Case Study - Purchasing Management

3732 Words Mar 3rd, 2013 15 Pages
INTRODUCTION

THE PRIVILEGED FLY
As a Privileged Fly I have been allowed to be on the wall of a corporate boardroom to observe the proceedings during the high-powered discussions. The case study is about a manufacturing and engineering firm that has been doing very well in terms sales but has a serious challenge of escalating freight costs. The case study reveals that the root cause of the problem is insufficient inventories and lack of planning and fragmented purchasing process. The case study will provide a detailed analysis of the basic inventory problems confronting the firm. The case study will also highlight management of forecasting, purchasing, inventories and Production with a view of indicating that the firm’s management in
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As the firm is manufacturing company it is therefore necessary to reflect on reasons for holding inventory. Sufficient inventory ensures that production is continuous and at an economic level, contributing to a lower manufacturing cost per product through efficient use of equipment and labour (Hugo, et al.; 2002). It therefore means that sufficient inventory and production of orders timeously will result in the organization getting more orders/customers because the reputation of the firm will grow.

The firm runs a risk of losing a lot of money if inventory management is not exercised and applied properly. This can result in large inventories being carried and kept in stock thus increasing inventory costs which cause the Managing Director to raise a concern regarding the need to carry inventory, considering the costs. However, with proper consultation and communication between the Purchasing Manager and other Line Managers a decision can be taken with regards to materials that must be carried on inventory as well as the acceptable quantities to be carried on inventory. The aim of inventory is to hold inventories at the lowest possible cost, given the objective to ensure uninterrupted supplies for ongoing operations (Hugo, et al.; 2002). It is clear that consideration must be taken into account when a decision is taken on

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