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Question 1: Describe the procurement issues being experienced by the company in relation to the resources (either identified in the case study or identified by you in your organisations)?
Question 2: Identify through literature research sourcing methods, strategies and processes which may be used to overcome the current issues. Discuss these methods, strategies and/or processes in detail using correct Harvard referencing techniques.
Question 3: Based on the research and discussion from question 2 above, provide detailed recommendations for the organisation to overcome the current issues. These recommendations may include new sourcing methods, sustainable and environmental solutions, ethics protocols and/or new company policies and procedures.
Report Requirements
Use the report template
Include at least 8 references (at least 4 must be journal articles published between 2006 & 2011)
Katsand wines is a family owned business which was established in 1983 in South Australia’s McLaren Vale and commenced production of wines in 1985. The winery was made up of 10ha of grape vines (Shiraz, Chardonnay and Riesling varieties) and a small production area containing a 1500kg/hour crusher, 4 x 20,000L fermentation tanks, 6 x 225L American Oak barrels and 4 x 225 French Oak barrels. Due to the small nature of the winery the bottling of wines was outsourced to a larger company.
During the 1980s Katsand established its brand with five key wines:
Shriaz
Chardonnay
Riesling
Sparkling Bubbles
Shiraz Vintage Port
As the brand gained customer awareness, new varieties were introduced in 1989:
Traminer Riesling
Sauvignon Blanc
Cabernet Sauvignon
Cabernet/Shiraz Blend
As Katsand was not producing all of these grape varieties (Traminer, Sauvignon Blanc, and Cabernet Sauvignon) they needed to locate suppliers of these varieties. Traminer and Sauvignon Blanc grapes were sourced from suppliers in Eden Valley (Adelaide Hills) whilst Cabernet Sauvignon grapes were sourced from multiple suppliers in the Barossa Valley.
Expansion and Global Supply
In 1995, Katsand management made the decision to expand and move into the export market which was increasing significantly particularly to the United States, United Kingdom, Denmark, Norway, Canada and Chile.
In order to enter the market a number of processes needed to be undertaken:
Travel to the new locations to find customers for Katsand products
New labels to reflect export requirements
Arrangement for appropriate transportation to new locations
Work with distributors in new locations
Liasion with Wine Australia and the Australian government to comply with export requirements (http://www.wineaustralia.com/australia/Default.aspx?tabid=262)
This expansion was a slow process and the first export wines were sent to USA in 1999 and over the past 12 years the export market has increased to all proposed countries. Katsand exported 100,000L of wine in 2010 and has a budget to increase this by 15% by 2015.
To be able to produce this quantity of wine for export and still maintain a presence in Australia, Katsand outsourced crushing and fermentation requirements to other locations in the McLaren Vale and increased its outsourcing contract for bottling.
The Katsand Board of Directors as decided that as this expansion increases they would like to maintain control of wine production and this has meant an increase in the number of fermentation tanks, oak barrels and crushing equipment required at the winery. A discussion is being undertaken as to how to procure this equipment. Directors are divided between direct purchase, lease, auction and tender.
Sustainable Procurement
The Board of Directors has also made a key decision to incorporate an environmental approach to all purchases to counteract the Australian Government’s proposed Carbon Tax. Purchases will now take into account recycled products and those obtained from sustainable sources. Transportation services are also being considered.
In addition there has been a recent trend away from the use of cork to either plastic corks or stelvin caps. An investigation into the supply and effect of these items will also be taken in line with the sustainable procurement policy of the winery.
New Varieties
The market has changed recently and Traminer Riesling is no longer a sought after variety in any of the markets in which Katsand are competitive.
A market analysis has been undertaken and Katsand management are introducing the following varieties into the 2012 market:
Semillon/Sauvignon Blanc
Pinot Gris
Sparkling Red (Shiraz/Merlot)
Merlot
Red Blend (Cabernet/Shiraz/Merlot)
Purchases
The general purchases made by Katsand are as follows:
Bottles (various shapes and sizes)
Printed labels
Wood chips (oak)
Activated charcoal
Cleaning chemicals
Laboratory chemicals
Laboratory glassware
Stationary
Yeast
Grapes (contract supply)
The capital equipment which needs to be purchased includes:
Fermentation Tanks
Pumps
Oak Barrels (American and French)
New Warehouse
Bottling Line
Utilities that need to be purchased are:
Water
Electricity
Gas
Services that are currently purchased by Katsand are:
Accounting
Transport (grapes, juice, bulk wine, bottled product)
Bottling (to be replaced in part by Capital expenditure)
Travel
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