Free Essay: Procurement Processes of Land Mark Computers and Risks to the Business

Land Mark Computers is a desktop and laptop computer retailer in Melbourne. Additionally, Land Mark Computers deals in software retailing and computer repairs.

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Procurement Processes:

The company uses Procure to pay system of a procurement system. The process commences with creating plans for the requisite materials, the time of their request and the price at which the business can make their purchase, the business then makes a list of suppliers that can make provision of the required materials after which requests for submission of quotations from each supplier and negotiations for the best deal with the supplier may ensue. Upon choosing of a supplier, the business creates a purchase requisition form that includes information like the description of the electronic goods, department account number, signatures of the managers who are authorized, delivery directives and quotation from the authorized supplier.

A formal purchase order is then conveyed to the supplier to make a delivery of the goods together with directives as to the settings under which they ought to be brought. After the business gets the goods from the supplier, a Goods Receipt is prepared by the purchasing department which reconciles delivered goods by the seller and what was ordered. A comparison of The Goods Receipt and the Purchase Order is made to corroborate the two documents. The business contracts the supplier if there is any discrepancy. Payment invoice is made after the substantiation of goods is done as required approvals from project managers are obtained; the cycle is finalized when the business makes complete payment to the vendor.

Risks to the Business

Delays

Supplier related: supply related delays in material flow happen when the supplier cannot effectively respond to demand. Notably, this results from high utilization and inflexibility. Besides, poor-quality output at supplier plants, high levels of handling or inspections during border crossings and changing transportation modes during shipping. Purchase orders of key parts or raw materials delayed by month can cause delays in the supply chain.

Delays resulting internally: delays in the supply chain can also occur when a critical plant shuts down unexpectedly for a month. Also, it may arise when the capacity at a key plant drops by 20 percent overnight. Delays in the supply chain occur when distribution or production orders are delayed by a month.

Consumer-related: consumer related delays can occur when the demand for the electronic products go up by 20 percent for all the products, an essential product or across the board. Customer orders delays may take up to a month.

Disruptions

Supplier related:

Suppliers of key commodities like laptops go out of business disrupting the supply chain. The reduction in the supplier's capacity also causes disruptions in the supply chain. The California dockworkers strike in 2002 produced shortages of high demand retail items (Christopher & Lee, 2004).

Internal:

Key plant shuts down unexpectedly for a month or the drop of capacity at a key plant drops by more than 20 percent overnight.

Customer-related: Disruptions in the supply chain can also occur as a result of customers demanding more of the electronic products.

Systems risk

Another risk to the supply chain emanates from the failure of the system that coordinates the chain.

Supplier related:

This risk occurs when the supplier's order entry system goes down for a period more than a week.

Internal:

This risk happens when key customer's procurement system inside the business fails for more than a week, the business inventory/accounts system goes down for a week, or the order entry system does fail for a period not less than a week.

Consumer-related:

This risk is realized when credit card information gets stolen or misplaced when the e-commerce system is breached or hacked.

Information systems risk

Information systems risk occurs when there is a breakdown of information infrastructure which can devastate the business.The "Love Bug" computer virus. In 2002, the fast-spreading Infection shut down e-mail at the Pentagon, NASA and Ford (Chopra & Sodhi, 2004).

Supplier Related

Information system risk may occur when the supplier rations supplies by 20 percent, increases minimum order size by 20 percent than 100 percent.

Internal

Information system risk may occur in the internal business environment when the business orders in quantities twice as large as usual to take advantage of volume discounts which affect the supplier's ability to forecast.

Consumer-related:

Information systems risk may occur when key customers order in larger batches than normal but with reduced frequency making it difficult for the business to forecast.

Mitigation of the risks

Companies can plan mitigation risks after looking at historical information.

Employees upgrade

Employ more versatile employees who can work in different departments in case of disruptions that may arise from employee strikes or other labour-related disruptions and delays. Toyota Motor Corp., for example, accomplishes this on its assembly lines by employing team leaders who can work on any station.

Combine different modes of transport with inventory

Employee diversification is effective in minimizing delays. An example is Dell Inc. which holds very little stock of high-value components in the United States. Instead, the personal computer manufacturer uses high-cost air transportation to deliver components from the Far East as needed. For less expensive components, however, Dell keeps some inventory that is regularly shipped at low cost to the United States. In this way, Dell minimizes delay-related risk as well as inventory-related expenses (Kumar & Craig, 2007).

Increase Capacity to be able to meet the high demand for customers and eliminate customer order delays.

Prefer capability over cost for high-value, high-risk products to ensure a smooth flow of these products from the supplier to the eventual customer.

Favor cost over capability for low-value commodity products to ensure that the risk of high losses is mitigated when the electronic materials are not sold (Wieland et al., 2012).

Centralize high capability inflexible sources if possible to ensure better system coordination.

Focus on low-cost, decentralized capacity for predictable demand to be able to meet abnormal demand patterns for the electronic devices that may arise.

Build centralized capacity for unpredictable demand. Increase decentralization as a cost of capacity drops. Favor cost over responsiveness for commodity products.

Favor responsiveness over cost for short lifecycle products

Favor more redundant supply for high-volume electronic products, less redundancy for low-volume electronic products. For instance, following a February 1997 fire at a parts factory owned by Japanese manufacturer Aisin Seiki Co. Ltd., a key supplier for Toyota auto giant was forced to temporarily shut down production at most of its Japanese plants (Chopra & Sodhi, 2004).

Decentralize inventory of predictable, lower value products to reduce pressure on the system and ensure smooth inventory flow. Also, inventory of less predictable, higher value product suppliers should be centralized.

Increase aggregation as unpredictability grows to manage system coordination better and reduce delays and disruptions.

References

Chopra, S., and Sodhi, M. S., 2004. Managing risk to avoid supply-chain breakdown. MIT Sloan management review, 46(1), 53.

Christopher, M., & Lee, H. 2004. Mitigating supply chain risk through improved confidence. International journal of physical distribution & logistics management, 34(5), 388-396.

Kumar, S., and Craig, S., 2007. Dell, Inc.'s closed loop supply chain for computer assembly plants. Information Knowledge Systems Management, 6(3), 197-214.

Tomlin, B., 2006. On the value of mitigation and contingency strategies for managing supply chain disruption risks. Management Science, 52(5), 639-657.

Wieland, A., & Marcus Wallenburg, C., 2012. Dealing with supply chain risks: Linking risk management practices and strategies to performance. International Journal of Physical Distribution & Logistics Management, 42(10), 887-905.