Laburnum Group: Challenges in Clothing and Energy Business Portfolios
Challenges and issues in strategic management
Laburnum Group a Victorian farmer cooperative venturing since 1920 has flourished in the global market with their diversified company range over the years. One of the prior objectives of this business group entitled to be providing quality returns to the stakeholders by fulfilling their requirements (Gattorna, 2017). Among the various business portfolios, Laburnum group puts on particular interest in clothing and energy business portfolios for their corporate strategic decisions as they formulate the biggest share of business. In the recent times, the company has been facing challenges regarding procurement facility in energy business dimension and supply chain management related issues in their cotton business forum. In the following report, there will be analysis of the various inefficiencies faced by Laburnum Group in this business portfolio of Sapphire energy and AusCotton with some theoretical implications. The report will end on a conclusive not through providing some suitable recommendations regarding the issues faced by the firm to make their business position strong in global environment.
Assessment of issues in energy business of Laburnum Group
Evaluating the effectiveness of current ordering system in energy business
Sapphire energy provides dependable electric provision to the various customers residing in different provinces of Australia and the material which is used for this service provision is 1/0AWG aluminium triplex cable wire for delivering electricity to the meter loop of the house via distribution pole. The Eastern Power store room is procures this cable through a part of contract with the company. The upcoming years of service procuring for extended service network, there will be an increase by 155,000 m where the cost for per metre inventory will entail up to $ 1.35 for each metre. Following this Eastern Power has subjugated for a contract with suppliers for distributing the annual requirement in 12 parts which asserts that the company will adhere one-twelfth of their annual necessity according to a monthly basis. Moreover the agreement between the two also aims for reducing the lead time which may increase by 12 weeks interference due to the nonexistence of the agreement. On the other hand, Sapphire Energy incurs upon a fixed price for procuring cables by Eastern Power. Eastern Power does not provide any discount irrespective of quantity; where as the minimum quantity stands to be 4500m. In case of Sapphire energy, the issue can be identified for absence of a flexible supplier and the implication of the surcharges and devoid of any discounts (Seuring, 2013). They suffer a huge inventory carrying costs as the annual buying constraint for the company stands to be about 90000 m. The effectiveness of the current ordering system of Sapphire energy seems to be system as a supplementary $50 is put on for ordering cost for each shipment. This vehemently affects the financial budget of the company.
Improving the current system
In case of the Sapphire Energy, it can be identified that there are certain issues regarding their inventory management. The sustaining inefficiencies in ordering system by the company can be enhanced through modifying the contract they had with eastern Power. There can be negotiation with the supplier for generating discounts on bulk of order. The Just-in Time Inventory theory exhibits that with the increasing demand of the customers, the production items has to be increased which can procure for less waste (Khoreshok et al., 2016). Moreover the theory also asserts that the company has to negotiate with the supplier in case of arranging their supplying cost for raw materials so that they can expect to meet the demands of the customers effectively and at the same time can also meet their budgetary allowances for procuring raw materials supply. In respect to this theory, the suppliers must increase their production and storage facilities so that they can meet up with customer’s demand consecutively all through the year. Therefore from the case study, it can be anticipated for growing demand of energy consumption in Australian states which must involve them to increase their capacity for storing 155,000 m cables. Moreover the restrictions for fixing amount to quantity also must be abolished so that there can be an enhanced proficiency in Sapphire Energy ordering system.
Assessment of issues in clothing business of Laburnum Group
Global issues for AusCotton relevant to the area of strategic resourcing
Strategic resourcing for a company composes of one of the priori factor to consider for propelling its business growth. The main objective of the strategic resourcing is to decrease the operational charges of a company. AusCotton, being a recognized merchandise company for summer and winter outdoor sports apparel in Australia uses contract manufacturer in developing countries like China, Taiwan, Vietnam and India for making maximum of their product line. From the various researches, it can be identified that developing countries are comprised of political instability which can depress their operational movement regarding range of materials being manufactured within these countries. Moreover, the immense rise of competitive markets will prevail upon attractive profit margins and can stand upon extensive rivalry in terms of their new products being manufactured in these developing countries (Botterud et al., 2013). The demand of the labour market in the global environment along with the relatively cheap resources in these manufacturing countries predicted to be low can affect the business operations with the manufacturers of these countries. On the other hand, it can be identified that cultural differences act as a vehement force for establishing relationship between buyers and suppliers. The manufacturers from these developing countries can also be a victim of this strategic resourcing which can hinder their business relation with AusCotton. Moreover the need of a diverse workforce is an essential element for a supply chain network. Therefore the manufacturing line of AusCotton being shifted to any other geographic location will need more workforces and the current global ambience for labour strength seems to be declining with the advent of implicit machineries. Another important issue which can be incorporated in AusCotton strategic resourcing issue is the quality control (Costantino et al., 2015). It can be asserted that there have been increased in demand of products overtime which can affect the quality of merchandise sold by AusCotton.
