Purchasing and Inventory Management at Viverra Motors - Case Study Example

Purchasing and Inventory Management at Viverra Motors Name Course Institution Professor Date Executive Summary The Viverra motors organization is concerned with the provision of car services as well as the selling of car parts to customers. The organization is thus involved in many dealings with different suppliers in a bid to ensure that it is able to access all the required materials to facilitate its operations. This paper highlights several perspectives of the organization more specifically in relation to its purchasing and inventory aspects which have proved to be quite sensitive and worth consideration if solutions are to be found for problems being experienced by the organization. In this case certain problems have been presented as well as the approaches that may be used to eliminate them. Herein are some recommendations which if embraced by Viverra motors there will be immense change within the organization. It will experience immense growth and development despite being in the middle of a competitive environment. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Overview of the purchasing and inventory management 4 Purchasing and Inventory Management Policies and Procedures 4 Main Weaknesses of the Current Purchasing and Inventory Management 6 The Impact of Supply-Chain and Inventory Management Concepts at Viverra Motors 7 Recommendations 8 Structuring the purchasing and inventory functions for Viverra motors dealership network 8 Conclusion 12 References 13 Introduction Overview of the purchasing and inventory management Purchasing and inventory management forms quite a significance part within any given organization. For an organization experience growth and development with ease it has to have in place a purchasing inventory program that is both effective and efficient. Key concerns are seen to arise in line with how an organization addresses its inventory needs and the path followed towards meeting the already put forth policies and procedures governing the entire processes of purchasing and inventory management (Lost, Johnson and Kaplan 2000, p.126). For there to exist an effective purchasing and inventory management program within any given organization focus should be put on the analysis, measurement and identification of inventories that can be reduced in the near term. This would involve reviewing the policies and procedures as well as practices that are in line with data from purchasing and inventory records. Basically there is a wide range of benefits for an organization that utilizes improved methods and techniques for purchasing and management of inventories. Purchasing and Inventory Management Policies and Procedures Purchasing and inventory management is of great significance within any given organization as far as the aspect of sourcing for materials and services from suppliers is concerned. The existence of different competitive suppliers in line with the provision of goods and services necessitates that organizations critically put into consideration various factors that determine the reliability, capacity and capability of suppliers to provide timely services (Tempelmeier and Horst 2011, p.56). Among them includes the purchasing and inventory management policies and procedures which in this case differ due to the fact that the dealership of purchase involves different types of services being offered by the different suppliers. For instance in the case presented specifically the dealership of purchase in line with lubricants versus genuine parts, purchasing management and inventory procedures may differ. Firstly, in the case of lubricants the both purchase and delivery of the product may be on a contractual basis whereby an agreement is reached at between the sourcing organization and the suppliers (Nishiguchi and Toshihiro 2006, p.42). Upon receiving of the products tagging follows to foresee the inventory management process. Also In regards to the source of the lubricants it may be such that single sourcing is the only applicable method to obtain the products. This is due to the fact that lubricants are products of oil which is a sensitive product that is left in the hands of very few suppliers. From the few suppliers available the organization thus may be restricted to connect with one supplier for its lubricants. On the other hand the dealership of purchase of genuine parts the organization may decide to connect with different sources that act as providers of products and materials for the organization. This is regarded as multiple sourcing. On the other hand Inventory management relates to storage of materials is facilitated and the process of record keeping concerning inventories whereby the organization’s ability to manage inventories is enhanced. This is usually in line with the amount of materials required at any given one time. The inventory processes also allow for proper planning and allocation of resources be made in as far as the management of finances within the organization is concerned (Khan and Jain 2003, p.28). Main Weaknesses of the Current Purchasing and Inventory Management Within the Viverra Motors organization the purchasing and inventory management practices reflects certain main weaknesses in their operations. They include the inability of the organization to identify right parts and materials as far as sourcing of materials from the suppliers is concerned. This is a very critical factor that raises great concerns necessitating immediate attention. The ultimate impact of having the wrong parts and materials leads to increasingly poor performance of the organization such that both its capacity and ability to deliver quality and reliable services is jeopardized. The organization is thus bound to experience decreased competitive advantage within the market environment in which it operates while at the same time having only a small share of