Lancaster Motor Group
The company Lancaster Motor Group is in the process of experiencing a radical change in its purchasing, inventory and supplies management. This is mainly attributed to the fact that it has a prospect of expanding its production through purchasing a new auto motor supermarket dealer. This new dealership is regarded as one of the most complex and yet rewarding deal. The success of this deal will only depend on the company’s ability to be able to apply principles of operational management and diagonise the operational management problems in the process of adopting this new system. As C.E.O I would recommend that appropriate operational management policies are to be implemented so as to strengthen the weaknesses that are likely to occur in the business entity. Some of these principles might include focus, unified purpose, investing in human resource, maintaining equipment, cutting set up costs, cutting flow time, organizing resources, visibility management, fixing causes of problems, knowing the competition among many other principles.
The report is written and addressed to Galena Markovic, the C.E.O of Lancaster Motor group addressing the differences in the purchasing and inventory management policies and the procedures and weaknesses of the current system and how these weaknesses could affect the new acquisition if not properly dealt with. The report also covers how the supply chain and inventory management concepts can help reduce investment and space requirements while at the same time maintaining the adequate levels of production. The report also offers recommendations with respect to structuring the purchasing and inventory functions for the Lancaster Motor Group dealership network. This report will help to address the issues at question and provide comprehensive solutions to these problems.
The purchasing and inventory management are different between the dealerships in the following ways;
The previous dealerships were involved in the purchase and sell of parts that relate to the make of their cars. For instance the Mitsubishi dealership only focused on purchasing the spare parts that related to the Mitsubishi make the car breaks, clutches, accelerators, carburetors are all from the same make within a particular dealership. But for the new dealership there are different spare parts for different makes of vehicles like Hyundai, Volkswagens and Chery. All these parts were to be found within the new dealership.
There would also be a difference in the way the inventories would be managed. For instance in the old dealerships, the spare parts were to be kept as anticipated inventories. The spare parts previously were to be held in anticipation of the customer demand but with the new dealership the inventories are expected to be kept as a safety inventory. This is because the new dealership can now protect itself against uncertainties in either demand or replenishment time.
With the new dealership, the frequently used parts such as the brakes and other commonly used parts should be used in the stocks. This means that they will be readily available whenever they are needed by the customers as they are the ones that easily wear out. On the other hand the infrequently used parts such as the clutch, side mirrors should be placed on order so as to market them. This is because they are not frequently purchased as they should be.
The major weaknesses within the company include the following:
The tremendous number of different parts that are to be kept at hand. Some of these would be used for servicing while others are sold over the counter. These voluminous number of spare parts can end up being mixed up thus interfering with the inventory records available in the company. These tremendous numbers of spare parts can also be costly as they would occupy a lot of space which might require the hiring of rooms to store these parts.
The amount of space available for storage of spare parts. With the consistent growth of the business entity and the constant resources to drive the company into progress there is a strain in the limited resources available. Such resources includes space and finances. It is thus important for the company to expand its human and non-human resources. This can be through increasing their service delivery so as to acquire more financial resources. This can also be attained through the organizing of resources.
There has also been a continued investment in the training and equipment so as to cope up with the continuous expansion of the company. This can be reduced as its costly in the long run and after all with the multiplicity of the dealers it means that there would be an expansion of resource base and thus each dealer can be able to operate autonomously.
The dealers largely forecast basing on the historical demand. This can sometimes be detrimental depending on the changes in economic situations. Such situations might include inflation, deflation, depression, changes in the exchange rate among other fluctuating factors. It is thus important for the company to forecast their demand based on current and future demands and also individual judgment so as to avoid instances of erroneous forecasting.
In the process of acquisition of the new dealership, the company focused mainly on the purchasing and inventory management policies at the expense of the existing technology. It should be noted however that technology is also key in the evolutionary process of every company and should thus not be wished away otherwise the company faces the risk of being technologically retarded.
There is also the problem of seasonality. For instance during winter there is a consistent breakdown of the batteries and alternators. This would portray a dark picture of the company’s failure to provide high quality batteries and alternators that would be able to withstand the winter season.
The new dealership in the business will also be accompanied with a lot of uncertainties as there is no surety that it would deliver to the customer’s satisfaction.
The purchase of a new dealership would help to reduce or increase on the weaknesses of the firm in the following ways:
With the acquisition of the new dealership the problem that is experienced with the seasonality breakdown of car spare parts like the batteries and alternators during the winter would not be that rampant. This is because the new dealership offers a new and wide range of spare parts which are considered to be of better quality as they are purchased from auto-supermarkets unlike the traditional ones.
On the negative aspect, the acquisition of this new dealership would be accompanied by an increase in the level of investment cost. This means that the company will have to incur more initial costs like establishing new offices for the new dealership.
The problem of spacing for the storage of the spare parts would be felt more. This is because the introduction of this new dealership into the company means that the firm should be ready to provide extra space for the storage of their spare parts and offices to their support staff.
