Logistic Management

Part I – Context of the case study

 Presentation of the company and problematic

Hello everyone, I am X, let me introduce to you our team of advisors: Y and Z. Together, we are a consultancy.

The case we are going to talk about deals with a company named Crank Ltd specialized in tubular assemblies products; Located in UK, where the purchasing structure is decentralized. Their new CEO is ready to think about an alternative procurement organization because it has influence and power on the management function and the structure of the company.

 Details of our plan (Adja)

First of all, we’ll talk about their current structure. Then, the alternatives structures. And finally, we’ll give our recommendation to the CEO of Crank Ltd.

Part II – Presentation of the current purchasing structure & the alternatives

 Presentation of “decentralized purchasing structure”

The CRANK LTD procurement organization is currently decentralized, so the purchasing resources are dispersed into local purchasing departments. Indeed, they are located in UK more precisely in Leicester, Southampton and Glasgow.

 Advantages

The advantages of the decentralized purchasing for CRANK LTD are:

o Speed and responsiveness by modern logistics practices

o Better understanding local needs

o A stronger customer orientation

o More power and responsibility and full autonomy of operating companies by delivering a target result on capital employed

o Less bureaucratic purchasing procedures

o Better management of low spend where no leverage is possible

 Problems

The problems of the decentralized purchasing for CRANK LTD are:

o Dispersed purchasing power: there are more than 40 suppliers for the five major purchases

o Lack of economies of scale

o No uniform way of handling towards suppliers : There are no group purchase contracts

o No co-ordination of purchasing: No formal tendering has taken place, for more than two years

o Less specific expertise on purchasing, supply markets and components for each location

o Less team spirit: the purchasing teams do not liaise

 Presentation of the alternatives

Beside decentralized structure, there are two others alternatives which are:

o Centralized structure: a department which will be responsible for all strategic and tactical decisions.

o Hybrid structure: the company will take advantage of its decentralized structure and add the benefits of centralized structure.

Part III – Our recommendation

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