Purchasing and Inventory at Silvaro Motors.

Case study: Purchasing and Inventory at Silvaro MotorsHelen Silvaro, CEO of Silvaro Motors, has just returned to her office after visiting the company?s newlyacquired automotive dealership. The new dealership was the fourth Silvaro Motors dealership in anetwork that served a metropolitan area of over two million people. Beyond the metropolitan area, butwithin a 45-minute drive, was another half a million people. Each of the dealerships in the networkmarketed a different make of car and historically had operated autonomously.Silvaro was particularly excited about this new dealership because it was the first ?auto supermarket? inthe network. Auto supermarkets differ from traditional car dealerships in that they sell multiple makesof cars at the same location. The new dealership sold a line of Daewoos from Korea, Mahindras fromIndia and Cherys from China. This brought the total number of brands sold by the group to six.Since the purchase of a bankrupt Mitsubishi dealership 15 years ago, Silvaro Motors had grownsteadily. As the city was relatively small, it was difficult to expand within a single brand, so eventuallySilvaro purchased a rundown Mazda dealership, and shortly afterwards, a small Hyundai dealership aswell. Under her direction, all three dealerships saw rapidly improving sales figures and the SilvaroMotors network grew in strength and reputation.Silvaro attributed this success to three highly interdependent factors. The first was volume. Bymaintaining a high volume of vehicle sales and turning over inventory rapidly, economies of scale couldbe achieved, which reduced costs and provided customers with a large selection. The second factor wasa marketing approach called the ?hassle-free buying experience.? Listed on each automobile was the?one price?lowest price.? Customers came in, browsed, and compared prices without beingapproached by pushy salespeople. If they had questions or were ready to buy, a walk to a customerservice desk produced a knowledgeable sales person to assist them. Finally, and Silvaro thought perhapsthe most important, was the after sales service. Silvaro Motors had established a solid reputation forservicing, diagnosing, and repairing vehicles correctly and in a timely manner?the service division?smotto was ?do it once, do it right?.High-quality service after the sale depended on three essential components. First was the presence of ahighly qualified, well-trained staff of service technicians. Second was the use of the latest tools andtechnologies to support diagnosis and repair activities. And third was the availability of the full range ofparts and materials necessary to complete the service and repairs without delay. Silvaro invested intraining and equipment to ensure that the fully trained personnel and the latest technology wereavailable at all sites. What she worried about, as Silvaro Motors grew, was the continued availability ofthe right parts and materials. She knew there was a fine line between too much and too little stock. Withthe new dealership, the complexity of inventory control had increased dramatically. This concerncaused her to focus on the purchasing function and management of service parts, accessories andmaterials flows at both a supply chain level, and as an internal function.Silvaro thought back on the stories in the newspaper?s business pages describing the failure ofcompanies that had not planned appropriately for growth. These companies outgrew their existingpolicies, procedures, and control systems. Lacking a plan to update their systems, the companiesexperienced myriad problems that led to inefficiencies and an inability to compete effectively. She didnot want that to happen to Silvaro Motors.Each of the four dealerships purchased its own service parts and materials. Each location had its ownpurchasing officer and parts manager. Purchases were based on forecasts derived from historicaldemand data, which accounted for factors such as seasonality. Batteries and alternators had a highfailure rate in the winter, and air-conditioner parts were in great demand during the summer. Similarly,coolant was needed in the spring to service air-conditioners for the summer months, whereas antifreezewas needed in the autumn to winterise cars. Forecasts were also adjusted for special vehicle sales andservice promotions, which increased the need for materials used to prepare new cars and to serviceother vehicles.One thing that made the purchase of service parts and materials so difficult was the tremendous numberof different parts that had to be kept on hand. Some of these parts would be used to service customerMGMT20085 3 Term 2, 2015vehicles, others would be sold over the counter to retail customers, whilst others (particularly genuinereplacement parts) were on-sold to wholesale trade customers. Some had to be purchased from the carmanufacturers (genuine replacement parts and accessories), to support, for example, the ?guaranteedgenuine parts? promotion or because that was the only source of supply. Non-genuine replacement partsand accessories were purchased from a variety of suppliers and other parts and materials such as oils,lubricants, fan belts and other generic service parts and materials, could be purchased from any numberof suppliers. The purchasing department had to remember that the success of the dealership dependedon (1) lowering costs to support the hassle-free, one price?lowest price concept, and (2) providing theright parts at the right time to support fast, reliable after-sales service.As Silvaro thought about the purchasing of parts and materials, two things kept going through her mind:the amount of space available for parts storage and the level of financial resources available to invest inparts and materials. The acquisition of the auto supermarket dealership put an increased strain on bothfinances and space, with the need to support three different car lines at the same facility. Investmentdollars were becoming scarce, and space across all the locations was at a premium. Silvaro wanted a?whole of organisation? approach, and wondered what could be done in the purchasing, supply chain,and inventory areas to address some of these concerns and alleviate some of the pressures.TaskAs a newly appointed Purchasing Manager at Silvaro Motors you are required to prepare a report for MsSilvaro that addresses the following questions:1. How might purchasing and inventory management policies and procedures differ because of thedifferent types of service parts and materials purchased by the dealerships (e.g. lubricants, nongenuineparts versus genuine parts) from different types of suppliers?2. What appear to be the main weaknesses of current purchasing and inventory management practicesat Silvaro Motors, and how could these weaknesses be affected by the new acquisition?3. How can supply-chain and inventory management concepts help Silvaro Motors reduce investmentand space requirements whilst maintaining adequate service levels?4. What recommendations would you make to Ms Silvaro with respect to restructuring the purchasingand inventory functions for the Silvaro Motors dealership network?midcourse.net.com is a professional assignment writing agency which provides students of all levels of study with 100% custom written essays, term papers, research papers, dissertations, coursework, book reviews, homework, book reports, presentations, projects and other assignments. Our team of writers is made of more than 100 expert Ph.D. and masters experienced academic writers. Click the Order Button Now to have a 100% plagiarism free paper on any topic, discipline and deadline. .

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