Please read & answer the questions in detail. Gene Smith, supply manager for the Oakland School District, has just completed an analysis of his workload for buying paper. His staff, consisting of an assistant, two buyers, a clerk, and a stenographer, had complained of the steadily growing number of orders that the department had to process. The school district had expanded to include another high school and two vo-tech schools during the last several years. This expansion, plus normal growth, had created a workload in which 31,164 purchase orders (exclusive of changes and adjustments) were placed, spending $5,405,678 with 1,296 suppliers. Another breakdown Gene developed showed that 15.2 percent of the suppliers received 82.5 percent of the dollar volume purchased.

A further analysis revealed that the average value of all orders placed was $482.21, and that 35 percent of them ranged between $30 and $100 and totaled 2.8 percent of the total dollars spent annually. In fact, 23 percent of the purchases were for less than $30 and added only 0.35 percent to the dollar volume. Purchase orders were evenly spread throughout the year, running about 2,600 per month.

One cause for the numerous orders, he told the district director for operations, was "daily need for rubber stamps, small equipment parts, special laboratory supplies, fluorescent tubes, MRO supplies, and other miscellaneous items." In Gene's words, "the school district seemed to be like a custom job shop type operation." In addition, the various departments wrote an excessive number of requisitions for supply management because they needed detailed records for their files, which are required by the stringent district accounting control policies.

Gene had asked Harry Flint, the controller, to reduce some of the documentation required. He was told that "it's necessary to have proper records to control expenses, and the extra orders are not extra expenses because you would be on the payroll anyway."

Mr. Flint also pointed out that the stores supervisor, who initiated many of the orders, was following present district policy to keep only very active inventory items in stock and to make direct purchases of all others. Both the controller and the stores supervisor were under the treasurer's office, which in turn reported to the district superintendent.

Another problem was the unpredictable number of change orders issued by maintenance and by the district engineer's office. These modifications involved changes in quality specifications, actual amount delivered, and date of delivery originally specified by users or by inventory control. Accounting insisted that it would not approve invoices that did not completely match a confirmed purchase order or its supporting changes. During the past year, 5,678 change orders had been issued, of which 2,946 had been due to relatively minor variations.

Smith knew that local suppliers and distributors had complained of the burden of small orders and that some were considering a minimum charge of $40 per order. After further investigation, he concluded that small orders were not economical for either the buyer or the seller and had asked the accounting office and stores to help him solve this problem. However, neither would suggest to his boss, the district treasurer, any change in policy or procedure. Smith's boss, the director for operations, also reported to the district superintendent and had expressed interest in trying to update the growing organization's management methods.

1. Identify the basic issues and management problems that Smith should consider in trying to improve the situation.

2. What additional information should Smith attempt to obtain?

1. How would you suggest Smith solve these problems?

Answer rating: 100% (QA)

Identify the basic issues and management problems that Smith should consider in trying to improve the situation a High Number of Purchase Orders The workload for processing purchase orders has steadil... View the full answer