I. Point of View
As shown in the case 7-4, Aloha Products faced different problems with its departments in the Purchasing Unit which operates disorderly that cause the inefficiency and ineffective allocation of resources.
II. Statement of the Problem
This study sought to answer the following questions:
1. What should the company do to solve the problem regarding the Purchasing Unit? 2. What are the things that the Purchasing Unit must consider before taking decisions? 3. What should the company do to lessen their cost of sales?
This study aims to change the current control system for the Purchasing Department and to unite the Purchasing Department with the Manufacturing Department.
IV. Areas of Consideration (Analysis of the Case)
1. External Environment
Having a common product for your company means having many competitors for it. Especially if these companies had considerable resources: infrastructure, distribution networks, brand equity, production resources, and marketing expertise that Coffee Giants like Nestle, Philip Morris(Maxwell House) and P&G(Procter & Gamble) have. In addition to these coffee giants, there were several niche players such as Starbucks. b. Opportunities
Having a strong relationship with your Growers provides two things: information about the coffee market and an inside track on a grower’s crop. Being knowledgeable also with the Coffee Consumption Trends, the company can think of new strategy to keep their business on track. 2. Internal Environment
Every company has their own weaknesses that come from the inside. In the part of Aloha Products, its department is one of the causes of its weakness. Like in the Purchasing group which was largely autonomous and their mismanagement of the company’s resources.
V. Alternative Courses of Action
1. The company must restructure the Purchase unit as an operational arm of all its plants. 2. The company must build a good relationship with the growers instead of the brokers.
VI. Analysis Courses of Action
1. Pros- By this, there will be coordination between Purchasing Unit and Manufacturing Department. Cons- There will be an additional work load. 2. Pros- It is much cheaper if you order directly to the growers. Cons- Growers want to deal with buyers they trust and vice versa. Hence, growers tend to favor those relatively large companies.
Given the unstable nature of the coffee market, having a central purchasing unit is necessary. Expecting each plant to handle the coffee purchases will add unnecessary overhead cost to the company. For recommendation, Purchase Department should take the requirements from each of its plants and execute them. This gives Aloha Products to achieve cost savings from bulk purchasing.