the entire market for its products and services. Most importantly the general growth and development of the organization is hindered. Another major weakness relates to the fact that the Viverra Motors organization lacks a plan that can be used for updating their systems. This state makes it to be become quite vulnerable to the problems in regards to inefficiency in its operations and the inability to effectively compete with other similar organizations offering similar services. The Viverra motors organization lacks an appropriate purchasing and inventory management system that would facilitate proper planning in line with acquisition of a viable dealership or purchase with the suppliers. Such weakness is seen as to increase pressure both on the organization’s finances relating for matters of purchase as well as space aimed at enabling the storage of materials and products purchased and in line with provision of support within the same facility to the different car lines (Coulter and Shepherd 1999, p.77). The Impact of Supply-Chain and Inventory Management Concepts at Viverra Motors Supply chain and inventory management concepts are of great significance as far as the growth of any given organization is concerned (Werner 2002, p.88). In line with Viverra motors the concepts are fundamentally crucial as they would highly aid in the reduction of investment and the space required while at the same time supporting the maintenance of quality service levels that are adequate. From the perspective of supply chain concepts the organization is provided for the opportunity to experience success and increased customer satisfaction. This would be achieved through the strategic planning of the daily activities and operations of the organization involving the flows of products from purchase straight from the supplier to the process of inventory management (Nagurney 2006, p. 60). This way the organization is thus made to be in a position to know the extents of investment to engage in and the amounts of materials or products to be purchased considering the amount of storage space available. Having in place an effective and efficient supply chain system it becomes easier for the organization to identify problems, develop the ability to operate under disruptions and know how to source for products or rather materials with utmost efficiency (Gokhan, Mehmet and Norman 2010, p.25). Recommendations Structuring the purchasing and inventory functions for Viverra motors dealership network In relation to the inventory management concepts the Viverra motors organization is bound to experience quite a wide range of benefits among them being having the capacity to reduce investment and offer quality services to its customers. The entire process of inventory management necessitates efficient and effective control of inventory. The Viverra motors organization will only achieve its desired objectives and overcome some of its current problems only through the following approach of managing inventory; The organization will have to maintain within its record keeping aspects the car items that are required as well as get rid of those items that are not needed. It will therefore indicate the promotion of orderly inventory management and keeping track of stock. Some methods through which inventory may be managed include; The visual control which is basically a method whereby the manager examines the inventory using visual means to determine whether there is need for more inventories. The Trickler control method involves the manager being in a position to count physically some portion of the inventory on a daily basis. This allows for the keeping of track on the daily flows of inventory. The click sheet control method makes it possible for managers to physically details about different items on a sheet of paper. This information is usually quite crucial in relation to reorder purchases. Due to toe the dynamism of the business environment and the increasingly growth being experienced in organizations need arises for more complex forms of inventory management to be set up. The main implication herein is the incorporation of within the Viverra motors organization. It demonstrates more feasibility due to the fact computerized systems to manage inventory that the organization is made to be more in a position where accountability and billing procedures are looked into without any worries of improper handling of information (Moskowitz and Robert 2010, p.65). There are certain tips that are very crucial and may be deemed as quite important in regards to inventory management and in providing a solution to the problems being faced by the Viverra motors organization. They include that; At the delivery time-verification should be carried through the counting process to ensure that the units received are what are indicated in the purchase receipt. Each carton containing the vehicle part and materials that have delivered should be carefully examined for visible damage. In case damage is identified on the parts then it should be noted on the delivery receipt with the deliverer providing their signature that acts as a witness to the claim. It is advisable that after the delivery of materials has taken place all cartons should be opened immediately for inspection of the merchandise that has been damaged. If any the materials that are damaged must be retained and held after they have been received. The carrier should be called to give a report for the damage with the call being confirmed in writing as way of providing protection for one-self. All materials or items understood to be damaged should not be moved in any case whatsoever from the area where they were received before they are inspected by the carrier after which they prepare a damage report which one should carefully read before signing after the inspection process is over. There should be no use of any materials or items that are understood to be damaged or