Main Shortcomings of the Current Purchasing and Inventory Management Practices at Viverra Motors - Case Study Example

Client inserts his/ her name Name of tutor Name of institution Course title Date of submission Table of contents 1. Executive summary…………………………………………………………………..3 2. Introduction ………………………………………………………………………….4 3. How the purchasing and inventory management policies and procedures might differ………………………………………………………………………………..4 -6 4. The main shortcomings of the current purchasing and inventory management practices at Viverra Motors and how they may be affected by the new acquisition…………………………………………………………………………6 -8 5. How the supply-chain and inventory management concepts help Llew Gwych reduce investment and space requirements whilst maintaining adequate service levels……………………………………………………………………………..8 - 11 6. Recommendations ……………………………………………………………..11 - 12 7. Conclusion ……………………………………………………………………..12 - 13 8. References ……………………………………………………………………..14 - 15 1. Executive summary The report presents a brief introduction of what the concept of inventory management entails. It further mentions the position of the Viverra Motor Company in relation to the concept of purchasing and inventory management. It further explores the methods how inventory and purchasing management policies and procedures are different because the dealerships purchase different types of service parts and materials. Further, the report outlines systematically the main shortcomings of the present purchasing and inventory management practices at Viverra Motors and how could these shortcomings can be affected by the new acquisition. It thus presents the analysis of the suitability of the various methods that are used to manage the inventory system and their weaknesses. Either, an illustration of how the supply-chain and inventory management concepts will help Llew Gwych reduce space requirements and investment whilst maintaining adequate service levels in Viverra motors is given while mainly indicating solution to the constraints identified earlier. Finally, some recommendations are offered on how to structure the purchasing and inventory functions for the Viverra Motors dealership network effectively. On the other hand, a conclusion is given describing the significance of effective purchasing and inventory management on the wellbeing of any organization. 2. Introduction According to Toomey (2000), inventory management entails the larger concept of the inventory management principles, the concepts and the techniques that control the supply chain systems in an organization. The systems entail customer demand analysis, distribution strategies as well as the entire product transformation activities. These functions are interlinked and they lead to effective supply chain management in an organization when they are well managed. The case study presented outlines the current position of Viverra motor company in terms of purchasing and inventory management an their future prospects in the way they handle upcoming changes. Various challenges are observed and their possible solutions outlined through the report presented below. It is clear that the purchasing and inventory system is dynamic and it is bound to change with any slight change in the supply chain system. 3. How might purchasing and inventory management policies and procedures differ because the dealerships purchase different types of service parts and materials (e.g. lubricants versus genuine parts) from different types of suppliers? Purchasing and inventory management policies and procedures must change because the dealerships purchase different types of service materials and parts which need varied chain of supply management. In regards to the theory of production as explained by Zan (1992), there is a problem of combing the available resources to produce an expected level of output. The Llew Gwych managers have overlooked the significance of carrying out a precise analysis of the relationship between input and output because it is the basis for setting the maximum profit standards for the company. The theory of production informs the theory of value which is concerned with how the company satisfies the demand in terms of quality (Chary 1995). The company should widen its scope in regards to purchasing and inventory management by showing concern for the need to expand the premises in order to take care of the expanding demand potentials. The strategy could help the company make multiple sales of numerous makes of cars at the same locality and other service parts and materials. The procedures for the inventory system should expand in in order for the organization be able to handle the ever increasing demand rate. The cost of production in the long run will be high despite the high market demand for the products if effective planning and analysis is not conducted. (Verter & Dincer, 1992) Since the dealerships purchase a variety of service parts and materials, an immediate increase in the level of selected inventories will be observed. This may influence the level of capital investment in the inventory system which may result into an increase. Consequently, there will be an improved product availability and convenience in regards to services offered to customers. In addition, there will be increased product inventory turns from such advanced procedures of the inventory system in Viverra Motors. On the other hand, changes will be observed in the nature of communications and connections between the sales operations department and those endowed with