Strategic Procurement Management

Question 1 (12.5 marks)

Your task is to select a grocery retail operator in Australia and analyse it using the two

questions below:

a. Critically analyse how product characteristics influence logistic and supply chain

costs of any two products from this particular organisation.

b. Determine the optimum approaches for managing inventory of each of the two

products you selected. Students are required to apply at least two inventory

management approaches in their analysis.

Question 2 (12.5 marks)

Firms tend to engage in transactional and relationship purchasing for competitive advantage.

Write an argumentative essay discussing at least four reasons for firms doing this. Next, debate

the importance of early supplier involvement in today’s environment and highlight some

potential problems that could arise with this type of collaboration? Your essay should also

reflect/include issues on innovation, quality standards and specifications?

*You must support or defend all your answers with appropriate examples and evidence.

Question 3 : Case Study – Golden Chain does it Again ! (15 marks)

The Golden Chain Hotel Company is extremely lucky to admit that they have won the Malcolm

Baldrige National Quality Award twice (1992 and 1999). The Golden Chain Hotel is renowned

worldwide and manages high-end boutique hotels. All of their establishments have received 4

and 5 star ratings from the Lonely Traveler Guide and platinum ratings from the Stay Happy

Association. The general belief held by personnel in the hotel industry is that quality can be

hard to quantify. Guests do not purchase a product when they stay at the Golden Chain: They

buy an experience. Thus, creating the right combination of elements to make the experience

stand out is the challenge and goal of every employee, from maintenance to management. The

ultimate goal for customer satisfaction is a defect-free experience for guests and 100%

customer loyalty.

Before applying for the Baldrige Award, company management undertook a rigorous


of its operations in an attempt to measure and quantify quality. Fifteen processes

were studied, including room-service delivery, guest reservation and registration, message

delivery, and breakfast service. This period of self-study included statistical measurement of

process work flows and cycle times for areas ranging from room service delivery times and

reservations to valet parking and housekeeping efficiency. The results were used to develop

performance benchmarks against which future activity could be measured. The hotel employs

this kind of measurement system to chart progress towards elimination of customer problems,

no matter how minor. To meet its goal of total elimination of problems, the Golden Chain has

identified over 500 potential instances for a problem to arise during interactions with guests.

To foster customer loyalty, the hotel has instituted an approach of “Customer Customization”,

which relies on extensive data gathering. Information gathered during various types of

customer contacts, such as responses to service requests by overnight guests or post-event

reviews with meeting planners, are systematically entered into a database, which holds almost

a million files. The database enables hotel staff worldwide to anticipate the needs of returning

guests. The “GC Version 2.0” is the Golden Chain handbook of quality processes and tools, a

nearly constant reference that is distributed to all employees. Any employee can spend up to

$1000 to immediately correct a guest’s problem or handle a complaint. More than 85% of the

company’s 15,000 employees – known as “The Ladies and Gentlemen of the Golden Chain”

are front-line hotel workers. The hotel’s “pride and joy” program gives employees a larger role

in the design of their jobs. Employees are organized into “self-directed” work teams.

Employee teams determine work scheduling, what work needs to be done, and what to do about

quality problems in their own areas. First-year managers and employees receive 250 to 300

hours of training. As a result, the hotel’s employee turnover rate, in an industry in which

employee turnover is a chronic problem, declined annually from 1992 to 1999, and levels of

employee satisfaction are moving upward. The Golden Chain believes that a more educated

and informed employee is in a better position to make decisions in the best interest of the


After reading the hypothetical case study above, answer the following questions in onetwo

paragraphs or depending on the question requirements. Every question will require

some external research.

a) Given the nature of this industry, how would customers typically judge the quality of

a hotel? (3 marks)

b) The Golden Chain has successfully won the MBNQA twice. What measures did it adopt

to achieve success? By applying the lean principles, discuss why might it cost the

Golden Chain less to “do things right” the first time? (6 marks)

c) The Golden Chain was applying the total quality management (TQM) practices, and

was planning to replace it by Six Sigma. Assuming that you are the lead consultant for

this hotel chain, clearly explain three major reasons why you would support this

replacement and initiative for operational excellence and competitiveness. You must

defend your answer with logical examples and support. (6 marks)

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