Assessment task 2—Analytical report (alternative B)
Due date: 1PM AEST, Thursday of Week 10 (October 8) ASSESSMENT
Weighting: 50% Length: 3000 words ±10% (excluding front matter and reference list) 2
Objectives
This assessment task relates to course learning outcomes numbers 1 to 5.
Before starting this assessment read the marking criteria (below) and information about business report
writing on the Academic Learning Centre (ALC) website:
https://moodle.cqu.edu.au/course/view.php?id=1497 (Choose the ‘Academic Communication’ door.)
The course website also provides useful information in regard to the development of this assessment item. In
particular, you must read the Assignment Writing Requirements document on the course website. This
document outlines course specific assignment requirements in some detail.

Purpose

The primary purpose of this assessment task is to help students develop skills in the use of OM principles,
theories and models in the analysis of the current operations of a service industry organisation. The
assignment requires you to analyse the current situation, identify the operational problems within the
organisation, and develop a set of recommendations that, when implemented, will overcome the identified
problems without creating new ones. In this assessment piece you are expected to provide a solution,
recommendations and action plan.

The secondary purpose of this assignment is to give students the opportunity to further develop analysis and
problem identification and problem solving skills, as well as skills in presenting an argument for change
within the framework of a business report.

Description

Assessment task 2 requires the writing of a business report. The report should explain what the current
situation is, what problems are in evidence and how those problems should be addressed. As a business
report it should be concise, accurate and actionable. At the same time, the report should be founded on
appropriate Operations Management principles and theories, and be supported by appropriate evidence and
discussion from relevant academic literature.

Details

The assessment item is based on the case study titled Silvaro Motors (a fictitious company). You should
read, and carefully analyse, the case and respond to the issues presented at the end of the case study within
the context of a short business report. The objective of the case study is to provide an operations
management situation that can be studied and analysed. You will need to put yourself in the role of a
management professional who is asked by the organisation to identify the nature of the problem(s), why or
how the problem happened or evolved, and make recommendations that will resolve it.

MGMT20085 2 Term 2, 2015

Case study: Purchasing and Inventory at Silvaro Motors
Helen Silvaro, CEO of Silvaro Motors, has just returned to her office after visiting the company’s newly
acquired automotive dealership. The new dealership was the fourth Silvaro Motors dealership in a
network that served a metropolitan area of over two million people. Beyond the metropolitan area, but
within a 45-minute drive, was another half a million people. Each of the dealerships in the network
marketed a different make of car and historically had operated autonomously.

Silvaro was particularly excited about this new dealership because it was the first “auto supermarket” in
the network. Auto supermarkets differ from traditional car dealerships in that they sell multiple makes
of cars at the same location. The newly acquired dealership sold a line of Daewoos from Korea,
Mahindras from India and Cherys from China. This brought the total number of brands sold by the
group to six.

Since the purchase of a bankrupt Mitsubishi dealership 15 years ago, Silvaro Motors had grown
steadily. As the city was relatively small, it was difficult to expand within a single brand, so eventually
Silvaro purchased a rundown Mazda dealership, and shortly afterwards, a small Hyundai dealership as
well. Under her direction, all three dealerships saw rapidly improving sales figures and the Silvaro
Motors network grew in strength and reputation.

Silvaro attributed this success to three highly interdependent factors. The first was volume. By
maintaining a high volume of vehicle sales and turning over inventory rapidly, economies of scale could
be achieved, this reduced costs and provided customers with a large selection. The second factor was a
marketing approach called the “hassle-free buying experience.” Listed on each automobile was the “one
price—lowest price.” Customers came in, browsed, and compared prices without being approached by
pushy salespeople. If they had questions or were ready to buy, a walk to a customer service desk
produced a knowledgeable sales person to assist them. Finally, and Silvaro thought perhaps the most
important, was the after sales service. Silvaro Motors had established a solid reputation for servicing,
diagnosing, and repairing vehicles correctly and in a timely manner—the service division’s motto was
“do it once, do it right”.

High-quality service after the sale depended on three essential components. First was the presence of a
highly qualified, well-trained staff of service technicians. Second was the use of the latest tools and
technologies to support diagnosis and repair activities. And third was the availability of the full range of
parts and materials necessary to complete the service and repairs without delay. Silvaro invested in
training and equipment to ensure that the fully trained personnel and the latest technology were
available at all sites. What she worried about, as Silvaro Motors grew, was the continued availability of
the right parts and materials. She knew there was a fine line between too much and too little stock. With
the new dealership, the complexity of inventory control had increased dramatically. This concern caused
her to focus on the purchasing function and management of service parts, accessories and materials
flows at both a supply chain level, and as an internal function.

