Chapter 3 Supply Organisation PDF

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Case study report
Covers - relevance to the chapter presented;
applications of the key concepts in the case; and
further extensions and critical thinking.
Within 1,500 words, excluding references and appendices.
Use Harvard referencing style.
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Chapter 3 Supply Organisation Case 3-1 - Iowa Elevators Iowa Elevators is one of the largest grain handling companies in the USA, employing over 2,500 people. The company is split into two units – the grain handling and marketing division and the farm supplies division. The revenue from the farm supplies division doubled in the last 5 years as they found more opportunities within the industry to sell supplies. However, a decrease in revenue has been generated from the grain handling and marketing division which has led to the company seeing a gradual decline in profitability over the past 3 years. Over the past year, Iowa Elevators were in a loss of $11 million. Action was taken to make changes within the executive team and a new President and CEO joined the company. The new CEO, Walter Lettridge, asked Scott McBride, director of purchasing, to design an action plan for the purchasing department to identify how the business can improve its overall performance. This report will analyse the current Iowa Elevatorss’ purchasing department and will identify possible changes that could be made. Supply businesses must be staffed with professionals, who have clear responsibilities so that they can contribute effectively to the organisation’s overall goals and objectives. Specialization within supply departments allows staff to gain expertise within a particular area. Most supply organisations consist of four general areas of specialisation: sourcing and commodity management, materials management, administration and, supply research (Johnson & Flynn, 2021). Within the case, it is not clear that Iowa Elevator’s purchasing department is split into these four areas of specialisation. Organisations that have clear departments can operate more effectively. If Iowa Elevator had a specific supply research department, they would be able to spend time benchmarking competitors to find out how they can make the business more profitable. Scott was asked to produce a five-year plan by the CEO however he was only given eight days to prepare and felt this was not an appropriate length of time. He had lots of data to collect and found it overwhelming. He stated that if he was given more time, he would have been able to gather more data. Supply organisational design includes the role of the chief purchasing officer (CPO), which is arguably one of the highest levels of the purchasing management function (Zsidisin, et al., 2003). The CPOs responsibilities can be divided among managers and departments, but the functional responsibility of the CPO needs to be recognised to avoid

confusion. Most top-level CPO’s report directly to the CEO within the organisation. Although this is not essential as it can be more beneficial to report to one of the other top-level managers as they can have more time available to deal with supply chain issues. Supply should report to a high enough level within the organisation so that the key supply aspects of the strategic managerial decisions will receive proper attention. The main factors which influence the level at which the supply function is placed in the organisational structure are; the nature of the products or services acquired, the extent to which the supply and suppliers can provide competitive advantage and, the number of purchased materials and outside services costs as a percentage of either total costs or total income. A high ratio emphasises the importance of the effective performance of the supply function. It may have been more beneficial if Scott reported to one of the other top-level managers as they can have more time available to deal with supply chain issues. This is because they have more time and interest in the supply chain issues facing the organisation and can offer more support.

Iowa Elevators is currently using a decentralised structure and each division is responsible for its own decisions. This is where the decisions for supply-related objectives are spread throughout the company (Bardhan, 1996). There are advantages and disadvantages to this kind of structure. Whilst it means that decisions can be made quicker and the division can adapt easier to the local environment's needs, it does mean that there may be a lack of standardisation within the firm as each department makes its own decision. Therefore, Iowa Elevators could consider changing to a centralised structure. Scott had to present to the executive management team his findings for his five-year plan. His main objective was to review and define the role of the purchasing department within Iowa Elevators in a new light. One of the biggest changes he considered was proposing the business restructure. It was recommended that they change to using a centralised structure, so they would be able to get on top of spending and try to improve the revenue of the company. However, when an organisation moves towards centralisation, they need to consider the sources of supply talent and availability of information within the organisation. The organisation will need to ensure that staff in-house have the correct experience to handle the change. Usually, when an organisation is operating a decentralised structure, it is because they do not have the appropriate staff who have the required skills. Once the structure has been decided, the company could consider a hybrid structure in order to allow employees a little more freedom to make decisions within the company. Organisations that have hybrid structures

