Procurement and Purchase - Katsand Wines - Case Study Example

Procurement and Purchase Name: Professor: Course: Institution: City and State: Date: Executive Summary This is a report of a business nature concerning the company Katsand wines, situated in South Australia is experiencing some shortcomings. A company specializes in wine production. Some of its wine variety currently includes Pinot Gris, Sparkling Red and Merlot among others. Procurement issues are bringing these shortcomings forth. The company is finding it highly difficult to operate smoothly having to outsource. It was at the beginning and for a while outsourcing in bottling, crushing and fermentation requirements. This report is aimed at coming up with solutions and long term strategies to help Katsand overcome its current problems. However, currently the company boards of directors are finding ways to get sustainable procurement. They are using a new type of materials in corks and recycled products. They have also been able to conduct market surveys and find which varieties of their wine stock are popular with their market. This is one strategy to reduce the operating cost of dormant goods. With studying this company and the problems it is experiencing in detail the company directors, will run it more effectively. Other companies and promoters of companies will be able to learn from these and hence make decisions that are more informed. Current Procurement Issues These are the various challenges facing Katsand Wines in procurement. The company has a small production area, which limits production of wine effectively and efficiently. The space is made smaller by the presence of a 1500 kg crusher, fermentation tanks and Oak barrels. In addition, to this the winery would not be able to accommodate the bottling of wines and it leads to shipping to another large company. This may lead to an over reliance to the other company, as they have no alternatives. This also increases their expenses and their estimated budget. Production of varieties as the brand is getting awareness from the market. Katsand though does not produce some of the varieties available. They include Traminer; Sauvignon Blanc and Cabernet Sauvignon. Thus, they have to locate suppliers of these grapes, from the different locations by outsourcing. These locations may be in very remote and in accessible areas which, make it inconvenient for the company (David and Philip 2000, p.214). Expansion and taking charge of the global market, this was where the company decided to start exporting. For this move to be a success, there were a couple of things the company had to do. They include traveling to new places to get new customers for the brand; new labels for the export necessity and liaison with the Wine Australian and the Australian government among others. All this processes that have to be assimilated need a lot of time that the company does not have. This is because to the company time is of the essence, as a competitor can easily overtake them in a number of days. Staying on the market, this is where Katsand Company had to balance their production and market share. This led them to outsource bottling, fermentation and crushing requirements. If they did not do this one would outweigh the other, and the consequences would be losses either way. Controlling the procurement the directors had decided to control their production of wine. That meant an increase in the equipment that include the barrels and Oaks, where they are still discussing how it will be possible. They have however, not been able to secure the equipment the best way. The purchase of this equipment will be very profitable for the company as they will have a constant supply with no shortages (Hampson, Keith and Walker 2008, p.124). Sustainability of the procurement, the company has taken an environmental approach to evade the imposed carbon tax on the purchase. This move has come with it several changes for example, use of plastic corks, transportation services discussion and use sustainable and recyclable purchases. For the company to do all this successfully, it has to form a concrete plan that it will use. The Board of Directors has to come up with one sooner than later. Changes in the market, where the sought after items are new. The company had to come up with new varieties for example, Red Blend with the old ones like Traminer Riesling being withdrawn from the market. The old brands are not being purchased, and new brand are bring introduced to substitute the old. Literature The possible methods of sourcing, strategies and processes that may be used as remedies for the issues above are discussed below. In the case of Katsand Wines The company, getting stakeholder can improve on the small production. They can get the public to get a stake in the company by issuing shares to them. This will provide them the extra funds they require to hire extra space for bottling their wine. With this extra space, they will be able to produce more wine and make good returns on the shares. They will be able to control their supply channels and not depend on the large company. There are “various forms of financial security exist” (Nicola, 2006, p.26). Therefore, the company cannot only issue its shares but can also purchase bonds and financial securities. The company can form mergers or acquisitions from outsourced suppliers. They can thus be in control of the grapes and increase reliability. The resultant being the company manages the plantations. All this will also reduce the time the company was taking to locate the suppliers which is a waste of precious time. “We all form one global business” (George 1997, pp. 96-103) meaning, that by one business taking another is part of the business world. It is best for the company to plan in a case where it plans to expand. This will reduce the time it will consume when it wants to in terms of finances, work force and all other resources. The expansion requirements and regulations must also be dealt with in the expansion decisions. “Handover must be planned in order” (Nicola, 2006, p.83), where the company is using a hand over from another company to expand. The company can balance its production and market share at the same time. This can be achieved through efficiency, market research and networking. “The procurement process is part of production” (Mike 2008, p.46) a company can be able to deal with the other parts like managing the market in the presence of production. The company needs to teach its workers to be efficient in production for them to produce as the target. Funds also need to be budgeted on for the company to clearly analyze its market. The market is a changing variable, and if the company is out of date, competitors will easily terminate it. This may lead to lose of their market share or market segment. Networking is also a vital part of the company’s prosperity it needs to connect with other companies, buyers and suppliers. They will give important information to the company that it will use to combat its shortcomings for example, other prospective suppliers (Walker 2003, pp.175-178). Accessing procurement can be enabled by the company decisions. These decisions are based