Case Study One: Blozis Company

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Executive Summary and Issue Identification The supply function and procurement process within Blozis Company is not organized correctly. Having properly organized supply and procurement functions will give the organization a set of strict guidelines on how to maximize efficiency, control spend, and continue success for future sustainability. This will allow the company to recognize specifications quickly and accurately, which will decrease production time and total cost of ownership ultimately increasing profitability. There seems to be no recognized company strategic or tactical directions in place that are being driven to the employees. Without communication from upper management of the company tactics and strategy the employees have no direction or goals to achieve and have no sense of what is required by their management teams. The Presidents compiled complaints from within the organization include: The managers do not know what materials are being charged to their departments until the monthly accounting statement was released The engineering and operating personnel were not notified when materials cam in unless the expediter dropped the material on the desk of the requisitioner The supply department was entirely too slow at processing orders taking almost a full day The supply department does not understand technical specifications causing the expediter to be overworked by handling all the technical orders

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I elected to answer the case study questions within this analysis. I feel that this set of questions brings an element of information required that the other does not fully achieve. This will provide a solid grasp on the weaknesses of the organization and the changes required to bring the organization to a strategic position within the market. I have included the questions within the information in italics to help identify their locations.

Body : Root Cause Analysis and Recommendations

1. If you were the supply manager, what recommendations would you have made?

The supply function and procurement process within Blozis Company is not organized correctly. There is a lack of technical knowledge, complete procurement processes, and requisitioning processes within the supply department, causing delays in order processing, spend analysis and budgeting reports, and other organizational errors. Implementing an organization wide supply management and procurement process and electronic system, as well as providing education to the departments about the technical components/requirements of the product will greatly decrease these errors, increase efficiency, and improve supplier and departmental relationships. All members of the organization will be able to input requisitions for manager approval, view, and track orders from the need recognition to the documentation phase with an implemented electronic procurement system.

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The Expediting portion of the production department lacks the proper supply management technology, receiving and delivery capabilities. The expediter is currently providing the supply department and requisitions with the technical specifications required for the engineering and production departments because the supply department lacks the technical knowledge to make the proper decisions. The expediter does this over and above his daily duties causing an overworked situation and errors being made which is trickling throughout the other departments. Providing the expediting portion of the production department with access to a supply management and procurement system will allow for proper receiving and documentation of goods coming and going within the organization. Having the goods signed for internally on a delivery slip that is linked to a particular purchase order will ensure that the goods are traced all the way to the end user engineering or production employee. This will put ownership and responsibility on that particular department if errors occur and/or product is lost. This will also allow for better budget reporting and accountability from spend analysis. Possibly a restructuring of the organization and movement of employees is necessary to ensure that the proper employees and their technical skills are being utilized to their fullest efficiencies.

There seems to be no recognized company strategic or tactical directions in place that are being driven to the employees causing employee freedom, lacking process and supervisory management. Having a company strategy will drive standardization and process compliancy allowing all members of the organization to have a particular goal to strive for. Every member of the organization will know what is required from their positions in order to meet

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these strategic directives. Management staff will need to remove the freedom of purchase from their employees and rely on an approved requisition management process to control project budgets.

2. At what points does this supply department exhibit weak control over (a) materials and (b) overall supply management performance? Materials Supply department manager makes no attempt to keep up with the specialized design problems of the company products Technical product requirements are not properly recognized and understanded at the buyer level Detailed complex specification requisitions are being provided by the expeditor for orders instead of the supply manager and buyers sourcing this information Time management of complex items are not being prioritized to ensure delivery in a timely fashion (example: 6 month turn around for the micrometer, this product needs to be ordered as soon as that product is requested in order to meet the project management deadlines in production) No receiving or delivery processes within the expediting department. There is no way to track orders and product moving in and out of the organization Product is being misplaced or lost within the organization Expediter is typing requisitions for rush material Specification challenges lack of clarity with technical specification to the buying department

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Overall Supply Management Performance: No technical experience and education where experience and education are necessary within the supply department. The supply management department is not qualified or properly managed with is decreasing performance, efficiency, and profitability Orders taking a day or more to be processed there are four employees within the supply department that should be working together to process orders asap to ensure quick and accurate delivery No control over project spend and capital budgets which is decreasing profits. 16 million in gross sales would increase if technical specifications are managed and purchased in a more efficient manner. The production time and total cost of ownership from start to finish will decrease which will improve company profile and reputation, and increase efficiencies and profitability Slow and overdue payments being made to the suppliers Supplier relationship management is non-existent Expediting department is overworked and performing tasks that is not required of that department Suppliers are accepting orders without a valid purchase order number and are invoicing orders without purchase order reference. Informal and open requisitioning process is currently being used

