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Iowa Elevators

In: Business and Management

Submitted By fdeoli
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Iowa Elevators Case
1. Where would you start? With which of the purchase categories?
It is wise to look at which categories have the most expenses: which in this case is the farm supplies, MRO/Construction and transportation services. It seems that combined, they account for approximately 75% of overall annual expenses. One should analyze why they are so high.
2. How much money do you think you can save in each of the next five years?
It is hard to predict the savings because of limited information but one can predict that once the targeted purchase categories are accounted for this savings can occur: Year 1: $0, Year2: $3mi, Year3:$6mi, Year4:$ 18mi and Year 5: $33million.
3. What are the inventory turns for farm supplies? What kind of improvements can be made in inventory management and how?
The inventory turn for farm supplies are crop protection: 1.9, equipment and supplies: 0.60, fertilizer: 6.2 and seed: 4.2. Many improvements such as adding hybrid centralized- decentralized method to their supply management, hire specialists to only focus on managing supply and inventory rather than give managers too much power and overwhelm them and lastly increase inventory turnover especially on equipment and supplies since its very low but also targeting all farm supplies. Maybe the company can also increase supplier relationship and buy local.
4. Why hasn’t Scott McBride proposed a cost reduction plan in the past?
Mr.McBride, the director of purchasing, has not proposed a cost reduction in the past because he was working with a small limited group of team that focused mainly on office supplies, brochures, advertising and other purchases. Iowa Elevators also did not view the purchasing department as a primary importance until new executives stepped in and realized that one can save a lot more by cutting costs in the inventory level (supply management) rather than…...

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