The Lawrence Sports dilemma has reached the fourth week of investigation. Lawrence has recently gone through numerous issues regarding cash flows that have disrupted the normal operations of the company. While these issues appear to be ongoing, part of the underlying problem deals with supply chain management.
Lawrence currently has two suppliers that offer the raw materials used to make the numerous types of sports equipment produced by the company (Working Capital Management Simulation, 2008). The focus of this paper is to again identify the issues at Lawrence involving supply chain management and offer a gap analysis. Additional areas of discussion include stakeholder perspectives and the company end-state vision statement.Situation AnalysisIssue and Opportunity IdentificationThe situation at Lawrence Sports involves many areas within the operations of the company.
Earlier research revealed multiple issues with cash flow management that started when Mayo Stores stopped making regular payments on goods received. This caused the company to in-turn delay payments to suppliers Gartner and Murray (Working Capital Management Simulation, 2008). One area that was uncovered during this investigation was the shipping of goods to Mayo. Some shipments were damaged and all parties involved blamed the other and no one would take responsibility. This situation brought about additional costs that the company was not prepared for. This leads into the next area of discussion involving the supply chain management.
Previous research on Lawrence revealed a serious flaw in the managing their supply chain. During the shipment of goods, common knowledge is that some items become damaged in that process. The result was a large number of damaged goods that cost Lawrence money that the company did not have.
This presents an opportunity for Lawrence to implement a Total Quality Management (TQM) program. The TQM program is designed where the focus is managing the organization as a whole. This focus is on all aspects of the goods and services provided to customers (Chase, Jacobs, & Aquilano, 2006).Currently the company has no quality plan in force. This was a factor in the recent problems with the shipments of goods. Implementing a TQM policy requires the careful design of products and establishing organizational processes and systems to produce consistent products (2006). According to Mesbahuddin, Himangshu, and Anupan (2007, p. 17), “commitment of top management has been cited as one of the most important factors impacting the success for implementation of total quality, management practice in a firm.
” Based on all the current issues at Lawrence, the idea of TQM appears to be a logical choice for management as the company looks to rebound from recent problems.During the recent problems with Mayo, Lawrence failed to plan for all contingencies. This failure also brings about an opportunity for the company to implement a forecasting strategy.
Forecasts are vital to organizations because of important managerial decisions are made frequently. These forecasts are the basis for organizational long-term planning (Chase, Jacobs, & Aquilano, 2006). In addition, forecasting give a company a foundation for budgeting, accounting and finance, and cost controls (2006). Part of the forecasting process is to establish a demand management policy.
The demand management idea for Lawrence is managing where the demand for their products and services come from (Chase, Jacobs, & Aquilano, 2006). Currently, the only demand for products comes from Mayo Stores, making them the dependent demand for Lawrence. This happens when Mayo requests delivery of products from the company and subsequently the products are delivered. Other areas of a forecasting plan for Lawrence are qualitative, time series analysis, casual relationships, and simulation (2006). Proceeding with a demand management policy is focused on vendors.
According to Jader (2008, p.1), “It is about moving the communications system of demand management to the vendors and service providers so they too can plan their supply chain policies and processes that would align with the firm’s.” This would be a good start for Lawrence to identify supply chain needs and align all those organizations in that process. Another big part of the supply chain is managing inventory.The opportunity for Lawrence to minimize costs while the current cash flow problem continues lies with the proper management of inventory.
The current system in place does not address fluctuations in cash flows. According to Chase, Jacobs, and Aquilano (2006, p. 11), “an inventory system is the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be.
” Implementing an effective inventory management program would alleviate some of the current issues at Lawrence. Recent slow cash inflows from Mayo Stores have put the company in a situation where the supply on-hand exceeds demand. Having too much inventory on-hand that is not being shipped and sold, costs Lawrence every day this inventory sits at the factory.The determination of how much to in raw materials to order from vendors comes from the total cost involved that are derived from the costs of holding, setup, ordering, and shortage costs. Proper timing of orders is also a key factor in limiting these costs (Chase, Jacobs, & Aquilano, 2006). The current system employed by Lawrence involves an outdated system using manual counts. The company would benefit by implementing an electronic system that can offer immediate tracking information used in the calculation of costs when determining need and planning.
According to Pearcy, Parker, and Giunipero (2008, p. 23), “with ever-increasing competitive pressures, growing numbers of firms use electronic procurement (e-procurement) in an attempt to reduce costs and increase profitability.” This may be a viable option for Lawrence while determining how to reduce costs.Stakeholder Perspectives/Ethical DilemmasThe stakeholders in the Lawrence situation comprise the three main players; Lawrence management and employees, Mayo Stores, and suppliers Gartner and Murray. For Lawrence, this situation offers many issues with many stakeholders. The existence of the company is in questions due to the cash flow problems and impeding debt if things do not change.
The loss of jobs could result if the current trend continues.Mayo Stores is currently in the middle of expansion plans but slow sales have strained relationships with their suppliers. The company has notified Lawrence that payments for more than one week will not be available. Since Mayo is the only distributor for Mayo, the company’s existence relies on timely payments. The suppliers Gartner and Murray are interested in receiving payments for goods delivered to Lawrence. While these suppliers could drop Lawrence as a customer, Lawrence could not.
As a whole, the non-payments by Mayo to Lawrence have created a negative flow that has hurt three companies in the supply chain.End-State VisionLawrence Sports has an end-state vision that is to secure a position as a leader in the sports equipment industry by implementing an effective supply chain management system. The designed plan is to reduce costs related to inventory management and offer a streamlined processes based on customer needs.Gap AnalysisResearch of the Lawrence Sports situation has revealed numerous gaps in the company’s supply chain management. While the company does have a system in place, this system is outdated and reliant on individual manpower to manage inventory and supply. Another flaw in the current system involves forecasting and planning for supply and inventory needs.
Failure to manage these resources has resulted in the company incurring additional costs in holding inventory while waiting for payments from their distributor. This in-turn has caused problems with payments to raw materials vendors.The streamlining of any system employed at Lawrence to fix the current problems would be helpful but not employing a TQM strategy to manage those processes could be costly. Focusing the company as a whole on the processes that affect customers’ needs is a priority. Not having these processes in place now have put the company in their current situation. Employing a TQM policy would align the company with the direct needs of all customers.
This program would encompass all parts of inventory and supply management processes that would be aimed at reducing costs and eliminating wasteful situations.ConclusionLawrence Sports is currently facing multiple issues during the recent cash flows crisis. While there may be multiple problems and potential solutions to fix what ails the company, a major part of the problem involves the supply chain. Now that problems and opportunities have been identified, the company is ready to move forward and determine a course of action to fix the supply chain management area of concern. Implementing some warranted changes in this area may have the potential to alleviate the burden of other areas of concern.