Blozis Company Case

Part 1: Executive Summary

Blozis Company is facing several procurement process issues due to an absence of communication, control and leadership from the top down. The organizational culture and attitude toward the business process has led to dysfunction and increased costs. The supply department is exhibiting weak control over materials handling and the overall supply management performance. The implementation of a supply management process will give the organization back the control over its operations and business culture. The potential contribution to effective organizational operations is essential in the function of an inventory cataloged system for recurring material purchase items, structure and discipline across the organization and position focus and restructuring. By recommending and successfully implementing purchasing procedures and material receiving control Blozis will be able to better utilize strengths already within the organization and hone on new found strengths through proper management structure and advanced technical specification training.

Part 2: Issue Identification

The primary issue faced by Blozis Company is an absence of communication and control throughout its procurement process. Uncertainty and misalignment is evident across their decentralized and informal supply chain. Anyone in the company can initiate requisitions and material can be purchased with minimal to no approval. The informal presence and lack of leadership from the top down contributes to a number of important issues that need to be addressed in order for Blozis to continue being successful.

First off, roles and responsibilities within the organization are not clearly defined. The supply department must rely on outside departments to decipher the technical specifications; this is significant since the $16 million gross sales of the company consisted primarily of units designed to customer specifications. The expeditor, part of the Production department, periodically issues purchase orders for rush items and in other cases, has picked up materials without a confirming order. This problem produces an influx of issues downstream in the supply process ending with missing materials and outstanding payments to put it mildly.

Secondly, there is a lack of control over the supply process leading to improperly received and accounted for materials at the receiving dock. Proper notification is not given to operations or production personnel when materials are received, leading to long overdue payments to suppliers and more importantly, missing sizable discounts with failure to meet the net date on several bills.

Finally, the overall organizational culture and attitude or "informal" business presence has led to weaknesses in the overall supply management performance including poor best practices and mismanagement of product. Issuing a purchase orders after shipments have been received not only damages business relationships within the organization and with suppliers but is not SOX compliant and can have serious legal implications against the company.

Part 3: Environmental & Root Cause Analysis

The lack of leadership, communication, and control is creating chaotic procurement process and increasing costs for the company. The communication barrier has evolved over time due to the highly technical nature of the company and the fact that even the supply manager has no technical training in this highly technical equipment manufacturing business. Although something can be said for experience, in this case a "fair grasp" of the engineering terminology used in the field, evidently is not adequate for the level of expertise required for Blozis. However, even when employees do have some technical training and knowledge as in the case of the expeditor who has been stretched thin across the company's departments, if their skills are not focused in the right areas with the appropriate amount of workload it will only lead to failure. Currently the expeditor is overworked, as he is involved in more than his assigned tasks including consultation for substitute components and ordering issues, writing commercial specification, requisitions and supervision of the stock room. Not only is there is no segregation of duties for the expeditor but as mentioned 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; receiving reports are frequently missed, end users are not notified when materials arrive, orders are lost, and suppliers are not paid on time. In addition, the lack of technical specification knowledge present within the supply chain has led to longer times to issue and process purchase orders. Consequently, purchase orders are often made up to match invoices if the material had obviously been received from the supplier - if it could be located!

Part 4: Alternative

The first option would include the introduction of a supply council composed of site leaders, role distinction - specifically the expeditor role, and introduce a streamlined process for receiving materials and payments.

Pros:

- The council would work to standardize processes across the site, aggregate requirements, and streamline the material management process.

- Role definition would create job focus and allow for better communication across departments.

- Accounting for materials when they enter or leave inventory

- Easier to tract whether materials have been charged to the correct departmental budget and paid for within the suppliers' set payment terms.

Cons:

- Challenging to get willing participation by site supply leaders

- Difficult to standardize primarily units designed to customer specifications.

- Potentially