Currently Blozis Company is facing many internal issues due to an absence of communication and control. The supply department is exhibiting weak control over materials and the overall supply management performance. The implementation of a supply management process will give the organization control of its operations. The large number of items, the large dollar value involved, the need for an audit trail, the severe consequences of poor performance, and the potential contribution to effective organizational operations inherent in the function are five major reasons for developing a robust process. The acquisition process is closely tied to almost all other business processes included in the organization and also to the external environment, creating a need for complete information systems and cross-functional cooperation.
There is a lack of communication and control across this organization. The expediter is overworked, as he is involved in more than his assigned tasks. He is consulted by engineering or production when there are ordering problems, he also writes commercial specifications for these departments, types the requisitions, issues purchase orders, picks up rush orders, and supervises the stock room. There is no segregation of duties as anyone in the company is allowed to initiate a requisition. As a result of the informal operations, the engineering and production departments have difficulties staying within budget as the managers do not know what materials are being charged to their department until the monthly accounting statements are released. There is no evidence of receiving procedures; end users are not notified when materials arrive, orders are lost, and suppliers are not paid on time.
Environmental and Root Cause Analysis
The lack of control is wreaking havoc on the company. The expediter seems to be the “main player” in the company as he is involved in many departments. He is performing numerous tasks other than expediting. The engineering and production departments often contact him on ordering problems before submitting a requisition to the supply department. Where applicable he suggests substitute components available from the stock room or he writes a commercial specification, types the requisition and submits it to the supply department. The expediter periodically issues purchase orders for rush items. He also picks up items without a purchase order and promises the supplier they will receive a “confirming order” from the supply department and then sometimes forgets to notify the supply department of the transaction. Consequently, purchase orders are made up to match invoices for material that had already been received from the supplier. The supply department has a deficient understanding of technical information. The supply manager has made no attempt to keep up with the specialized design problems of the company. The buyer can successfully handle technical items with detailed specifications provided by the engineering or production. There is no indication of a procedure for receiving orders. End users are not being notified when their materials arrive unless the expediter brings it to them, orders are lost after receipt, and suppliers are not paid on time and discounts are not taken because receiving reports are not completed. The engineering and production managers have difficulties staying within the materials budget. The managers do not know what materials are being charged to their departments until the monthly accounting statements are released. Orders under $10,000 require only the approval signature of the supply manager. Orders over $10,000 require the president’s approval, but in practice, all orders for more than $10,000 were approved by the president either in the materials budget or the capital budget long before the requisitions were made out.
Alternatives and/or Options
There is a need for improvement in the...
Please join StudyMode to read the full document