Katsand Wines Supply Performance Management Analysis - Assignment Example

Student name Lecturer Subject Date: June 15th, 2012 Case study: Katsand Wines Supply Performance Management Analysis Q1. Katsand Wines is currently analyzing the Performance of their Suppliers. Using the categories of cost, quality & time describe how the performance measurement might be undertaken.  Cost criteria Katsand wines should look into the suppliers that would offer payment terms offer longer period before payment are made are most advisable. Promotions and discount in relative to the quantity purchased. Relatively find an estimate of failure costs. i.e. expense that might be incurred due to poor supplier quality. Like late delivery, defective materials, and unapproved materials by Food and Drug Act (FDA) since katsand is a food manufacturing company. The company should find out how these expected costs can be reduced when Supplier Performance Management (SPM) is put in place. From this analysis, the management will be able to know the amount of savings is estimating to achieve.  Quality criteria Katsand as well should look at poor-performance-to-cost-ratio that occurs as a result of poor supplier quality (time and quality). How many dollars go to waste as a result of this? Or how many dollars will be saved following adoption SPM. This will be done using Return on Investment (ROI) estimates; as they reflect what benefits the adoption of SPM will bring in the company in terms of liquidity. NB. Some qualitative improvements can not be measured in terms of money but remain vital like improved supplier relationship, like a supplier who chips in during business crisis, joint overhead reduction. This company should evaluate suppliers able to offer products and services fulfilling the quality system certification like ISO 9000. Katsand wines management should visit the site of the supplier to evaluate quality standards. Should also evaluate approved Food and Drug Act (FDA) firms.  Delivery criteria Katsand wines should look at the suppliers who are able to deliver orders on time. They should also consider those able to deliver the minimum lot size requested in the span of time given consistently. The assessment of such a supplier will also need to consider his location. Is important the company outsourcing suppliers who may have limited challenges to access the company. Time, cost and quality will all go together in SPM Q2. Application of Kraljic's positioning matrix to Katsand Wines, identifying suppliers that fall into each category within the matrix. (Bottleneck, Critical, Routine or Leverage) & (Single, Multiple, Delegated or Parallel Sourcing Strategies) and explanation.  Routine category: suppliers in katsand wines which follow under this category need to be efficient suppliers as this is a spend category. The objective is to get the most competitive price for a certain product as well as maintain standards of quality and delivery. Such as: printed labels, cleaning chemicals, wood chips, laboratory chemicals, stationery, fermentation tank, pumps, new warehouse, Cabernet Sauvignon grapes and bottling line. To achieve the objective in this category multiple sourcing is advised or parallel sourcing. • Bottleneck spend category involves items that are known to affect products and services of the buyers firm. Although the products mostly come in low value, however, they remain scarce in the supply market. Suppliers under this category in katsand wines include: Traminer Riesling, Sauvignon Blanc, yeast and grapes. These supplies are fundamental to manufacturing of different spirit and ensuring continuity supply of wine and spirits hence the company should enter into a longterm contract with the suppliers. Single sourcing will be advisable or parallel sourcing to reduce the weaknesses of a single source. • Leverage spend category aims at obtaining the best value of a product in the supply market. Is a strategy applicable when buyer feels that the marketing of a service or product is low yet the product is of high value. In this case, the power of a buyer is usually high while that of the supplier is low. Such include the bottles oak and barrels, travel, transport (grapes, juice, bulk wine, bottled product). This will allows for economies of scale, and the buyer has a room to negotiate on the prices. Delegated sourcing strategy is advisable; the buyer will be able to work with one supplier and this will cut down costs incurred on a daily basis and reduce buyer several suppliers’ contacts. • Critical is a spending category buyer need to cooperate with suppliers since the services and products they supply are ofa high riskk as well as impacting the business highly in value terms. Such suppliers in katsand wines include: Accounting, Bottling (to be replaced in part by Capital expenditure), water, gas and electricity. Single sourcing will be applicable to ensure ease exchange of ideas in this category and building up of market concept for supplier and buyer. However, there may be a likelihood of overdependence on one supplier and lack of market exposure by the buyer and, therefore, high priced by the supplier. Q3. Discuss about the make-buy decision related to the case study and the Theories behind make/buy (Neo-classical economic, transaction cost economics, Capability approach & Resource based approach) Katsand wines manufactures does both in-house sourcing and out-door sourcing of different products and services. To this regard, they make the end product that the spirits and distributes them to the different locations. Alternatively they do purchase equipment, technology and services they are not able to come up with and also some spirits. Capability approach The capability approach theory gives room for people to exercise freedom in order to achieve well being and the concerned principles. Such individual have the capability and opportunity and should be at liberty to maximize it. The katsand wines have explored this theory through expansion of the business from South Australia's McLaren Vale to United States, United Kingdom, Denmark, Norway, Canada and Chile. Resource based approach Katsand is able to manufacture wines and spirits that are unique from the company such as Shriaz, Chardonnay, Riesling, Sparkling Bubbles, Shiraz Vintage Port and Cabernet/Shiraz Blend. In this regard, they do have a room in the market for a competitive advantage. This will ensure that the company improves its production on its possessions. Transaction cost economics From the analysis, of how the Katsand wines has been in the market and plans to venture the market still it will not escape the transaction cost. Transaction costs are expenses incurred apart from the buying price of an item such include marketing, insurance, legal measure or travel expense. Neoclassical economic theory This theory assumes that as an individual one have own choices of that have shown to bring benefits. However, there are those have proved to give in more returns and hence the individual is free to choose those which give more benefits than others. Trading in the marketplace, therefore, involves voluntary transactions carried by rational and self interested parties. In addition, the government has to chip in incase where the there is no sufficient allocation of resource by the market in ensuring smooth flow of goods and services e.g. infrastructures and security. Katsand Wines Company has portrayed this theory from increased production of the spirits that were started with in the onset of the company. In addition, it has expanded production to other varieties that have still high demand. The company is liaising with the Australian government to comply with export requirement. Read More