the sourcing duties. Moreover, the nature of business in regards to acquisition, storage and sales calls for establishment of better tools that are used to mange inventories as well as enhanced reports and controls that are used to monitor the entire system of operation within the organization. The company further needs to consider adequately the nature of management information in reference to data availability and proper timing and planning for transactions that concern various supplies. (Mahadevan, 2010) According to Verter & Dincer (1992), the inventory management policies should be aligned towards understanding better ways of analyzing stock and the inventory as well as ways of improving the productivity of Viverra Motors Corporation. Also, the manager ought to understand adequately the role of the inventory in the supply chain in order to be able to balance costs and service requirements in the organization. According to Zan (1992), purchasing and inventory management policies and procedures ought to entail a framework of continual advancement which examines the link of inventory in the company’s supply chain management and activities. It should focus on the analysis of key areas of operations with the aim of understanding the performance indicators that show the position of an organization in the wider business arena or in relation to competitors. Despite the challenges involved, a Viverra motors is bound to succeed in advancing its operations if effective changes in policies and procedures of purchasing and inventory management are effected appropriately by the manager involved. (Bowersox et.al 2002) 4. What do you see as the main weaknesses of the current purchasing and inventory management practices at Viverra Motors and how could these weaknesses be affected by the new acquisition? The purchasing and inventory procedures at Viverra Motors Corporation do not interlink and connect adequately with each other. These functions should often overlap. The main weakness observed at Viverra motors is that the business delivery function focuses more on value to customers rather than the involvement of logistics and inventory management in the purchasing system. Poor planning is also observed which results into lack of space for storage of goods due to the orders that are made without considering the space available in the organization premises. The main challenge that the Viverra Motors Company is experiencing is rooted in lack of proper planning and scheduling within the operation process. The new acquisition and operations have interrupted the normal process since the firm has no capacity to deal in extensive orders such as multifarious dealings within a single premise. The managers have overlooked the fact that the operational space should be expanded as well as new procedures should be established that govern the process of acquisition, supply, purchasing, ordering and storage as suggested by Munson & Rosenblatt (1997). Lack of capacity to handle extensive dealings coupled with lack of adequate planning and timing leads to revenue loss because the cost of inventory management is increased greatly. This is a clear indicator of the intense inefficiency in planning within the production and operations management system of the Viverra Motors Company. Mahesh & Lynn (2008) in their theory of constraints explain better the current purchasing and inventory management practices at Viverra Motors. Through this theory, it is easy to identify the challenges and hindrances within Viverra’s operational system that may limit the level of achievement that the company can attain. It is a fact that all organizations experience various constraints in their struggle to achieve continuous growth. The purchasing and inventory manager at Viverra company has failed to identify the constraint elements which hinder the allocation of resources to the wanting areas such as the space within the premise, proper production and operation schedule as well as the purchasing and inventory keeping procedures. It is therefore difficult for the company to achieve its goals with increased inputs that involves numerous dealerships that purchase different types of service parts and materials such as lubricants and genuine parts from different types of suppliers. (Mahadevan, 2010) The capacity constraints are clearly identifiable within the purchasing system which remains the same even with expanded supply chain activities although the manager is not concerned with defining the problem at hand. Through logistics, the company requires a clear analysis of resource allocation, the level of growth and time of expansion and the costing systems. The application of the theory of constraints will move the company a long way because its relevance stretches to all levels of management within an organization. The company will experience tremendous success in the production and operations department if the theory of constraints is understood and applied fundamentally. (Mahesh & Lynn 2008) In regards to the queuing theory of operations management, the Viverra Company’s financial position will definitely go down due to the queuing problems that occurring because of the introduction of new acquisitions. The factors that are queuing in the company which will bear a financial and economic constraint include the physical capacity problem, procedure and planning of inventory activities, maintenance problems and time schedules and estimations. To save the situation, the managers should engage in a fast time cycle strategy so as