Question
You have just been hired as a Purchasing consultant at Stellar Freight Forwarding & Logistics and they have 20 branch offices across Canada (at least
You have just been hired as a Purchasing consultant at Stellar Freight Forwarding & Logistics and they have 20 branch offices across Canada (at least 1 Branch office in each major province, 2 in major cities).
Stellar Freight Forwarding & Logistics is growing at plus 20% a year based on their superior customer service financial solutions especially when the inevitable goes off plan.
The Head office is in Toronto and each field office has a Branch Manager with total responsibility for their Branch Profit and Loss. Their targets are aggressive and with focus on revenue achievement.
All branches have been meeting or exceeding budget on an annual basis.
Costs have also been rising at the same rate which is not a good sign.
As business volumes increase corresponding savings are not being achieved. There is a general sense..."if we need it we just go and buy it" ......
There is both maverick and rogue buying taking place with a general a lack of focus on the total cost of ownership (TCO).
Stellar Freight Forwarding & Logistics operates a central vendor or supplier management department but the purchasing function is not centralized.
As a consultant you have been given a full budget for travel and expenses with a 3 months' timeframe to develop the future Purchasing plan. The CEO is open to potentially centralize all 20 Branch purchasing activities into head office for all Purchasing across Canada.
Any future recommendations must also allow the 20 Branch offices to not be hampered by a new process which may distract from their goals in achieving their revenue-profit targets.
Accounting (centralized at Head Office) has advised that 80% of the invoices being paid are all with similar vendors and in many cases the same products and services are being purchased across all 20 Branches.
At least 10 branches all have warehouses, albeit different sizes, with similar material handling equipment. The remaining 10 have shared warehouses given their close proximity to each in being in large cities.
Accounting advise they have 10 Branches that are excellent "accounting role models" and 5 "disaster" Branches from an accounting perspective. Accounting advise the balance have assorted clear opportunities to improve.
Accounting is amazed they are all doing well in achieving profit targets and feel this has a lot to do with the solid economy vs. cost control.
You have a full travel budget with per diem expenses and you have 3 months to complete your future state recommendations:
- Outline your steps to learn about the current state or "as is" of the Purchasing process across the 20 Branches?
- Who would you meet and consult with to understand the current savings potential and build a future budget target?
- The CEO has confirmed you have access to the entire company staff as a resource.
If you decide to take a team approach who would make up your team?
Explain the value would you expect from various team members?
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