LOG317: Procurement Strategy and Policy
Question 1
Senior management observed that the occurrence of natural calamities has been on the rise. The company’s supply of flexible packaging comes from a supplier situated in Florida, the sunshine state of the USA. Unfortunately, Florida is susceptible to foul weather (hurricane storm) in the second half of the year. Thus far, the company has been able to manage supply disruption by holding a large inventory. The purchasing manager justified his actions by citing a significant price discount. The other reason given is the stringent qualifying requirement e.g. a stability test requires 18 months. You have been asked to review the purchase.
(a) Interpret the situation and identify the challenges that the company is facing. Demonstrate written proficiency in your answer.
(b) Construct a recommendation on appropriate risk mitigation action. Outline the steps or stages of implementation.
Question 2
If you need to draw a diagram or figure, you may take a picture of the image you have drawn and insert it in your answer. You are reminded that the overall file size of your submission of this TOA should not exceed 500MB.
Consider your organization (or one that you are familiar with).
(a) Describe the profile of this organisation and the role of the procurement function within the organisation. Then, analyse how procurement adds value to the company.
(b) Assemble two (2) procurement levers that the organisation’s procurement department uses for its purchase. In your discussion, relate your answer to the procurement portfolio generic matrix (illustrate using diagram) to identify the type of purchase and outline its segmentation. You should identify the strength, weakness and opportunities of these spend and explain how you would make use of the procurement lever that you have identified.
Question 3
Up to now, the Maltodex company has been purchasing semi-finish corn products from a supplier in France as an ingredient to its feed business. Mr Morris, the CEO, feels that the company should take control of the purchase of corn as a commodity and negotiate a toll manufacturing rate with the current supplier.
He believes that the company can manage costs better this way. As the VP of Procurement, develop a plan for the implementation of a commodity policy for hedging against price risk. In your answer, appraise the breakdowns of the implementation into stages. Examine applicable framework and outline concerns or the key success factors at each stage.
Question 4
If you need to draw a diagram or figure, you may take a picture of the image you have drawn and insert it in your answer. You are reminded that the overall file size of your submission of this TOA should not exceed 500MB.
Annie has been tasked to review the spending on direct materials with the aim of improving cost efficiency. She tabulated her purchase over the last two quarters and inserted her observations on the supply-market/ product characteristics in the remark column (see below).
She decided to classify each product into four quadrants of a matrix, in that the matrix has ‘spend (amount of spend)’ on the x-axis and ‘supply risk (number of suppliers in the market)’ on the y-axis.
(a) Assess the spend data and classify each product according to the matrix. Support your choice with reasons.
(b) Propose the appropriate procurement strategy and one (1) tactical action plan that Annie can consider for
– Product-A
– Product-B