worth disposal without prior permit from the carrier. Not at any given one time should damaged materials be returned without a written authority from the supplier. There are certain recommendations that may be made and may as well as undergo implementation to manage practices involved in purchase of products and procedural activities in the inventory processes. This concerns the use of improved data and information as well as reports aimed at monitoring and controlling activities. In order for Viverra motors organization to be able to survive within the competitive environment need arises for the restructuring of its purchasing and inventory functions as far as it dealership networks are concerned. There are some recommendations that are quite viable if the organization is to develop and experience in a positive manner. Firstly the organization can try to blend its operational functions in line with purchases made from different dealerships and how its inventories are managed considering the general concepts of supply chain management and how they might impact the entire process (Saxena 2012, p.24). Most often it is advisable to merge the first two functions that is purchasing and inventory management. The main reason behind this action is that the two can be easily linked together. It is therefore important for a professional dealing with purchasing to have adequate understanding of the principles under inventory management. In the case presented the Viverra motors organization will be in a position to know what amount of inventory to have at any give time in order to ensure that there is continuity of supply within the three purchase dealerships in the occurrence of unusual increase in demand. The quantity of inventory in line with these structuring of the purchase and inventory functions is known as safety stock (Tempelmeier and Horst 2011, p.57). Such knowledge on keeping safety stock is crucial in maintain the relationship with suppliers since adequate information is provided to them in a timely manner as far as their supply function is concerned. Secondly, the Viverra motors organization needs to have a clear understanding and knowledge of its status as far as the need for delivery of more inventories is concerned. This relates to the perspective of reordering of materials for inventory from the dealership networks that have been established whereby the reorder time should always be known. From a general perspective the matter of time is affirmed when there are decreases in the quantity of stock to certain levels commonly regarded as reorder points (Khan and Jain 2003, p.32). The reorder point may be determined through the following formula; Reorder point = Safety Stock Quantity + (Quantity Used Daily x Average Lead Time (in days)) This way the organization will thus improve relations with the suppliers who in the mean time are motivated to work and offer their services under a clear system whereby they are provided with information of what is needed enabling them to supply exact amounts of materials hence not operating with excesses or surplus supplies. Thirdly, it would be advisable if the Viverra motors organization knows how much quantity of materials to order at any given one time. This means that it will have to apply the complex mathematical equation that is used to determine economic order quantity. The equation identifies the tug of war in existence between the inventory carrying and the purchase or rather acquisition costs. It reflected from the equation that if the organization does not order big quantities in a frequent manner then the general aggregate acquisition costs are lowered with the inventory costs being high as a result of higher inventory levels (Khan and Jain 2003, p.36). On the other hand, in case frequent orders are made that involve small quantities of materials, the costs of inventory are lowered with the costs of acquisition going high since more resources are expended on orders. Such understanding brings us to the key purpose of the economic order quantity equation which is basically meant to minimize the sum between the purchasing cost and the inventory costs. Conclusion Therefore through the development of a strategy for Viverra motors organization aimed at governing it’s purchasing and inventory management needs it will gain competitive advantage and have quite a good share of the entire market of automobile products. This would be achieved through the designing of assessment procedures in the purchasing and inventory management operations geared towards developing and implementing plans and actions that are directed at acquisition of products and management of inventories in a way that aims at minimizing inventory and improving services that are rendered to customers. References Coulter, J and Shepherd A 1999, “Inventory Credit–An approach to developing markets”, Rome, Macmillan. Gokhan, H., Mehmet, N. and Norman, M 2010, "Development of a Simultaneous Design for Supply Chain Process for the Optimization of the Product Design and Supply Chain Configuration Problem.". Engineering Management Journal, vol. 1, pp. 20–30. Khan, M and Jain P 2003, Theory and Problems in Financial Management, New York, Springer. Lost R., Johnson, L and Kaplan, L 2000, Purchasing and inventory management, Harvard, Harvard Business School Press. Moskowitz, J and Robert, L 2010, Using Your Computer for Inventory Control, Michigan, Accvision. Nagurney A 2006, Supply Chain Network Economics: Dynamics of Prices, Flows, and Profits, London, Edward Elgar Publishing, p. 55-68 Nishiguchi, M and Toshihiro, K 2006, Strategic Industrial Sourcing, New York, Oxford University. Saxena, R 2012, Inventory management: Controlling in a Fluctuating Demand Environment, New Delhi, Global India Publications. Tempelmeier, J and Horst, K 2011, Inventory Management in Supply Networks, Michigan, Norderstedt. Werner, K 2002, Supply Chain Management. New York, Springer. Read More