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Iowa Elevators

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by

Jeffrey Allen

on 29 April 2014

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Transcript of Iowa Elevators

Iowa Elevators
Introduction
Scott McBride, Director of Purchasing
Tasked with five-year plan to reduce costs
The upcoming year includes:
Identifiable projects & initiatives
Schedules
Project plans
Expected costs
Benefits
Plan is to be presented to executive management
Scott viewed this as an opportunity to redefine the role of purchasing at Iowa Elevators
Background
One of the largest grain-handling companies in U.S.
Headquarters: Des Moines, Iowa
Annual revenue: $2.3 billion
Employed > 2,500 people
Two main business units / divisions
Grain-handling and marketing
Farm supplies
Grain-handling/marketing division operated 300 grain elevators in Midwest (represents 75% of revenue)
Revenue decreased by 20% from last year due to drought
During recent fiscal year
Loss of $11 million
Sharp decline in working capital
Attributed to lower volumes in its grain-handling/marketing division
Purchasing & Supply Management Department
Only change has been the addition of a travel coordinator
History of decentralized management system
Elevator Mgrs. held many responsibilities
Purchases for elevator operations handled locally and monitored based on spending limits set in annual operating budgets
Farm supplies division had four product managers responsible main segments:
Supplier selection
Product mix
Branding
Promotion
Corporate Spending Analysis
Focused on two things:
The MIS Proposal
MIS Director requesting $10 million in additional spending beyond standard upgrades over next five years
Anticipated cost savings of $500,000 per year
Stephanie Abayan
Jeffrey Allen
Peiqi Li
Elliott Schultz
Sandy Vu
& Hanna Yi

1. How much money did IE spend with its outside suppliers
2. How much inventory did the company carry
Total Purchases by Category:
Team Onesies:
Farm Supplies Division Inventory:
Preparation for the Meeting
Five-year plan needs specific objectives for each year
Cost reduction targets
Established budget and HR requirements for recommendations
Staff needs to be increased if purchasing dept. was to be expanded
Proposal plans
Proposing a new organization structure
Establish head count plan & budget for purchasing dept.
Issues of Iowa Elevators
Staff surplus
Surplus suppliers (1,500)
20 suppliers accounted for 45% of total spend
Top five suppliers represented 35% of total spend
Spending categories not representing enough info
Recommendations
Immediate Solutions
Develop an approved accounting system
Work w/ division & field managers to create a collaborative solution on cutting costs
Request additional info for $10 million MIS proposal
Negotiate contract terms & reduce amount of suppliers
Analyze transportation info to determine any inefficiencies
Implement a cross-functional supply team
Long-Term Solutions
Implement a hybrid system to improve efficiency
Evaluate correlation between inventory on hand & annual purchases to determine most efficient amount of inventory to keep on hand
Have the MIS department implement a new software to better analyze the data and improve the communication of this information to management
Reevaluate the delegated tasks to connect similar responsibilities (i.e. separate the Grain handling and marketing department to improve the quality of each department)
Conclusion
With the data provided, Scott is able to make several recommendations in his meeting to help redefine the role of purchasing within the company.
Resolve the problems by removing excess staff through combining different responsibilities & re-evaluate all current responsibilities
Create/obtain a new software system that will be able to categorize costs better to analyze the $11,926,000 in unclassified spending
Most importantly, Iowa Elevators must adopt a hybrid system to improve purchasing efficiency
Questions?
Full transcript