The purchasing and inventory management policies were enhanced with the acquisition of this new dealership. This meant therefore that the procedures of procuring and purchasing of the car spare parts were improved with the acquisition of this new dealership. Thus the company is considered to have become more efficient in its operational management strategies.
The supply and chains management would help to increase investment and reduce space requirements in the following ways:
Through the introduction of a more sophisticated motor dealership the company would enhance their after sale services so as to reduce on the number of spare parts that are stored in their ware house as defaults. This would help save on the space.
Since supply chain management is concerned with the management of interconnected business networks, all the inventories in the motor company would be effectively managed. According to “Cecil c.2003.Introduction to operational and supply chain management.42(6) page 564” This would boost the company’s investment capacity. All the motor dealers would hence maximize on the firm’s goals.
There would be a more integrated operational management, logistics, procurement and information system .This would mean that there would be less administrative costs for the firm as a whole. According to “Margretta. J 2003.The power of virtual integrations”. In an interview she argued that the minimization of costs would go in handy in boosting the investment levels of the company.
With the introduction of the 4th motor dealership, there would be an urgent need to manage the complex and dynamic supply and demand chain within the firm. This can only be attained through the introduction of an effective supplies chain management. This concept in the long run would help to manage the costs that are incurred in the maintenance of Lancaster Company.
In general, the supplies chain management in the firm would be of importance as it would enhance the various aspects of the company such as configuration of distribution networks, distribution of the strategies, trading off in logistical activities, integration of information, Proper inventory management whether they are in the raw materials stage, work in progress stage or in the finished goods stage.This is according to the findings of “Cohen 2007.Saturn's Supply chain Innovation.Review 40.NO 40.Pg 93-101.”
There has to be an overhaul of both the purchasing procedure and inventory management. This is because the company has now become more complex with 4 dealers and thus it would require a more sophisticated management system.
The company should adopt the transportation inventory system. This should be carried out with the sole aim of catering for the limited space. “Lee H. 2007.The Bullship Effect In The Supply Chain. Review 58.Pg 70-77.” With this system in place there would be enough space to store the most vital inventories and transport those spare parts that are considered as less vital. The vital parts might include the car engine while those that are considered to be non-vital are the car mats.
There can be also the need to reduce the anticipatory inventory by shrinking their own lead time and persuading the customers of the spare parts to wait a little bit longer before they get their ordered products.
The company should also consider the just-in-time inventory management system.In this case the dealers are to keep low inventory levels and rely on their supply chains to deliver the car parts that are required to build up vehicles. The car parts should not arrive after or before they are needed but they should be arriving at the time they are actually required to arrive. This would help to reduce on the inventory costs and enhance efficiency within the car dealers and the company as a whole.
There should be introduction of better methods of cutting down on the set-up costs and flow time so as to improve the image of the company. This can be through cutting down on the number of staff members that are working within the dealerships as the new dealership is more sophisticated and has improved inventory system.This would also help improve the firm's performance “Leuscher R. 2013. A Meta analysis Of The Supply Chain Intergration And Firm Performance. Pg 101.
The company should also improve on the inventory management policies and procedures. For the organization to remain competitive, it’s important to check on the supply chains, services and manufacturing sectors. This is because the company is expanding from 3 to 4 dealers and thus proper inventory procedures have to be considered.
The company should be able to understand the needs of its customers. With the increased number of dealers it would be prudent for the Lancaster group of companies to be able to identify the needs of its customers precisely so as to avoid wastage production of goods that might not be useful to the customers. For instance the company should be able to identify the type of services that are mostly required by the customers. EG The most sold spare parts should be given the highest priority in the purchasing procedures.
All the four dealers despite being autonomous should aim at having a unified purpose. This would assist the company in striving towards a common goal which most of the time is to maximize profits. The new dealer should therefore be able to cope with the existing ones despite their differences in their backgrounds.
There should also be a rapid improvement in the policies and procedures of the company. For instance the hassle free procedure should be improved in such a way that the sells personnel that meet the customers are also able to offer other services to the customer such as advertisement, luxurious services among others. This would improve the customer’s relations with the company.
The company can also decide to conduct the offloading services. This is by selling off the unassembled spare part to the customers. With this the company is able to cut down on the holding costs and reduce the problem of space.
In conclusion therefore Lancaster group of companies should be able to embrace both the purchasing procedure and the inventory management policies in its goal of expanding its influence across the metropolitan city. As the new C.E.O I would recommend that the company should acquire the new dealership while weighing on the strengths and the weaknesses of acquiring it. With the new dealership the firm is able to achieve through the process of improving the supplies chain management the following goals: customer’s satisfaction,Decrease in the energy use, Diagnosing problems that might arise, foundation and infrastructural development, Growth of corporations, Boosting the customer service, Right product assortment, Reduction in the use of large fixed assets.
The company should also be in a position to ensure that all the dealers are able to maintain the right quantity of inventories in their stores whether the inventories are cycle stocks, safety stocks, anticipated inventories, hedge inventories, transportation inventories or smoothing inventories.