Assignment #2 - Case

It is Thursday, November 3 and Sammantha Kelly was preparing for her presentation to the Board of Directors, which was scheduled for the following Tuesday.Sammantha was hired a month earlier as the Director of Purchasing for Maison Du Vin, a high-end store based in Montreal, Quebec. The company's president, Brantly Jennings, said that Sammantha was to prepare the major steps in detail that she intended to take with her new position.

Company Background

Founded in 2005 in Quebec City, Maison Du Vin became one of Canada's elite wine stores.The company operates 10 stores in 10 Canadian cities, selling wine from all over the world.

The peak sales periods are July and August, and October to December. All year round, the Maison Du Vin used marketing campaigns to promote the various types of wines.

Maison Du Vin's Buyers, located at their main store in Quebec City, issue approximately 15,000 orders a year and in most cases, are issued several months in advance.Only about 750 suppliers are used in a typical year out of their 1,500 total suppliers. Similarly, the company had approximately 2,500 stock keeping units (SKUs), but only about 50 per cent were active at any given time. In addition, some of the wine categories remained fairly stable. Changing wine trends meant introducing new wines which accounted for approximately 15-25 per cent of the SKUs ordered each year.

Maison Du Vin Purchasing Function

The buyers for Maison Du Vin placed orders with suppliers, issuing between 1,250 and 2,000 orders each month. All of the wine is shipped to the primary distribution centre (DC) located in Toronto, Ontario. Suppliers are responsible for making the shipping arrangements, and prices are free on board (FOB) the DC. The wine is then shipped to the stores.

There is a supplier evaluation process put in place, but not really used. As long as the supplier producing the type of wine that the company thinks their customer would like, they sign with them.The company is understaffed, so there is not enough time to evaluate, select, and continuously monitor their suppliers.

Current Situation

Sammantha was hired by Maison Du Vin to replace the retired Director of Purchasing.She has more than 15 years of experience in Europe and the United States and reported to the Director of Finance.Her predecessor as agreed to stay for two weeks after her arrival as part of the transition process.

Sammantha's first week was spent just observing the purchasing function of Maison Du Vin. She realized that the staff spent a great deal of time preparing the purchase orders, tracking down late deliveries, and quality management. This can be very time consuming because they have global suppliers and they are dealing with cultural and language challenges, along with time differences.

The staff spent a lot of time on the phone just confirming and adjusting the previous orders with the suppliers. The stores were always calling and looking for their inventory and the staff was constantly following up on the delivery status with both the suppliers and transportation service providers. In addition, three of the suppliers were having quality control issues. There was no time to spend building those important relationships with the suppliers or even evaluating the performance of their suppliers.

Preparing for the Board Meeting

Sammantha was hired based on the expectation that she would bring a fresh perspective to the Maison Du Vin purchasing group. For her meeting, Sammantha is expected to outline her detailed plan, including financial justification for any capital expenditures that she recommends. She really wants to concentrate on utilizing supplier evaluation process for every supplier, strengthening supplier relationships, and improving supplier quality.

From the feedback provided by the store managers, Sammantha was aware that there were concerns about the level of stockouts caused by the DC. This problem is occurring because the flow within the DC isn't quick enough from the DC to the stores. Sammantha knew that she would be questioned about how she planned to reduce the levels of stockouts.

Questions

1. What initially appears to be the problem? What really is the problem(s) in this case?

1. How important is maintaining a great supplier relationship for Maison Du Vin?Would this help to solve their current issues with their suppliers?

1. Explain the role of performance measurement in managing supply chain activities.

1. What can be done to improve the late deliveries and the quality issues with their suppliers?

1. Why do you feel that the evaluation and selection process for the company is not being used? What do you suggest can be done to make sure that the process is followed?