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3. How could these weaknesses be corrected? First of all developing and implement a proper procurement and specification management process is essential for sustainability. This will provide Blozis with the tactical and strategic direction required for organisational-wide success. The procurement process will include following these steps: I. Need Recognition is the process of identifying that a good or service is required and determining the timing of the requirement. This stage will take place in multiple departments simultaneously. The key to need recognition from a strategic perspective is to ensure that procurement is working actively with goods and services users, as well as with potential suppliers or those goods and services. II. Need Description or Specification is describing the need in sufficient detail to ensure that the correct good or service is procured, in the correct quantity, at the correct time, at the correct place. This is the most essential key to successful procurement. III. Sourcing investigate and qualify potential suppliers, evaluate these suppliers. IV. Supplier Selection choose the correct supplier for the required specification. V. Ordering making the purchase from the supplier. VI. Monitoring -follow up and expediting the orders. VII. Receipt and Inspection receiving goods and inspecting that it meets all specified requirements. VIII. Payment -clearing the invoice from the supplier for a particular purchase order and issuing a payment.

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IX. Documentation completion of all the paperwork related to the goods and services purchased. (bills of lading, invoices, payment requisitions, purchase orders, etc). X. Relationship Management managing internal and supplier relationships. Using this procurement process implement an electronic procurement system throughout the organization which will allow for cross-departmental communication and monitoring of the budgets, open and closed orders, requisitions, specifications, etc. In addition, education and training are key to a successful business. Due to the technical complexity of the majority of Blozis products a technical understanding of every component is necessary throughout every department member within the organization. Reorganizing the current staff is essential to ensure sustainability. The current expediter needs to switch roles with the current supply manager in order to apply his current knowledge and experiences to the needs of the engineering and production departments from a sourcing and supply management point of view. Within this new role, the new supply manager will be able to direct and monitor the buyers at all moments of the procurement phase. He will be able to monitor, understand and assist in the correction of the ongoing specialized design problems. The current supply manager will now become the expediter and will use his knowledge of the process and product to ensure the goods are being delivered to the proper departments in a timely manner. Part of this new role will include quality control and inspection of goods, so technical training must be achieved.

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Blozis must implement and enforce a No PO No Pay policy with suppliers to ensure t hat all material is being requested, tracked and budgeted properly. If product is urgently required, a PO can be given to the expeditor over the phone by the supply management department. Implementing a requisitioning process to be in place with the electronic procurement system is necessary to control spend and specification complexities. Every employee can enter an electronic requisition. A base production or engineering employee will have a spend limit of $200.00 per requisition, anything required that is above this limit will go to their manager for approval and review. This will ensure the technical requirements are being described correctly and that the purchase is approved and track under that project budget. The managers will have a spend limit of $0-5000.00. Anything above the manager approval limit will go for approval by the supply manager, his approval limit is $0-10000.00. Anything over and above the $10000 spend will go to the president for approval. This will all occur electronically and automatically which will save time and resources making calls and signing papers. It is very important to identify the types of specification applicable to the good or service before submitting the requisition to the supply management/ purchasing department. If the specification is clear and detailed then the buyers can identify the best process to define and acquire the specification. If it is a complex specification, more detail and communication will be required from the requester. If it is a simple specification than minimal detail and communication between the departments will be necessary. Having a clear understanding of the specification will help eliminate specification problems.

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4. What activities should the expediter be responsible for in this organization? The new expediter will have two primary responsibilities: pick-up the rush orders and supervise the stock room. The expeditor and the expediting clerk are responsible for getting the goods ordered to the end users, issuing inventory to employees, having the end users sign a receiving slip for the goods, maintain minimal stock levels by monitoring and requisitioning inventory, picking up and signing for product shipments, tracking open orders, quality control of goods, returns, stock record keeping, and disposing of unnecessary product.

5. What is the supply departments responsibility in establishing and interpreting technical specifications? The supply department has a large important roll within Blozis Company in need recognition, specification understanding, sourcing, ordering, payment, supplier management, quality control, spend analysis, budget reporting, and internal and supplier management. This department is the key connection in determining and understanding the engineering and production specifications and retrieving these through outside supplier sourcing and management processes. Without this understanding of the specifications the quality and complex customer ordered products would not be produced, therefore eliminating sustainability.

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