The Concepts of Purchasing, Supply Chain and Inventory Management - Coursework Example

Operations and Production Management By: Institution: Course: Instructor: Date of submission: Abstract As a newly appointed manager at Prime Motors, I have embarked on working towards ensuring an unremitting critical evaluation of the prevailing processes as well as policies that can affect the firm’s daily operations. The aim for this is ensuring the promotion of efficiency, costs reduction, as well as improvement of Prime Motors. Purchasing entails a process by which an organization or a business makes an attempt to acquire services and goods to attain the enterprise’s goal. Inventory comprises of list of materials and goods present in the stock. The aim of this report is to offer solutions to the problems faced by Prime Motors in the process of its growth, purchasing, as well as materials and service part availability which are essential in its operations and business sustainability. The report will also aim at critically ensuring the evaluation of the process. It will in addition provide the recommendation for management’s approval. Apart from that, the report will highlight the importance of inventory and purchasing management procedures and policies, and provide an introduction to the supply chain management concept as solution to the challenges of operation as experienced in the company. Table of Content Abstract ……………………………………………………………………………………….......2 Introduction ……………………………………………………………………………………….3 Differing Purchasing and Inventory Management Policies ………………………………………3 Weakness of the Company and Solutions ………………………………………………………...5 Apply concepts of SCM …………………………………………………………………………..6 Recommendations ……………………………….………………………………………………..7 Conclusion.......................................................................................................................................9 Bibliographies ………………………………………………………………………………..….10 Introduction SCM (supply chain management) can solve its present challenge in supplies, finances, as well as space. Since the supply chain apply to the systematic and strategic coordination of all the factions of the business for the firm with the primary aim of ensuring long term improvement of performance and efficacy, Prime Motors can utilize SCM. This covers services, products, information, and services from a single source to the next, with the operation chain and to the end user or the consumer. SCM ensures the creation of value to the company as well as the consumer. Furthermore, there can be the utilization of SCM as a competitive strategy, a factor which ensures the integration of customers and suppliers and a reduction of response time in addition to the creation of flexibility (Ramanathan 2014, p. 50). Prime Motors has numerous suppliers and this calls for differentiation in the treatment of the purchasing types because of existing differences in the demand, type of suppliers, storage, as well as procurement. Differing Purchasing and Inventory Management Policies Purchasing and inventory management policies and procedures might differ in various ways in case the different types of materials and service parts were purchased from different supply line. Each line of supply has its own set of policies and procedure. In addition, each country across the globe has different set of policies as well as procedures of purchasing and inventory management. In a situation where purchasing is done in bulk, the most recommended policy for this unit is that of central buying (Dobos & Gobsch 2011, P. 35). Since different supply lines have different purchasing procedures and policies, Prime Motors is forced to apply the policy of decentralized purchasing. In this case, the buying of the inventory is independent for each dealer. With effective management of the supply chain, Prime Motors can ensure the streamlining of the process of acquisition as well as maintenance of efficacy in inventory control while ensuring a reduction in needless inventory warehousing. It is important for Prime Motor to conduct an analysis of turnover rates of the inventory to ensure the identification of the appropriate supplies’ range necessary in every category of service parts and materials. In addition, it is important for Blacks to make changes to the levels of inventory to ensure the accommodation of the demands when the season is at its peak, and during the period of professional marketing. Emerging the link with the suppliers and distributors is essential to ensure the suppliers’ availability, essential in ensuring the maintenance of services to consistently enhance the satisfaction of the demands of customers (Potočan 2008, P. 26). The basis of supply forecasts is the historical demand data, because the material and service requirement is based on the seasonality factors whose determinant is the weather. For instance, during the period of summer, air-conditioners are needed at a higher level where else during the winter period, the demand for batteries increases (CIPS 