Impact of less than perfect demand forecast for AusCotton and volatility in cost of transport services
The demand forecasts apprehended by AusCotton managers are not accurate which represent for frequent out of stock scenario for the company and incurs over a challenging situation for the AusCotton. This vehemently affects the advantage which the company as its brand image in the global podium because of their disparity in their supply chain of outdoor sportswear products. As it can be apprehended that poor inventory is deciphered for raising the inventory cost of the company along with inefficient transportation service provided for shipping of products to various countries (Robinson et al., 2014). Moreover the instability in the costs of transportation makes the pricing of goods for AusCotton to be capricious for determining the pricing of goods. The customers are affected by this procurement as they are faced with delayed delivery of their products with such instability in their transportation costs and disparity of their supply-demand entity.
For mitigating these problems, the prior most things which can be anticipated are making a cooperation with the staffs from sales division which can improve their forecasting demand. The company has to ensure that they accounts for marketing and advertisement activities so that they can predict the demand of their stocks in acceptance to the market scenario. The supply chain management is another fortay which has to be focussed by the company so that they can meet up with impulsive demand reallocation (Childs, 2017). The transportation costs can be leveraged through outsourcing for improving their efficiency. It can be abbreviated that the transportation costs for AusCotton has risen over the years and therefore they must opt for more reluctant outsourced transportation services so that they can meet with demands of the customers and at the same time make their brand image strong.
Elements of strategic resourcing for improvement of AusCotton
Strategic resourcing is one of the main priorities which every company for their allocation of resources and distributing them according to the demands of the customers. For AusCotton they have going through incompetence in their strategic sourcing which can be improved through improvising the performance of the suppliers, process of acquisition and cost-cutting phenomenon. The company must choose for a right and efficient raw material supplier with proper negotiation of the contract made between them. The performance of the suppliers should be monitored on a regular basis for abolishing the suppliers who are keeping up their promises according to the supply of raw materials and for which they are failing in their demand-market competition. Another important resource for strategic sourcing can be identified as the quality indicators of the suppliers which must be assessed thoroughly for performing better within the industry (Schneider, & Spieth, 2013). The transportation system belongs to be the heart of any supply chain management system. The increased cost of transportation by AusCotton enacts for a fresh transportation vendor to be approached so that they can minimize their transportation costs burden affecting their profit margin in supply chain network. There also should be incorporated proper culture-building and transformation system with the suppliers and manufacturers with developing countries they have been depending so that they can entrench more labour forces into the sector. A risk management plan also should be incorporated within the strategic resources of the company so that they can identify their strengths and evaluate risks through taking appropriate measures for improving their operational movements in global competitive environment.
Respond to the prediction about illegal merchandise by contract manufacturers of AusCotton
There is a necessity for a legal enquiry to be incurred upon in order to establish the claims concerning the counterfeit clothes which are manufactured by the contract manufacturers of AusCotton. In case of the claims being proved, the company is liable to put an end its association with the alleged contract manufacturers because of their falling of brand image due to representing of fake manufactured products in their brand’s name. The fake products can vehemently affect the company’s reputation and the company can lose their credibility to the following manufacturers. It can be apprehended company’s in today’s domain depended over extensive outsourcing can respectively create a chance of counterfeit products which can deteriorate their market position and share in business clothing market. The presenting of counterfeit products can also be depicted as a violation of IPR or intellectual property rights of the company which is not only deceiving the customers with fake products, but also making it difficult for the customers who intend to buy original products are cheated with counterfeit products (Hadfield, & Bozovic, I2016). Moreover the AusCotton can also take up legal actions against the manufacturer producing counterfeit products and incorporate officials to verify products coming from the manufacturers. The imposition of trademarks and patents are an important phase to be incorporated within the products of the company like AusCotton so that they can fight against such illegal merchandise manufacturing.
Conclusion and Recommendation
Therefore from the case study of Laburnum Group, it can be identified that the company has been facing some vehement challenges in their two most prioritized strategic areas of business like energy and clothing business. The challenges which seem to be engulfing these two business areas are mainly regarding their procurement and supply chain management. The inefficiencies which have been identified in the company’s supply chain network can be regarded as a consecutive factor for hampering their reputation and meeting up the demands of the customers. As it can be enforced that supply chain network is the backbone of any business, therefore it is necessary to make a choice of suppliers for the company amidst such turmoil which they have been facing (Wanjiru, 2013). There also must be proper communication of their performance metrics to the suppliers regarding price of material in case of Sapphire energy business and quality standards along with timely delivery must be attained from the suppliers. It is also important to come into terms with suppliers before arranging for a contract like the after-sales services, terms of payment, overhead expenses, transportation costs through shipments etc. on other hand, the company for their AusCotton business operation has to keep an updated standard in demand forecasts so that they can improve their ROI.