Silvaro thought back on the stories in the newspaper’s business pages describing the failure of
companies that had not planned appropriately for growth. These companies outgrew their existing
policies, procedures, and control systems. Lacking a plan to update their systems, the companies
experienced myriad problems that led to inefficiencies and an inability to compete effectively. She did
not want that to happen to Silvaro Motors.

Each of the four dealerships purchased its own service parts and materials. Each location had its own
purchasing officer and parts manager. Some purchases were based on forecasts derived from historical
demand data, which accounted for factors such as seasonality. Batteries and alternators had a high
failure rate in the winter, and air-conditioner parts were in great demand during the summer. Similarly,
coolant was needed in the spring to service air-conditioners for the summer months, whereas antifreeze
was needed in the autumn to winterise cars. Forecasts were also adjusted for special vehicle sales and
service promotions, which increased the need for materials used to prepare new cars and to service other
vehicles.

MGMT20085 3 Term 2, 2015

One thing that made the purchase of service parts and materials so difficult was the tremendous number
of different parts that had to be kept on hand. Some of these parts would be used to service customer
vehicles, others would be sold over the counter to retail customers, whilst others (particularly genuine
replacement parts) were on-sold to trade customers. Some had to be purchased from the car
manufacturers (genuine replacement parts and accessories) as most customers expected genuine
replacement parts to be used, or because that was the only source of supply. Non-genuine replacement
parts and accessories were purchased from a variety of suppliers and other parts and materials such as
oils, lubricants, fan belts and other generic service parts and materials, could be purchased from any
number of suppliers. In her mind, Silvaro considered that there were three main classes of inventory
involved in the business (apart from vehicles), genuine spare parts, non-genuine spares, and generic
parts, materials and consumables. Thus, she felt that there were three basic supply lines that needed to
be managed. She was also concerned that the purchasing department maintained an awareness that the
success of the dealership depended on (1) lowering costs to support the hassle-free, one price—lowest
price concept, and (2) providing the right parts at the right time to support fast, reliable after-sales
service.

As Silvaro thought about the purchasing of parts and materials, two concerns were evident: the amount
of space available for parts storage and the level of financial resources available to invest in parts and
materials. The acquisition of the auto supermarket dealership put an increased strain on both finances
and space, with the need to support three different car lines at the same facility. Silvaro was acutely
aware that inventory holdings cost money and reduced profits. She also knew that without proper
inventory management, the company’s strategy could not be successful. Investment in excess inventory
had to be avoided at all costs, and as space across all the locations was at a premium, a more systematic
approach was needed. Silvaro wanted a ‘whole of organisation’ solution, and wondered what could be
done in the purchasing, supply chain, and inventory areas to address some of these concerns and
alleviate some of the pressures.

Task

As a newly appointed Purchasing Manager at Silvaro Motors you are required to prepare a report for Ms
Silvaro that addresses the following questions:
1. How might purchasing and inventory management policies and procedures differ because the
different types of service parts and materials (e.g. genuine parts; non-genuine parts; generic parts,
materials and consumables) were purchased from different supply lines?
2. What appear to be the main weaknesses of current purchasing and inventory management practices
at Silvaro Motors, and how could these weaknesses be affected by the new acquisition?
3. How can purchasing, supply-chain and inventory management concepts help Silvaro Motors reduce
investment and space requirements whilst maintaining adequate service levels?
4. What recommendations would you make to Ms Silvaro with respect to restructuring the purchasing
and inventory functions for the Silvaro Motors dealership network?
The report should be a confidential report for the CEO, and be presented as a suitably professional document.
It is expected that your discussion will refer to appropriate models and theories covered in this course, but
your research should extend the theoretical discussion beyond the course material. The assessment criteria
should give you a clear indication of what you need to include in this assignment. The report should include
an effective introduction and conclusion; an executive summary of no more than one page to preface the
report; and a table of contents to give guidance to the reader. The report should be accompanied by a letter of
transmittal.

This assessment item involves researching your assigned topic to enhance your understanding of Operations
Management concepts and utilisation of academic literature. If you are not familiar with the retail motor
industry, some field and/or desk research would be advisable. Whilst you should AVOID using only
textbooks, the prescribed textbook for the course must be cited in regard to broad operations management
principles highlighted by the case. You are expected to present information and evidence from, and cite, at
MGMT20085 4 Term 2, 2015