2013, P. 25). Furthermore, Prime Motors may experience seasonal vehicle sales’ and services’ promotion, which increases the demand for materials as well as service parts. It is important to maintain high inventory for parts that are rapidly moving whereas the slow moving parts should have low inventory (Wanke 2014, p. 10). Apart from that, it is important to ensure the centralization of the purchase for products such as lubricants, fun belts, and oils. The case is different when it comes to genuine parts since in this case, is important to ensure centralization. The difference in the procedures and policies of the inventory management and purchasing will be dependent on the procedures and processes of the individual suppliers within the supply chain. Weakness of the Company and Solutions The main weakness of the current purchasing and inventory management practices at Prime Motors is the failure of the company to ensure the proper management of its inventory risk, which is linked with seasonal products. By ensuring the utilization of pull contract, the company can acquire discount when it comes to prices. Apart from that, such a move would ensure that the inventory risk will be subjected to the suppliers instead of the retailer at the course of the season. On the other hand, the retailer shall share the risk prior to the occurrence of the season. Prime Motors can ensure the maintenance of hassle free experience in buying and the outstanding servicing of the customers. This can be achieved through the utilization of the concept of cost, service, as well as repair while utilizing the right repair as well as parts dependable after-sales services. However, it is important for the company to ensure that it is utilizing effective ways such as, ensuring the placement of the parts that are rapidly moving in a manner that the employees can access them for restocking, utilizing the mechanical means to ensure the handling as well as moving the stock (Potočan 2008, P. 29). Apply concepts of SCM The concepts of purchasing, supply chain and inventory management can help Prime Motors reduce space as well as investment levels while maintaining adequate service levels in various ways. It is important for Prime Motor to ensure the restructuring of its function of processing inventory. Prime Motors is witnessing growth. It desires that the operations of its business will continue via enhanced experiences of the customer as well as the company’s support and after-sale sustainability (CIPS 2013, P. 25). Through these concepts, the company will ensure proper utilization of inventory storage space because of the high cost of space. With the acquisition of new dealership investment finance, facility as well as space support faces overstretching. Furthermore, the prevailing financial resources face depletion in each investment of the business, and therefore, the best way to address this operation is via purchasing, restructuring, and the management of the inventory supply chain. By following the concepts of SCM, the business’ best sources and its sustainability is enhanced via proper supplies’ sourcing, warehousing planning, as well as saving efficiency while managing investment finances. The predicted implication would ensure a change within the operation. To ensure efficacy in the inventory management, it is important to meet the changing supply and demand market trends through the development of SCM in response to the dynamic environment of the business to ensure that it is benefiting from the new opportunities within the market (Weele 2010, p. 17). Recommendations The company can embark on supply chain as well as process mapping whereby the management of Prime Motors and the CEO can ensure the brainstorming as well as the definition of directions and strategies. This would aim at the identification of the required capability of the supply chain and existing gaps, essential in bringing a solution to the challenges of operation. This challenge involves supplies procurement, space requirement and investment (Potočan 2007, p. 21). The company should also embark on data gathering and categorization. This can be achieved via discussions, interviews and meetings, whereby the gathering of the data occurs. It also involves the checking of the document for the source of the data such as the report, demand reports, suppliers’ list, warehouse distribution, expenses, infrastructure, among others (Gobetto 2014, P. 12). It is recommended that once the gathered data has been analyzed, it is important to utilize the model of SCM which incorporates warehouse, distribution, cost, and inventory for materials and supplies. The finance department as well as the management will carry out the process of validation. It is also important for the company to ensure the identification of the results and the findings of possible issues from the model and the sample data. The next step will involve the presentation of the recommendation to the CEO for approval and to the management who would then design the model of solution. The