Page 58 - DMGT525_MATERIALS_MANAGEMENT

Unit 4: Purchasing Management

 It also appears that freedom of association and collective bargaining are not taking Notes
place on this site.
Breaches of ETI's Principles: The retailer's buying practices also go against the Principles
of Implementation. In particular, the following Principles are not applied:
 The code and the implementation process are not integrated into the core business
relationships and culture.
 Negotiations with suppliers do not take into account the costs of observing the code.
What went Wrong?
From the information given, it appears that a number of factors led to these breaches
occurring, including the facts that:
 There is fluctuating consumer demand.

 The retailer and supplier have not agreed a minimum order value or volume, which
means that significant order reductions or cancellations can occur without
compensation.

 No notice is given to suppliers for changes to orders.
It also appears that there is no collective bargaining of workers with the employer to
agree overtime, transport and shift arrangements.

What could be Done in Future?
ETI members identified a range of measures that retailers, in conjunction with suppliers,
could adopt to prevent this kind of breach occurring in future. This is not an exhaustive or
prioritised list, but a set of potential solutions which individual companies would need to
explore for themselves.

Raise Awareness among Buyers: Raise awareness amongst buyers of the impact their
decisions have on suppliers. Emphasise the importance of making changes as early as
possible (eg the day before) so that workers have notice and can volunteer for overtime.
Agree Minimum Orders: Set out minimum order volumes or values with suppliers to give
more stability to the supplier.

Model Wastage Costs: Work with suppliers to find ways of reducing waste, model the cost
to the producer of unavoidable waste, and build this in to retailers' cost models.
Improve Forecasting: Explore improvements to forecasting, such as:

 Sharing real-time sales data with suppliers.
 Where possible, holding buffer stocks in cold storage to deal with peaks in demand.
 Researching the peaks and troughs of demand to identify any improvements that
can be made to forecasting systems.
 Training forecasters to ensure they are using the best available forecast methods.
Encourage Actions by Suppliers: Members also identified a number of actions that could
be taken by suppliers, including:
 engaging with workers to explore solutions, such as setting up shift patterns; and
 making buses available for workers to leave at the end of the standard working day,
as well as at the end of an overtime period.
Contd...

LOVELY PROFESSIONAL UNIVERSITY 53