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Describe and Analyse the Most Important Strategic Issues Facing Alpha Toiletries Limited

Essay by   •  August 8, 2012  •  Research Paper  •  1,420 Words (6 Pages)  •  1,769 Views

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Alpha Toiletries Limited faces the following issues: -

Poor deliver performance to their customers and from their suppliers

Delivery performance for materials from Alpha's vendors as well as Alpha's delivery performance to their customers has been described as not good and an area of concern to all major stakeholders. Although the company has identified delivery performance as an order winning criteria its inability to deliver on time to their customers negatively affects the customer service they render. This inability to meet delivery schedules has a wide range on consequences both on Alpha and its customers. For Alpha, poor deliver performance results in lost turnover for the company; leads to high inventory levels and its associated tying up of working capital. There is also further revenue loss when unsold stock is sold to customers at heavily discounted prices when this could have been avoided if delivery time lines were met during the contract period. For the customers of Alpha the overdue deliveries is an inconvenience that causes dissatisfaction with the service being rendered to them and can also lead to loss of sales if they run out of stock in their stores. Since delivery performance is a factor that Alpha's customers will rate them by, not addressing this issue may lead to them losing some of their accounts and customers to our vendors.

Delivery performance for materials from Alpha's vendors although being rated as not good is not supported by any key performance indicators to measure the extent of the issue and how it impacts on the company. This perceived poor performance negatively impacts on the production and subsequent deliveries of orders to customers since the materials needed are not delivered on time. The procurement policy of single sourcing could also be a factor in the poor delivery performance since the company is obliged to buy required materials and components from a single source whereas having a number of reliable vendors for some materials will alleviate the issue of poor delivery performance.

Issues with inventory management and controls

The management of inventory is a vital function for both manufacturing efficiency and customer service. This is obvious lacking at Alpha Toiletries Limited. Stock turns for Alpha were quite low at an average of 3.4 per year on sales for 2001. Finished goods, raw materials and components account for the highest per cent of total inventory value i.e. 96 per cent of total inventory value of £2.66 million. Looking at the product cost structure, materials were the significant cost driver and with approximately 54 per cent of total inventory value (i.e. £1.44 million) tied up in raw materials and components, it implies that a huge amount of working capital is tied up in inventory. A similar situation exist with finished products were £1.06 million worth of stock is still occupying space in the warehouse instead of being sold to customer. All the above compounded with the revelation that no data is available to provide classification of the stock position clearly show laxity in inventory management and controls which can be a huge risk area for the company. Manual system of inventory recording is also an area of risk since it allows room or human error and possibly theft. This process also implies that information is not readily available to support production and provide feedback to both customers and other stakeholders in the organization.

Lack of an integrated information technology application

Clearly there is no system or application in place that integrates the activities of all the various departments within the company. The lack of such a system hampers the flow and storage of timely information across the various functional areas and levels the company fragmented at all levels. Each departments ends up working with a silo mentality and puts in place their own informal systems to manage their activities without due consideration on how their activities impact others. This is clearly evident in how difficult it is to even get information on the status on customers' orders and deliveries.

These issues if not properly address can have a significant impact on the company's performance in the coming year. They can lead to lost accounts and customers. A number of strategic options can be put in place to improve the business. I will recommend the following:-

Implementation of an Enterprise Resource Planning (ERP) System

It is clear that there is little integration and information flow within the company. Implementation of a well thought of ERP system can address two of the strategic issues identified. Davenport (1998) describes ERP system concept of having one comprehensive database housing all an organization's corporate information on sales, marketing, customers, financials, production, etc. as undeniable alluring. Implementing such a system will address the issues



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