simulation model of the supply chain will then be presented with the aim of addressing the operation as well as challenging Prime Motors. Apart from that, it will be essential in presenting the financial impact (Ramanathan 2014, p. 54). The presence of SCM ensures the minimization of the differences in policies and procedures because the suppliers as well as the industries become aware of the systematic and the efficiency of the process. Purchasing as well as inventory management is essential in ensuring operation’s key area layout and physical control. This ensures the proper management of the various procedures with the various partners vital to the obtainability and procurement of parts and supplies, covering replenishment and forecasting strategies, inventory systems and quantity calculation (Potočan 2007, p. 27). In case of Prime Motors, the four network of dealership are managing numerous models and make of the cars which involves various supplies for parts and materials. This would lead to various differences in in the procedures as well as policies such as the delivery time, purchasing policy, methods, and schedule, order placement, forecasting, return policies, and payment settlement among others. With this servicing regard, Prime Motors is offering support to the various genuine parts for the various models and makes of the car being offered by the authorized wholesalers and dealers. The company is also selling spare parts that appear to be seasonal in terms of the demand. Prime Motors and its department of purchasing have come up with a system to ensure the management of the inventory as well as the purchasing system. However, owing to the growth of the business, operation changes, ensuring the continuity of the supplies and the procurement of the various parts in the future, necessitate the company to reduce the inventory as well as the procuring cost by ensuring the presence of a diverse policy for the various products. It is important for the company to ensure the following: Maintaining a high inventory level for parts that are rapidly moving such as lubricants, fans and oil, and a low inventory for genuine or slow moving parts (Wanke 2014, p. 15) Ensure the rearrangement of the storage as well as the sales areas in a manner that the employees can rapidly pick as well as reckon the parts that are rapidly moving. This will be achieved through the use of mechanical means for ensuring the storage of the moving parts (Potočan 2007, p. 27). The company can ensure that it is reducing the space as well as the investment requirement via reviewing of the processes in addition to eliminating processes that are redundant and ensuring efficacy. This would lead to the minimization of the cost and ensure that the company is saving. It is also recommended that the company will minimize transactions using papers and ensure the utilization of recycled papers to save on cost (Gobetto 2014, P. 15). Conclusion SCM entails a system that improves the performance of the organization once it is implemented. For the first time user of the SCM application and model, this incorporates a change that calls for management because it (management) ensures that the plan as well as the implementation of the model of SCM has occurred. With the business growth, it is important for the whole organization to comprehend the company’s direction and the measures of quality via SCM. In addition, it is important to encourage efficiency. The recommendations provided in this paper are meant to ensure improvement on the basis of resolving the present challenges in space, supply procurement, and investment. Bibliographies CIPS. 2013. Purchasing policy and procedures. Dobos, I., & Gobsch, B. 2011. Supply chain coordination in a HMMS-type supply chain with purchasing price contract. Supply Chain and Corporate Environmental Management / Barbara Gobsch ... (Eds.). Gobetto, M. 2014. Operations Management in Automotive Industries From Industrial Strategies to Production Resources Management, Through the Industrialization Process and Supply Chain to Pursue Value Creation. Dordrecht, Springer Netherlands. http://dx.doi.org/10.1007/978-94-007-7593-0. Potočan, V. 2008. Supply chain management: the relationships in supply chains. VII. Međunarodni Znanstveni Skup Poslovna Logistika U Suvremenom Menadžmentu, Osijek, [11. Listopada], 2007. 33-45. Potočan, V. 2007. Organization of supply chain management some organizational questions. Proceedings of the 4th International Conference on Logistics & Sustainable Transport 2007. 58-65. Ramanathan, U. 2014. Supply Chain Strategies, Issues and Models. Springer EBooks. London, Springer London. http://ezproxy.uniandes.edu.co:8080/login?url=http://dx.doi.org/10.1007/978-1-4471-5352-8. Wanke, P. 2014. Aconceptual Framework for inventory management: focusing on low-consumption items. Production and Inventory Management Journal. Vol 4, 1. Weele, A. J. V. 2010. Purchasing & supply chain management: analysis, strategy, planning and practice. Andover, Cengage Learning. Read More