on the cost and the various ways they may acquire certain equipment. They may decide to purchase the equipment directly from the seller this may be advantageous as the item will be new. Therefore, the cost of repairing the equipment will not be incurred as in the case of an auction. The item that the company wins a bid on may be of lower value, than the high bid. It may also need a number of repairs to jump-start it. However, “different methods may be used to solicit bids from suppliers” (Nicola, 2006, p.18). This is through prices comparison, minimum quotation, and formal call for sealed tenders, request for proposal and bid solicitation. They may also decide to lease than tender, as in the case of leasing they may be able to purchase the equipment later. The method the company uses however, must be most advantageous to it. For the company to sustain its procurement, it has to weigh its options first. In Katsand Wines case, they decided to go environmental which is a one way. Hence, all its products are environmentally friendly being recyclable. “The environment is part of us” (Keith 2008, p.78) and the companies need to consider it in their activities. Other companies can also come up with products that use what is available freely by the environment and in the future would not be scarce. In the case of a construction company, they may use the soil provided, to come up with a type which, can be used to build. Designers of clothes can come up with innovative fabrics provided by nature. They can come up with clothing lines that use for example, grass. The creativity and innovativeness of the company has to be present all the time. “Business is always evolving” (Gadde 2001, p.56), and hence a company should always maintain its competitive edge. They have to keep coming up with new and better goods that will not lead to being irrelevant in the market. They need to stay active and fresh as the customers’ tastes and preferences are always changing. Recommendations My recommendations to the business include the following. The companies can develop a network system between the various local companies. By doing this, they will network easily and conveniently. They will take advantage of the opportunities in the environment. They will be able to access funds and ready information as well (David and Philip 2000, pp.59-63). In the scenario where the prices are unstable, I would advise the companies to form a market. In the market, they would form a monopolistic type of market where they would use economic mechanisms. These tools would ensure that the market stays in check in times of for example, inflation (Morledge, Smith and Kashiwagi 2006, p.154). The companies need to remain at the lead of their games this they will be able to do by hiring (Levi and Kaminsky 2000, p.96). The company by employing new people in the form of interns they will come up with new ideas. They will also train the interns to take over the company in the future. This will ensure a succession in the legacy of the business. The new ideas will also enable the company to come up with better quality products. Sustainability of companies can also be dealt with by hoarding. The companies can acquire procurement, not in excess but just more than the production schedules. The excess can be stored in the reserves for times when a shortage in the items may occur (Hampson, Keith and Walker 2008, p.136). The companies can also liaison with international companies outside their country and take advantage. They can be able to expand and outsource more freely. The outside countries also offer favorable packages for noncitizen to encourage investment. This will boost the company’s output and increase its revenue. Small companies can form mergers with larger companies (Gadde, Lars and Hakan, 2001, p.73). The advantage of this is this would reduce their operating cost unlike if they did not. This would be if they shipped their products to be produced by the large company. The smaller companies will enjoy economies of scale and higher productivity. In the sector of risk management, I would advise the companies to take insurance. An insurance policy would be an easier way of hedging against the risk. A convenient and simple process does not consume much time. For the small companies to gain procurement advantage (Greenhalgh and Lowry 2011, p.148) they have to choose a fitting method. Method, which, they can best, acquires the goods or equipment. In case they decide to take a lease, they must investigate the legality of it. They have to seek professional help first before they agree to lease. The companies can also practice issuing competitive contracts. This ensures that the supplier that gets the job is qualified. The supplier that deserves to get the job will get it. The successful procurement the goods will be achieved. This ensures that no mix-ups and no miscommunications will take place (Nicola 2006, pp.46-50). When the company wants to come up with a new brand it has to consider certain factors. These factors will ensure that the current products will not be outdone but will complement instead. In case the new variety, outdoors the old the new has to cater for the revenue lost. The company must hence consider all aspects before venturing in a new line of goods. The company can be able to expand and can do so in various ways. These ways include the mergers and takeovers. The company will increase its market share when it combines with another or if it takes over. Where it will take the other companies part, and add to its own. The companies also need to take quality first before anything (Adrian 2006, p.185). They need to procure for example a machine that will be long lived. This means the company will use the gear for a long period. They will be able to test on quality if they outsource for suppliers properly. References Adrian, S., 2006. Building Procurement. 1st ed. Ireland: RICS Research. David, L., 2010. Operation rules: delivering customer value trough flexible operations. Massachusetts: MIT Press. David, L. and Philip, K., 2000. Designing and managing the supply chain: concepts, strategies and case studies. New York: McGraw-Hill. Gadde, Lars and Hakan, H., 2001. Supply network strategies. United States of America: Wiley. George, C., 1997. Internalisation strategies. New York: St. Martin’s Press. Greenhalgh, L., & Lowry, J. H. (2011). Minority business success: refocusing on the American dream. Stanford, Calif.: Stanford Business Books. Hampson, Keith and Walker, D., 2008. Procurement strategies a relationship-based approach. United States of America: John Wiley & sons. Levi, D., Kaminsky, P., & Levi, E. (2000). Designing and managing the supply chain: concepts, strategies, and case studies. Boston: Irwin/McGraw-Hill. Mike, B., 2008. Profitable buying strategies: how to cut procurement costs and buy your way to higher profits. London: Kogan Page. Morledge, R., Smith, A., & Kashiwagi, D. T. (2006). Building procurement ([1st ed.). Coventry, UK: RICS Research. Nicola, D., 2006.Handbook of procurement. London: Cambridge University Press. Walker, D. H. (2003). Procurement strategies a relationship-based approach. Oxford, UK: Blackwell Science. Read More