to deal effectively with waiting and focus on time based competition. (Sanjay et.al 1995) 5. How can supply-chain and inventory management concepts help Llew Gwych reduce investment and space requirements whilst maintaining adequate service levels? It is important to note that the supply-chain and inventory management concepts will lead to improved policies, procedures and practices used for sourcing, purchasing and management of inventories as argued out by Bowersox et al (2002). Moreover, it will allow for understanding of the organizational structure, manager roles and responsibilities for logistic operations within the business systems. Llew Gwych as the manager in charge will be able to comprehend the recommended opportunities that lead to the reduction of operating costs that are related to inventory and purchasing management as well as other related logistic functions and operations within an organization. The inventory management concepts determine the nature of the supply chain which in return influences the financial status of a given organization as well as the nature of the balance sheet. The knowledge will enable the manager to maintain an optimum inventory system that is characterized by balanced levels of requirements that are not overestimated or underestimated in relation to the financial position of the organization. This concepts outline the fact that inventory systems are dynamic and they change with the operation system in place in a company. Viverra Motors Company will not experience space limits if the inventory management system performs a careful evaluation and analysis of external and internal issues which may be controlled effectively through planning and constant review. (John et. al, 1989) In addition, adequate service levels could be maintained if the organization manager realizes the need to separate the department of inventory planners. In that manner, their role will be effective in that they will be able to continuously plan, monitor and control as well as review the inventory activities adequately as implied by Dornier et.al (1998). Also, the inventory planners will effectively complement the function of other departments such as production, procurement and finance within the organization by demonstrating high levels of interconnectedness. Nevertheless, Viverra Company could be very effective in terms of purchasing and delivery if the operations manager estimates and fixes up production targets and dates of delivery efficiently. This could keep the production costs very minimal because of efficiency. Also, there could be no goods lying in the stores without proper inventory systems as described by Williams (1984). It means, they will be able to make orders as per the customer needs and demands. This will increase profits in the long run if the company works on both a cost and a time schedule. The production management department should be conventional in drawing the time table for various activities, with specifications of the starting time and finishing time in regards to the inventory and purchasing process. All this is possible if the people involved have adequate information in regards to supply-chain and inventory management concepts. (Handfield, 1994) According to Cohen & Lee (1989), it is prudent to carry out business forecasting efficiently so as to understand the purchasing times in regards to the position of the business in future. The manager ought to keep in mind the capacity of the loads in the stores and the facilities available in order to reduce overcrowding in the warehouse. Routing is a very important practice which ensures that the flow lines for goods, materials and services are well monitored so that every stakeholder knows what is going on within the organizatiooon. It is easy to pppoint out the department that sleeps on its function and thus take action accordingly. Every department needs to complement another for the customer value to be achieved. Conclusively, the company needs to achieve high profits while minimizing the costs of operations and other expenses. For the company to become efficient, the manager should begin by identifying the constraints, then devise ways of handling the constraints and finally elevate the constraints by breaking them down into manageable bits. All departments should be given a role in the activity to ensure that high interconnectedness between the departments is achieved. In this regard, it is easier to eliminate the constraints bit by bit until the system is realigned as desired. Nevertheless, the move may seem simple, but it requires pure concepts especially for Viverra Motors Company that needs to establish right measures to solve the current operational constraints. (Arntzen et. al 1995) 6. What recommendations would you make to Llew Gwych with respect to structuring the purchasing and inventory functions for the Viverra Motors dealership network? As a newly appointed Purchasing Manager, Llew Gwych should utilize materials and supplies by effectively managing the purchasing function within Viverra Motors. He should analyze the nature of vendor relations, the quality of demand, the forecasting exercise and the type of ordering system that exists in the company. Some of the recommendations that the purchasing manager may consider as outlined by Arntzen et. al (1995) includes: Work towards a better understanding of the various methods and strategies used in the purchasing exercise and also adopt and apply strict policies in purchasing. Show appreciation of excellent vendor relationships