Business report Purchasing and Inventory at Ace Outdoor Power Centre Ace Outdoor Power Centre
The primary purpose of this assessment task is to help students develop skills in the use of OM principles, theories and models in the analysis of the current operations of a service industry organisation. The assignment requires you to analyse the current situation, identify the operational problems within the organisation, and develop a set of recommendations that, when implemented, will overcome the identified problems without creating new ones. In this assessment piece you are expected to provide a solution, recommendations and action plan. The secondary purpose of this assignment is to give students the opportunity to further develop analysis and problem identification and problem solving skills, as well as skills in presenting an argument for change within the framework of a business report. Description Assessment task 2 requires the writing of a professional business report. The report should critically review the current situation, identify and analyse any problems that are in evidence, and demonstrate how those problems should be addressed. As a business report it should be concise, accurate and actionable. At the same time, the report should be founded on appropriate Operations Management principles and theories, and be supported by appropriate evidence and discussion from relevant academic literature. Details The assessment item is based on the case study titled Purchasing and Inventory at Ace Outdoor Power Centre. You should read, and carefully analyse, the case and respond to the issues presented at the end of the case study within the context of a short business report. The objective of the case study is to provide an operations management situation that can be studied and analysed. You will need to put yourself in the role of a management professional who is asked to identify the nature of the problem(s), why or how the problem(s) happened or evolved, and make recommendations that will resolve the situation. MGMT19126 2 Term 1, 2016 Case study: Purchasing and Inventory at Ace Outdoor Power Centre Ace Outdoor Power Centre operates from three retail locations across the Queensland city of Brisbane. The three centres are similar, but do offer different product mixes designed to meet local demand. For instance, the outer suburban centre in Ipswich has a much larger range of ride-on mowers and other garden equipment more suited to larger properties such as residential acreages and small hobby farms. Phil Mathers, owner of Ace Outdoor, had opened his first outlet in Mt Gravatt in 1985, and purchased the Strathpine centre as a going concern in 2001. This acquisition was quickly followed with the purchase of the Ipswich store in 2004. The Ipswich store was also purchased as a going concern. As both of these new branches functioned well, and were staffed by experienced people, Phil never saw any reason to interfere in their operations. Rarely did anything go seriously wrong, so Phil allowed the three centres to operate basically as independent businesses. He managed Mt Gravatt, John Smith managed Strathpine, and Warwick Sloane looked after Ipswich. So whilst Mathers was nominally CEO of the whole group, most of his time was devoted to looking after his own branch. John Smith had worked at Ace Outdoor for about ten years, the last few, as the Branch Manager of the north-side centre in Strathpine. When Phil and Mary Mathers, the owners of Ace, decided to retire, John jumped at the chance to buy the business. He incorporated PowerPlus Pty Ltd for the sole purpose of purchasing the business from the Mathers. John had watched the business grow during his time at Strathpine, and was confident that this growth would continue into the future. Ace Outdoor had evolved from a basic retail lawnmower business in the 1980’s to a thriving group of three retail outlets that supplied almost every garden power tool imaginable. Not only was the range wide, but with a variety of brands, it was also deep. Many of Ace Outdoor customers were in fact, commercial operators. People who relied on their tools for a living found that reliability, performance, after sales service and readily obtainable supplies and spare parts were essential components of their supply chain. Retail customers were also attracted to Ace Outdoor because the firm has a strong reputation for knowledgeable staff, high quality merchandise, and excellent after sales service. It was not unusual for customers to drop in for advice, even if they were not looking to buy at that time. Staff knew that when it came time to purchase, Ace would be at the top of the list. In fact, their reputation was so strong, customers were happy to pay a premium over the big box stores in town. Customers could certainly buy cheaper elsewhere, but when quality, assistance or advice was needed, Ace Outdoor was indeed, ace in the industry. It felt a little strange to Smith as he strode into his new office in the Mt Gravatt store. This had been Phil Mathers’ office up until yesterday, and the ghosts of the firm’s founder were palpable. As he looked around, Smith felt like he was almost intruding on Phil’s space. Shaking his head, Smith strode out onto the showroom floor. Smiles greeted him as he walked around the facility. He had always been a popular