...United States exceeding $2.3 billion in revenues annually. It is also the employer of more than 2,500 employees. Iowa Elevators has recently experienced declining revenues over the past year as a primary result of drought conditions. Needless to say, the drought had a huge impact on crop production, hence setting in motion a need for change. Scott McBride, director of purchasing at Iowa Elevators, has been tasked with developing a plan to regain control of purchases made throughout the company in order to increase revenues and cut back on costs. With this in mind, Scott’s task was to develop and present a five year plan for the purchasing department. This plan would identify major issues in purchasing company wide, identify areas where cost could be cut. This would include reducing headcount, overhead expenses, and capital expenditure budgets. In Scott’s plan he would identify annual targets for achieving the reductions. Working with a team of acquisition specialists, sales representatives, and administrative offices, Scott began to work on a plan for cost reductions. Cathy, Scotts’ right hand purchasing analyst, began analyzing corporate spend which averaged $728 million with 20 of the 1,500 suppliers accounting for 45% of total spend and the top five represented 35%. This led to the perception of many things, including the ability to begin making cuts in supplier relations. Cathy designed a table which identified total purchases by category with farm supplies leading...
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...Southeastern University Situation: * Southeastern University was one of the largest universities in the state. * Total enrollment of more than 25000 students and approximately 3500 staff. * Had 12 faculties at the university, over 20 continuing education diploma and certificate programs and 3 affiliated colleges. * Its purchasing department was centralized and it has a detailed policy. * Purchasing director Blake Hyatt, reported to the university’s VP of administration. * Maintained a list of approximately 1200 approved suppliers, adjusted every 3-5 years. * Follows a weighted average vendor selection system * Volume of purchases amounted to $75 M for goods and services each year. * The office of registrar handled about 160000 pieces of mails a year. * 50 to 60 employees(full time and temporary) were occupied in manually stuffing envelopes two days a month. * Walter Charbonneau, Manager of university registrar’s office bought the automatic folding machine; at cost -$14000 and supplier-not in the approved supplier list. * Heather Sloman, buyer in the purchasing department received quotes from 3 of her suppliers for a similar machine * .Q1- 10000,Q2- 11000 and Q3- 15000 +free 1 year service. Tasks: * What does Heather do? * Investigate unauthorized purchase * Talk with Walter about following university policy * Check with other suppliers on stock availability/lead...
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...------------------------------------------------- Situation: * Heather Sloman, buyer in the purchasing department of SU * Reports Glen Meredith * Walter Charbonneau, manager of the registrar’s office * Bought folding machine without following standard university * The supplier was not on approved supplier list * Against the policy of soliciting at least two written quotations for purchases in excess of $7500 * Approved supplier quotes $10000 for similar equipment * Current situation * Purchasing in SU was centralized and managed by purchasing department * It is university policy that approval from the purchasing department was required before commitment could be made to supplier * At least two written quotation for purchases in excess of $7500 * Heather collected bids from the suppliers on list: $10000, $11000 and $15000(one year of free service) BASIC ISSUES 1. Purchase for university 2. Purchasing policies 3. Supplier policies 4. The price, quality, service trade-off. Tasks: * What does Heather do with the machine in the registrar’s office? * Keep the machine and pay the supplier * What are alternatives? Need to weigh alternatives. * is there a penalty on cancellation * Will the supplier offer a lower price? * Complete cost-benefit analysis; does the cancellation penalty more than the money we can save by purchasing from approved suppliers? * Are the machine really needed...