because they are key participants in the supply of goods and services by adopting a quality program for a better purchasing and supply system. He should be able to deal with all external vendors while handling their queries efficiently. Develop participant skills such that they are able to learn and adopt better methods of demand forecasting in their respective departments as well as effective ordering systems. This may limit the challenge created by lack of storage space within the company’s premises due to unplanned ordering of goods. Recognize the cycle of duties that make the supply chain process complete. The purchasing manager should bear in mind that his responsibility covers the entire cycle of purchasing activities thus identify the planning need, sourcing, purchasing, receiving and storing. The purchasing manager should focus on high standards by ensuring that all the goods purchased from their supplies are of high standard and are fit for the purpose they are intende to be used in. It is critical to note that high standards lead to good value which consequently secures customer loyalty. The manager should portray high competencies in regards to analyzing, planning and improvement. The procedure should be followed in that manner to ensure effective supply management. Consider distribution and inventory costs when designing goods as well as keep the customers informed about when their orders may arrive. They should understand well the kind of inventory systems the dealers employ in their operations in order to avoid succumbing to operations management pitfalls. (Bozarth et. al, 1998) 7. Conclusion Conclusively, it is evident that there are a number of benefits accrued to an organization which practices efficient production and operations management. The consumers benefit a great deal from the advanced industrial productivity which increases the general value of the goods. They enjoy the flexibility and convenience of obtaining the products at the time when they need them from the right place. The products are often in the right quantity and quality. Consequently, the company will experience good profit returns which will benefit the shareholders as well as the society as a whole. When a company gets good returns, the community benefits economically and socially because more investors and customers are expected to come in the scene. The nations in which the businesses operate achieve better security and economic advancement because of increased innovation, creativity and productivity within a healthy industrial atmosphere. Chary (1995) asserts that each system or section within an organization has different aspects and elements. The characteristics endow the sections with specific capacities and efficiency to perform the various functions that it is designed for. When the systems are well coordinated, they produce the best and maximum results. Failure of one aspect may make the entire element a constraint to the production process. All the elements are equally important and they collectively determine the efficiency of the operation system. The Viverra Motors dealership manager should review the system often to allow issues identification that need to be realigned identified to ensure that the system bears greater levels of efficiency. 8. References Arntzen, B., Brown, G., Harrison, T. & Trafton, L. 1995, ‘Global Supply Chain Management at Digital Equipment Corporation.’ Vol. 25, p69–93. Bowersox, D, Closs, D. & Cooper, M. 2002, ‘Supply Chain Logistics Management.’ McGraw-Hill Irwin, Boston, MA. Bozarth, C., Handfield, R., Das, A., 1998, ‘Stages of global sourcing strategy evolution: an Exploratory study.’ Journal of Operations Management, vol.16, p 241–255 Chary, S. 1995, ‘Theory and Problems in Production and Operations Management.’ Tata McGraw-Hill Education Cohen, M. & Lee, H. 1989, ‘Resource Deployment Analysis of Global Manufacturing And Distribution Networks.’ Journal of Manufacturing and Operations Management vol. 2, p 81–104. Dornier, P., Ernst, R., Fender, M. & Kouvelis, P. 1998, ‘Global Operations and Logistics: Text And Cases.’ John Wiley & Sons, Inc., New York. Handfield, R. 1994, ‘US global sourcing: patterns of development.’ International Journal of Operations & Production Management vol. 14, p 40–51. John, A., Gary, C. & Roger, G. 1989, ‘Operations Strategies: A Literature Review.’ Journal of Operations Management Vol. 8, No.2, P 133-158. Mahadevan, B. 2010, ‘Operations Management: Theory and Practice.’ (2 Ed) Pearson Education: India Mahesh, Gupta. & Lynn, Boyd. 2008, "Theory of Constraints: A Theory for Operations Management", International Journal of Operations & Production Management, Vol. 28 No.10, p.991 – 1012 Munson, C. & Rosenblatt, M. 1997, ‘The Impact of Local Content Rules on Global Sourcing Decisions.’ Journal of Production and Operations Management, Vol.6, p. 277–289. Sanjay, L., Robert, L. & Damodar, G. 1995, ‘Productions and Operations Management.’ Vol 4, No.3, P. 277-306 Toomey, J. W. 2000, Inventory Management: Principles, Concepts and Techniques. Springer Verter, V. & Dincer, M. 1992, ‘An Integrated Evaluation of Facility Location, Capacity Acquisition and Technology Selection for Designing Global Manufacturing Strategies.’ European Journal of Operational Research vol. 60, p. 1–18. Williams, T. 1984, ‘Special Products and Uncertainty ill Production/Inventory Systems,’ EZI - Ropenn Journal of Operational Research, vol.15. No. 46-54. Zan, W. 1992, ‘The Limits of Japanese Production Theory,’ Interfaces vol. 22, p.14-25. Read More