibility of one of the three partners. Instead of buying products from various suppliers because of various reasons, Nessa’s bar should adopt a formal selection procedure of supplier. Nessa’s has two options including procurement of goods from various suppliers which is known as multi-sourcing or procurement of goods from a single supplier or single-sourcing. Selection of a particular strategy should be dependent on formal supplier selection criteria. If more than one supplier fulfills the criteria, then multi-sourcing is a better option as bargaining power of supplier will be reduced. For example, all three partners can sit together and make profiles of existing or new suppliers of Nessa’s bar. A sample supplier profile has been given below. Source: EIPM Website After making different profiles, different evaluation criteria should be selected to evaluate the suppliers. For example, currently, price and availability of goods are the two major factors, therefore, the partners can create such a formal evaluation criteria. A sample, criteria has been presented below. Source: EIPM Website After evaluating different suppliers, for final selection, a final comparison chart can be developed. A sample comparison chart has been presented below. Comparison Source: EIPM Website The benefits of selecting a formal selection procedure for supplier will be that a long term relations would be established with suppliers. Even if two suppliers are selected, trust will be established between the partners and suppliers. The suppliers will give the priority treatment and will ensure the availability of goods. Moreover, if one partner will be involved in procurement, the duplications of orders will be reduced. In addition, it will also solve the quality concerns, which are currently being ignored because suppliers will have a surety to repeat business with Nessa’s bar. For inventory management, the second partner can completely look after the inventory. He will be responsible to keep record of all inventories, so that reductions in inventory can be followed up and wastage of inventory could be reduced. Since, Nessa’s bar is operating in such a business that demand is uncertain therefore, just-in-time inventory approach can be adopted. However, to reduce uncertainty, demand should be forecasted. Finally, no one is looking after the invoices and related issues, therefore, the third partner should get control over the payment deliveries to the suppliers. 3) If CFI did buy out Nessa’s Bar, what changes and benefits might occur? If CFI did buy Nessa’s Bar, the various changes would take place at Nessa’s bar. The major change will be the change in organisational structure. Since CFI is the chain of some 20 nightclubs, therefore, the major action of CFI just after the acquisition will be to formalise the processes according to parent company. CFI also has a strong market positioning therefore, after acquisition, Nessa’s Bar will be also able to get goods from the suppliers of CFI. In this way, the staff of Nessa’s bar will be able to establish strong relationships with suppliers. The current management style is very relaxed at Nessa’s bar and after acquisition, the management styles will change, as new managers will take over the bar. This may influence the staff either positively or negatively. As the total number of stores of CFI shows that the chain must be performing well, therefore, this acquisition can really appear very fruitful. For the last two years, Nessa’s bar has not been making enough profits; therefore, for the financial strength of the company, such action can be taken. Moreover, as presently, there is not training system of employees at Nessa’s bar, therefore, if CFI buys out Nessa’s, staff will get the opportunity to learn more. The current situation of company shows that Nessa’s bar is not only facing procurement and supply chain issues, but it is facing various other problems, and CFI acquisition can really help the company in this regard. Sources EIPM. (2004) Supplier Selection Criteria. [Online] Available from: http://www.eipm.org/portal/intenda/post-learning/EIPMTools/Supplier%20Selection/Supplier%20Selection%20Criteria.pdf [Accessed March 01 2010]. Read More