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...savings can occur: Year 1: $0, Year2: $3mi, Year3:$6mi, Year4:$ 18mi and Year 5: $33million. 3. What are the inventory turns for farm supplies? What kind of improvements can be made in inventory management and how? The inventory turn for farm supplies are crop protection: 1.9, equipment and supplies: 0.60, fertilizer: 6.2 and seed: 4.2. Many improvements such as adding hybrid centralized- decentralized method to their supply management, hire specialists to only focus on managing supply and inventory rather than give managers too much power and overwhelm them and lastly increase inventory turnover especially on equipment and supplies since its very low but also targeting all farm supplies. Maybe the company can also increase supplier relationship and buy local. 4. Why hasn’t Scott McBride proposed a cost reduction plan in the past? Mr.McBride, the director of purchasing, has not proposed a cost reduction in the past because he was working with a small limited group of team that focused mainly on office supplies, brochures, advertising and other purchases. Iowa Elevators also did not view the purchasing department as a primary importance until new executives stepped in and realized that one can save a lot more by cutting costs in the inventory level (supply management) rather than...
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...Heather Sloman, buyer in the purchasing department of southeastern University, was preparing for a meeting with her boss, Glen Meredith, for later that day. Two days earlier, on April 6th, Glen had received a phone call from Walter Charbonneau, manager of the university registrar’s office. Heather was surprised to learn from Glen that Walter had just bought a new piece of equipment for his department without following standard university purchasing policies. Glen asked Heather to look into the situation and get back to him with recommendation. Purchasing Department Southeastern University was one of the largest universities in the state, with total enrolment of more than 25,000 graduate and undergraduate students and approximately 3,500 staff. There were 12 faculties at the university, over 20 continuing education diploma and certificate programs and three affiliated colleges. Purchasing was centralized, and the purchasing director, Blake Hyatt, reported to the university’s vice president of administration. The purchasing department was responsible for negotiating with suppliers, signing contracts with suppliers, and supervising the execution of contracts. Small-value purchases those less than $100 could be handled out of petty cash. The purchase department had also recently introduced a purchasing card, which could be used to acquire legible goods and services with a value of less than $1000. The purchasing process began when a purchase request...
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...Service Purchasing at the Sunny Hotel Jen Daniely MGT608 Summary A well known Hotel and Spa Resort in Turkey started off as a family owned business and has expanded 200% during a six year period. Previously the purchasing department only handled the purchasing of the supply of goods. The responsibilities of purchasing services were handled by the related department directly receiving the services. The owners decided to bring in a Purchasing Manager, Murat Var, to take over all the purchasing of services for the entire Hotel therefore centralizing responsibilities and building strong customer-supplier relations and improved levels of customer service. The department managers believe this new consolidated purchasing organization is logical and advantageous, however they do have a few complaints which include purchasing personnel not engaging department heads in the source selection process which has sometimes lead to wrong or bad selections. Discussion Questions 1. What makes the procurement of services different from that of the purchase of goods and materials? In the case of the Sunny Hotel/Spa & Wellness Resort, strategic procurement of services is crucial for the company’s success. The services flow is treated as a focal point that should be properly managed by outsourcing to service companies, whereas the flow of goods and materials supports service management. Therefore the procurement team for services at the Sunny Hotel are focused on securing service...
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...SCM880TT-International Purchasing and Supply Management Analysis of Southeastern University case study This case involves the purchase of a folding machine by the purchasing department of Southeastern University. The school’s laid down procedures, one of which is buying from an approved supplier amongst other things was not followed and now Heather, the buyer has a meeting with Glen her boss to explain ways to avoid problems of this kind in the future. The appropriate course of action would be for Heather to tell Glen, that she would meet with the staff involved with purchasing in general to remind them of and sensitize them to the importance of adhering to the university’s purchasing practices at all times so the integrity of the centralized purchasing system in place is not jeopardized or undermined. It also helps to save costs. Besides, transparency is also of utmost importance because it is a public institution that is funded by taxpayers. Also the processes involved with future purchases should be audited and vetted by a senior member of staff before the order is paced. In regards to the folding machine already bought, the best thing would be to go back to the supplier and negotiate a better deal comparable to the quotes she received from other suppliers. If that doesn’t work, a cancellation penalty might be another option so long as the final costs do not exceed the other quotes. So a cost-benefit analysis of the situation would be necessary. They may return...