can benefit from the flexibility it offers and the sustainable social value which it creates (Haigh, et al., 2015). Using the hybrid structure once revenue has improved is more likely to be accepted by managers and divisions as Scott is concerned, they will be resistant to his proposed changes. Scott is concerned with resistance when looking at starting to make changes to the decentralized structure, in leading and managing a supply team the organisation can provide support for the employees in order to minimise resistance. The organisation must have a supportive organizational culture, structure, and systems that will give employees a common compelling purpose within the organisation. Moreover, it is beneficial to have a common agreed-upon approach and investment in a high level of communication. It is important to make sure the right people with the right qualifications, are in the right team where their skills are needed and at the right time when those skills are needed (Johnson and Flynn, 2014). These are some ways the organisation can deal with resistance and help facilitate change. Scott emphasises the need for better budgeting as Iowa has seen a decline in profits and seen losses of £11 million after taxes and a decline in working capital. Within the organisation product managers at Iowa Elevators have assumed greater responsibility in a wide range of areas, including some that are not considered traditional. There are various supply chain activities that the managers were responsible for which include supplier selection, product mix, branding, and promotion and assisted elevator and, marketing centre managers in the areas of promotion, new product development, and inventory planning. A well-organised supply chain management system involves optimizing operations functionality to be fast and efficient. “Today, more than ever before, supply chain management has become an integral part of business and is essential to any company’s success and customer satisfaction” (Kleab, 2017). The product managers at Iowa have a demanding job as the success of a business is linked to the efficiency of its supply chain and failure to find suitable quality suppliers for example can have devastating impacts on profits (Johnson and Flynn, 2014). However, a business with a well-managed supply chain may significantly reduce all the operating expenses connected to that chain, which contributes to a greater profit. The implementation of supply chain management can help an organisation reduce costs and reduce transaction costs it can additionally control and facilitate information sharing, enabling companies to maintain a high degree of market sensitivity (Wei and Xiang, 2013). This will aid Scotts ’ objective of costsaving.

Overall, Scott should be able to help Iowa Elevators cut their costs and improve revenue by implementing his proposed plan. Ensuring Iowa Elevator’s purchasing department is split into the four areas of specialisation will allow the business to split roles and responsibilities more evenly throughout the department. By changing to a centralised structure, the company will become more in control of its costs. The company can later change to a hybrid structure once revenue is more constant. He also expressed his concerns about the lack of budgeting within the company, but with the restructure this should tackle this issue. Scott is aware that there could be resistance to this idea but with a strong culture within the company, this should reduce the resistance. Word Count - 1413 References Haigh, N., Walker, J., Bacq, S. and Kickul, J., 2015. Hybrid organizations: origins, strategies, impacts, and implications. California Management Review, 57(3), pp.5-12. Rendon, R., 2005. Commodity sourcing strategies: Processes, best practices, and defense initiatives. Journal of Contract Management, 3(1), pp.7-21. Laseter, T.M., 1998. Balanced sourcing: Cooperation and competition in supplier relationships (Vol. 1). San Francisco: Jossey-Bass. Zsidisin, G.A., Ogden, J.A., Hendrick, T.E. and Clark, M.A., 2003. Chief purchasing officer compensation: An analysis of organizational and human capital effects. International Journal of Physical Distribution & Logistics Management. Bardhan, P., 1996. Decentralised development. Indian Economic Review, pp.139-156. Kleab, K. (2017). Important of Supply Chain Management. International Journal of Scientific and Research Publications, [online] 7(9), p.397. Available at: http://www.ijsrp.org/research-paper-0917/ijsrp-p6949.pdf. Johnson, P.F. and Flynn, A. (2014). Z-Library single sign on. [online] 1lib.domains. Available at: https://1lib.uk/book/5008630/8b2e5c. Wei, Z. and Xiang, W. (2013). The Importance of Supply Chain Management. International Journal of Business and Social Science, [online] 4(16). Available at: http://www.ijbssnet.com/journals/Vol_4_No_16_December_2013/28.pdf [Accessed 29 Mar. 2021]....