Allen Park Power Case Study

Executive Summary

Allen Park Power Ltd. (APPL) is a municipal power company, it provides electrical generation, distribution and sales to the citizens and industry within city boundaries. These are the metrics used to evaluate the success of the recommendation listed below.

We outlined several alternatives at the corporate level available to Allen Power Park Ltd. including procuring product overseas, hiring a specialist that is familiar with this market in Asia. Implementing a procure to pay system to decrease over head costs and decrease inventory variances.

Based on the decision criteria the recommendation is to focus on moving away from single sources and using multiple suppliers and evaluating them based on performance more frequently.

Issue Identification

Tactical Issues – Short Term:

1. Supply of Transformers

This is a very urgent issue and will greatly affect the success of APPL.

2. Review the length of five-year supply agreements.

This issue will greatly affect how often the evaluation of the supplier is made based on price and delivery.

3. Forecasting Accuracy

Accurate projected values will decrease funds used to rush in materials. Savings in time and money.

Strategic Issues:

1. Single Sourcing Transformers

This is a very important issue to avoid being in a similar position in the future.

2. Reduction in Greenhouse Gas Emissions

This can affect the long-term relationship with suppliers.

3. Demand for Copper

This can affect the price long term.

Root Cause Analysis

Allen Park Power Ltd. Mission Vision and Values

Allen Park Power operates in a safe environmentally responsible manner that delivers above average returns for our owner. At home and across the world Allen Park Power is the number one choice for safe, reliable and effective electrical power. Our five core values inform all the decisions we make in our business: Safety first – for our employees and our customers, People make the difference – we treat our employees and customers with respect, Environmental stewardship is our responsibility, we are long-term thinkers in a long-term business, and we improve the quality of life for all who come in contact with us.

SWOT Analysis:

Strengths:

• The company is starting to build green purchasing into their practises.

• Increasing contact with suppliers over seas.

• Implementation of Key Performance Indicators to measure company performance.

• Provides electrical generation distribution to the entire city within city boundaries

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Weaknesses:

• Translating customer demands into supply forecasts for materials.

• Paper-based requisition system in purchasing. This creates a bottleneck, the data-entry and processing takes longer than it should and is prone to error.

• The media seems to be very critical of practises such as sole sourcing and the use of negotiated partnerships rather than competitive bidding.

• APPL has not international experience.

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Opportunities:

• The board is considering entering a joint venture to develop a nuclear power station, but this not an area the company has expertise at the moment.

• Rural usage.

• Planning to outsource APPL’s IT systems.

• Online reverse auctions.

• Green purchasing

Threats:

• The company receives a great deal of public scrutiny especially over issues of pricing, purchasing, cost control, service, social responsibility and environmental impact.

• Green Purchasing.

• Demand for copper has skyrocketed.

Alternatives and Options

A. Focus on having multiple suppliers for