Case Study Report – ROSEWOOD LIMITED Rosewood Limited is a shipbuilding company specialising in the manufacture of yachts, ships, luxury vessels and small cruisers in Australia. Seven months ago, it recruited a new engineering design manager who initiated a design review of the whole range of high speed and lightweight ships. This has led to significant changes to the bills of materials for each product within the range. At last year's international boat show held in Darling Harbour, Sydney, the new range was shown to trade buyers. The demand has been exceptional and the current year’s sales are already showing an increase of 24 per cent. This has led to the five-year business plan being revised. Year-on-year, sales are predicted to carry on rising by at least 15 per cent. Last week the CEO called for a meeting with the management team, including you as the procurement manager. The meeting dealt with the increase in production and its impact on existing skills and manufacturing facilities and the discussion then focused on procurement issues. The engineering design manager voiced the view that, given the increase in quantities, the purchase prices should ‘come tumbling down’. He mentioned the learning curve as being very relevant, and proposed that your department immediately undertake an investigation into how the purchase prices could be dramatically reduced. This point was supported by the CEO. The production manager then said that some existing 10 manufacturing lines would have to be outsourced because he could not create the necessary production facilities in the available time. Rosewood Limited has never previously outsourced and has seen no requirement for any form of electronic purchasing infrastructure. However, an internal group is well advanced with the development of an EBS (Enterprise Business System) and this is your opportunity to state a case for e-Procurement. The CEO has asked you to prepare a report to deal with the outsourcing actions and the CEO understands this will be a major challenge for you and your department. You have promised within a month, you will have a report on the purchasing strategy for the nominated 10 lines to be outsourced as declared by the production manager. Questions Using the facts as presented above for Rosewood Limited, write a 3,000-word (+/- 10%) word business report which addresses the following: 1. Include an Executive Summary that provides a clear and concise summary of the major points of the report. 2. Present the actions you would include in the project plan to ensure your department's capability to deliver effective strategic procurement. 3. Explain the theory of ‘make or buy’ and ‘outsourcing’ and state which theory (or it may be both) you are going to use and why. 4. Using Kraljic’s procurement model, assess the importance of the ‘ten (10) lines with considerable sub-assembly work’. 5. Define Supply Relationship Management (SRM) and explain how technology enhances SRM. 6. Having considered your position, make detailed recommendations to the CEO. This is to be presented as a Business Report and it is recommended to use the following structure: Executive Summary This section provides a 1-page summary of the major points of the report. You are required to write this as a Business Report specific for Rosewood Ltd. The purpose of an Executive Summary is to enable the reader (CEO) to understand the pertinent elements of the report being methodology and findings, at a glance, without having to read the whole report. The recommendations of your academic research will be summarised here as action points for the company. Project Plan for the procurement department You need to develop an overall project plan (this is not the Outsourcing Strategy as this topic is covered in the next section). Topics that could be considered may include (but are not limited to), procurement strategy, structure of the procurement division, teams (maybe call for tenders), partnering, adoption of electronic support, buying from overseas, etc. This is your opportunity to advise the CEO on how you want to set up the structure and actions of your department. ‘Make or Buy’ or ‘Outsourcing’ Strategy Your department is going to grow and there is little time to think about strategy, so you need to learn fast. The decision to ‘Make or Buy’ and/or ‘Outsource’ is very complex and these concepts are supported by robust academic research that includes both a commonality and a distinction between them. As we do not know in detail about the ’10 lines’ other than they include sub-assemblies, academic theory helps make the decision on what you are going to do (whether ‘make or buy’ and/or an ‘outsourcing’ strategy). Explain using the literature why you are taking this direction. It is important to make a decision and support it thoroughly, as the CEO is expecting you to be decisive. Kraljic Procurement Portfolio Model Research the Kraljic model using at least 2 most recent academic journal articles (published within the last five years) and apply the model to the case study. You will need to draw the model as part of your explanation (graphical brilliance not required) and position the ’10 lines’ as a collective described as ’10 lines’ on the model. You will use academic research to support your explanation of the positioning on the model. It is advised that you adopt the Kraljic model published in academic journals (and the course text), rather than those found on the internet using Google Search. Internet models will not be acceptable for this assessment. Supply Relationship Management (SRM) and impact of e-procurement The 21st century model of SRM mandates the relationship between buyer and supplier be increasingly conceived as a collaborative partnership. Explain SRM and provide detail of how your e-Procurement strategy will enhance SRM as well as the competitiveness of Rosewood Limited. Recommendations This section outlines your recommendations to the CEO on your strategy. It should be presented in a professional manner (without the use of bullet points). Provide a word count at the end (excluding the Executive Summary, Reference list or any figures/diagrams). Marking criteria and standards: The report will be assessed on the following criteria: - relevance of your answer to the question - originality and creative thought - up-to-date research with the topic - clarity of expression - supporting documentation for arguments - correct documentation and use of at least TEN sources of references including SIX journal articles - logical planning and sequence - use of inclusive language - overall presentation including correct grammar, spelling and punctuation - comprehensive coverage reflecting engagement with readings, texts and other relevant materials Format: Content Page (2 marks) Executive summary (8 marks) Project plan for the procurement department (15 marks) Evaluation of ‘Make or Buy’ and ‘Outsourcing’ strategy (15 marks) Application of the Kraljic procurement model (15 marks) Supplier relationship management and impact of e-procurement (15 marks) Recommendations (10 Marks) Words count: Referencing (10 marks)