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...Questions | 1. |Which one of the following is not a type of organizational data that is utilized in the procurement process? | | | | | |Client | | |Company Code | | |Storage Location | | |Purchasing Organization | | |Manufacturing Plant | | | | | |Answer: e Difficulty: Easy Page Reference: 2 | | |Section: Organizational Data Practice: | | 2. |What is a storage location? ...
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...Case 1-3: Southeastern University Situation: * Heather Sloman is a buyer in the purchasing department for Southeastern University * Walter bought a $14,000 piece of equipment without following standard university purchasing policies * Purchasing is centralized and responsible for negotiating with suppliers, signing contracts with suppliers, and supervising the execution of contracts * Supplier is not on the approved supplier list and quotes from three approved suppliers are less than the one Walter chose or involve better service * $75 million spend Basic Issues 1. Acceptable suppliers 2. Price, quality, service 3. Budgeting 4. Authority for internal users/following purchasing policies 5. Purchasing for a public institution/service organization Tasks: * Define alternatives * Keep the machine and pay for the supplier. * Return the equipment and negotiate the cancellation penalty * Go back to the supplier and use the quotations to negotiate a lower price * Improve the purchasing process to avoid unauthorized purchases * Obtain information from unapproved supplier via RFQ Actions: * Evaluate unapproved supplier with RFQ * Accept the supplier * Acquire purchase information * Decide whether to add supplier to list of approved suppliers * Reject the supplier * Return the equipment * Negotiate the cancellation penalty. * Consider quotes...
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...Melissa Chicola Service Purchasing at the Sunny Hotel 11 October 2015 1. Procurement of Services may be uncertain at times. For example, when purchasing a good, a company will choose a supplier, ensure the good is what they need, and receive the good. With procurement of services, the stages may not be similar. When Sunny Hotel has an outside cleaning service, the hotel can only judge the service after it has been completed. 2. Sunny Hotel currently purchases and contracts its security, cleaning, animation, insurance, software support, staff training, and food storage and delivery services. The company could include a program for the satisfaction of customers as well as include risk management services. 3. I do believe centralized purchasing is a logical way to increase purchasing efficiencies. It works with other departments and suppliers to combine orders for products, so the companies can get the product for cheap. It also keeps the organization’s spending in one location that can be easily checked. Although it is good for the company, I do not think it is an advantage to have the purchasing department manage service purchases. It may slow down the process and prevent employees from receiving those goods on time. Departments, like employees, may be at a standstill because they do not have the goods to make the products. 4. I think some additional criteria could be support services as well as quality level. If you supply a service, you should be...
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...NT1210: INTRO TO NETWORKING WEEK 5 ESSAY Microsoft and VMware Comparison Tyler Reed In today’s world of cloud storage, cloud computing, and virtualization; I think it is important to understand what virtualization is before comparing the different options. Virtualization first started in the 1960’s as a way to logically divide the system resources provided by mainframe computers between different applications. It is very important to remember that computer strength and hardware performance wasn’t as strong or efficient when this method was introduced. While today’s smartphones are inherently stronger than the best computer during that time, the base problem still exists. Mainly because of the amount of resources needed to run multiple applications, allow server access to potentially thousands of computers and devices accessing the same computer or hardware. Since the concept’s inception the meaning has broadened into hardware virtualization, mobile virtualization, and desktop virtualization. Virtualization has helped organizations reduce cost and increase efficiency in the data center. New virtualization products allow for different benefits and challenges and must be carefully considered for businesses to realize the long term benefits, such as increasing user productivity and decreasing IT costs. Microsoft has the largest range of desktop virtualization and management products that can be integrated into a flexible solution for many different scenarios. Microsoft...