manager, and people were excited about the opportunities the change of ownership might bring. As he wandered around he stopped and talked to everyone. As an experienced manager, Smith firmly believed in the benefits of ‘management by walking around’, and saw no reason to stop now. Once he finished his tour of the centre he headed out to the Ipswich store and repeated the process. Smith was very familiar with how his Strathpine branch operated, but he was interested to see how the other two locations got things done. The firm had traditionally run as a fairly loose, decentralised organisation based on common-sense, goodwill and mutual cooperation. Phil Mathers had not been one for tightly defined policies and procedures, trusting in his branch managers to put the interests of the firm first. Whilst Smith had thrived in this environment, he had seen a number of issues that were problematic, and could see quite a few areas where improvements could be made. He had run a tight operation at Strathpine, but he knew Phil was fairly relaxed in the operation of the Mt Gravatt store, and he was not really sure at all about how things were going out at Ipswich. It had been a week since Smith had toured the three centres. It had been a week of consultation, thinking and introspection. It was obvious that the three sites acted almost as separate businesses, even though there was a lot of cooperation between them. One area that seemed to be in need of some attention was MGMT19126 3 Term 1, 2016 the whole process of purchasing and inventory management. As a retail establishment, Ace Outdoor required a heavy investment in stock, and an effective means of managing that investment. Mathers’ laissez-faire approach to the business had resulted in some rather odd purchasing and inventory management practices. Each store operated autonomously, and whilst various stock items were transported between stores when shortages occurred, there was no integrated approach. Even major product brands differed from store to store. Each of the three inventory managers did their own sourcing and purchasing, and had their own way of managing inventory. This situation had led to three completely different and unconnected purchasing and inventory management systems. Smith was not altogether convinced that the current approach was effective or sustainable. A rough Pareto analysis suggested that rationalisation of procurement and inventory management processes would reap substantial and immediate financial and operational gains. Task As the Purchasing and Inventory Manager at Ace Outdoor’s Strathpine branch, you have been asked by the new CEO to prepare a report that addresses the following questions: 1. What are the current purchasing and inventory management processes being used by the company? 2. What are the comparative advantages and disadvantages of the currently used processes? 3. What supply-chain and inventory management concepts would help the company increase efficiency and reduce investment whilst maintaining adequate stock levels? 4. What recommendations would you make to John Smith with respect to restructuring the purchasing and inventory functions of the company? (Please include a brief action plan showing how the recommendations, if approved, will be implemented.) The report should be a confidential report for the CEO, and be presented as a suitably professional document. It is expected that your discussion will refer to appropriate models and theories covered in this course, but your research should extend the theoretical discussion beyond the course material. The assessment criteria should give you a clear indication of what you need to include in this assignment. The report should include an effective introduction and conclusion; an executive summary of no more than one page to preface the report; and a table of contents to give guidance to the reader. This assessment item involves researching your assigned topic to enhance your understanding of Production and Operations Management concepts and utilisation of academic literature. If you are not familiar with the industry in question, some field and/or desk research would be advisable. Whilst you should AVOID using only textbooks, the prescribed textbook for the course must be cited in regard to broad operations management principles highlighted by the case. You are expected to present information and evidence from, and cite, at LEAST eight (8) relevant peer-reviewed, academic journal articles (minimum requirement). Refer to your recommended readings for examples of academic journals. While you can cite these articles, you must find at least eight (8) peer reviewed journal articles not listed in the course materials. The quality and number of citations will demonstrate the breadth and depth of the literature used to formulate your argument. Your marker is interested in the analysis that you have developed from YOUR review of the literature and how well you use the literature to respond to the topic. AVOID presenting a descriptive account ONLY of your readings. What is required in this assessment is a critical evaluation of the evidence in the case and the academic literature as it relates to the specific details of the case study. Your marker is interested in the conclusions that YOU arrive at from YOUR evaluation of the literature and of the case study.