Supply Chain Management Assessment 2: Case Study Analysis

Assessment 2: Case study analysis:

You are the expert hired by Laburnum Group to investigate two different aspects of their business portfolio. You have been asked to provide both quantitative and qualitative analyses of inefficiencies and/or challenges identified in the following case study, and to address the specific questions raised by the top management across both the energy and clothing business portfolios of Laburnum Group.

Carefully read the Laburnum Group case study and the associated questions. Develop a report that addresses the questions asked by the top management in relation to both energy and clothing businesses of Laburnum Group. You will need to draw on theories covered in this subject as well as other academic resources (e.g. journal articles, book chapters). Make sure you carefully read the marking criteria before you start work on your assignment.

Submit your final report as a Word document, including your analyses and recommendations about both businesses. Remember to use the Academy of Management referencing style. (Note that your calculations and your reference list are not included in your total word count.)

1. Laburnum Group

Background: Laburnum Group

From its origins in 1920 as a Victorian farmers' cooperative, Laburnum Group has grown into one of Australia's largest listed companies with headquarters in Victoria, Australia. Laburnum Group’s diverse business areas cover home improvement, office supplies, chemicals, energy, industrial and safety products, and clothing. A key objective of Laburnum Group is to provide a satisfactory return to its shareholders while addressing various requirements of their wider stakeholders.

Given the scale and scope of their operations, Laburnum Group constantly monitors performance across its diverse portfolio of businesses which is essential to their corporate strategy decisions. In particular, the energy and the clothing portfolios are of strategic interest to Laburnum Group as together they constitute the biggest share of their overall business. These portfolios are currently facing inefficiencies and challenges which have motivated their top management to re-examine the current systems, processes and strategies across different product categories.

A report that contains information about the recent assessment of energy and clothing businesses of Laburnum Group shows that the majority of the inefficiencies and challenges across these sectors can be attributed to procurement and supply chain management decisions. As a result, a number of procurement and supply chain-related issues across the energy and the clothing areas were further analysed by a cross-functional team to identify areas where improvements might be attainable.

The following sections detail specific inefficiency/challenge areas within the aforementioned business portfolios of Laburnum Group (energy: Sapphire Energy; clothing: AusCotton). You are required to use your learning obtained from this subject as well as academic resources to provide a quantitative and qualitative analysis of these inefficiencies/challenges and address the specific questions raised by the top management in form of a report.

2. Sapphire Energy

Energy Portfolio: Sapphire Energy

Sapphire Energy is responsible for providing reliable electric service to customers in and around the areas of Ballarat, Bendigo, Geelong, Mildura, Melton, Sunbury, Shepparton, Traralgon, Wangaratta and Wodonga. One material used extensively to provide this service is the 1/0 AWG aluminium triplex cable (see image below), which delivers the electricity from the distribution pole to the meter loop on the house.

The Eastern Power storeroom procures the cable that this company will use as part of its contract with Sapphire Energy. For the coming year, Eastern Power will need 155,000 metres of this service cable. Since this cable is only used on routine service work, practically all of it is installed during the five normal work days. The current carrying cost of this cable is $1.35 per metre. Under the present arrangement with its supplier, the Eastern Power storeroom must take one-twelfth of its annual need every month. This agreement was reached in order to reduce lead time by assuring their customer (i.e. Sapphire Energy) a regular spot in the supplier's production schedule. Without this agreement, the lead time would be about twelve weeks. No quantity discounts are offered on this cable; however, the supplier requires that a minimum of 4500 metres be on an order. The Eastern Power storeroom has the space to store a maximum of 90,000 metres of 1/0 AWG aluminium service cable.

Associated with each cable shipment are ordering costs of $50, which include all the costs from making the purchase requisition to issuing a check for payment. In addition, inventory carrying costs (including taxes) on all items in stores are considered to be 10% of the purchase price per unit per year.

Being a government-regulated, investor-owned utility, both the Victoria’s Essential Services Commission and the Laburnum Group shareholders watch closely how effectively the business, including inventory, is managed.

Your task:

 You have recently been hired as the new Inventory Controller at Sapphire Energy. You are asked to address the following questions:

1. Evaluate the effectiveness of the current ordering system.
2. Can the current system be improved?

Your answers to these questions will help you towards developing your report for Assessment