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...Introduction: Chapter 4 case 4-1: Qmont Mining: Alice Winter’s manager gave her a project which requires her to determine how the supply systems for remote locations can be improved. Qmont has 17 remote locations. Each have their own drilling crew with a geologist or engineer that is in charge. Alice contacted the accounting department to find out how the invoices for the remote locations were paid. She found out that the accounting department paid all invoices that were submitted even if they did not have confirmation that the order was received. They do this because they demand a quick turnaround from suppliers and want to extend goodwill confidence with them. The communication between sites and their suppliers was usually done one of two ways either the site leader placed the order with head office personnel in exploration or engineering or the site leader will order directly from the supplier. If the site needs a part right away they will order from multiple suppliers hoping that they will get the part quickly to get back to work. Alice discovered that there were multiple times that the bill for airfreight was higher than the price of the item or there were multiple purchases of the same item delivered within days of each other. Question 1. Did it make sense to start the project by looking at supplier invoices? It does make sense for Alice to start her project with looking at the supplier invoices. Her goal is to find a way to improve the supply system for remote locations...
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...Supply-based Reduction On May, 18, 2004, Robert Ryan met with John Lucas , purchasing director of Transport Corporation at Transport’s corporate headquarters in Phoenix, Arizona. “ Your new assignment, as part of your recent transfer to the strategic sourcing manger position, is to make recommendations on how best to utilize information technology in our chassis and body parts supply-base reduction efforts. I expect your recommendations in 2 months,” john said. Company Background: Transport company operates a fleet of nearly 30,000 trucks, one of the largest fleets in North America. The company provides transportation services to more than 25 million residential, municipal, and industrial customers across North America. With more than 1200 operating and maintenance locations, Transport faces some unique challenges when it comes to replacement parts of its vehicles. In the past, these 1200 locations have dealt with thousands of different parts suppliers across the country using separate legacy systems. Transport is currently in the process of moving forward centralized strategy development and price negotiation, but will still have decentralized order execution. On the corporate level, Transport now has 10 strategic sourcing teams working closely with employees throughout the company to define needs, find the best suppliers, and develop systems for streamlined purchasing. One of the key points of Transport’s overall business strategy involves implementing a procurement process...
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...In this case the executives are looking for a five year purchasing plan aimed at making the company more financially profitable. The expectation is for purchasing to have a significant plan to deliver ways to save cost. This is where the greatest amount of the companies expenses come from. It is being asked to deliver how this goal can be met and what ideas are on the table to be visited for a successful cost saving plan. The executives are also asking another department to present the same five year plan. They have made it very clear that if major changes need to be made they aren’t afraid to do so. Iowa Elevators is a large operating company with huge financial success and annual revenue. With that in mind this company has the ability to implement several different kinds of organizational structures and departments. The best approach to starting the idea of cutting expenses and increasing revenue would be to become more centralized than in the past, but not 100% centralized at this point. This new structure would create two to three new divisions under Scott; a farm supplies purchasing department which would include a salaried manager, or a manager and two supervisors, an analyst, three buyers, an expediting clerk that cross trains as an invoice clerk or an invoice clerk. The larger farm supplies purchasing department would fully handle the purchasing of farm supplies. Taking the power away from the local managers and the product managers would give them the ability to...
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...successful worldwide corporation provides engineering and technical support services to reduce the cost and improve the reliability of the U.S. Department of Defense systems and equipment. DCI currently uses its employees to execute its largely manual and paper intensive purchasing process, contributing to a purchasing pain as well as the loss of valuable resources. Key Issues DCI identified amongst its four subsidiaries that the same supplier was often listed in two or more of their purchasing databases with different prices as well as different suppliers providing the same product, little or no visibility to buyer activity, little ability to tract requisitions or purchase orders, this being just the few of the many purchasing pains DCI currently encounters. In order for DCI to exceed and maintain its mission of “reduce cost”, “improve reliability”; DCI will need to implement strategic sourcing strategies as well as establishing a Hybrid purchasing organization. Strategic Sourcing Strategies To improve the purchasing process at DCI an Internet-based electronic purchasing system will need to be installed. The primary benefit of e-procurement include significant cost savings and the freeing up of time for purchasing staff to concentrate on more of the firms core business activities. An e-procurement system is more efficient when selecting and maintaining a list of potential suppliers, processing requests for quotation and purchase orders. Duplicate data entry on the purchase...
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