WEDLOCK-prefinal (1)

docx

School

Southern Alberta Institute of Technology *

*We aren’t endorsed by this school

Course

370

Subject

Management

Date

Jun 14, 2024

Type

docx

Pages

Uploaded by GeneralMoonKookabura41

Case 10-1: Wedlock Engineered Products (p. 308)

Table of Contents CASE 10-1: WEDLOCK ENGINEERED PRODUCTS ................................. 3 INTRODUCTION .......................................................................................... 3 Major Issues: .......................................................................................... 3 S CENARIO QUESTIONS ................................................................................. 3 1. How much weight should be placed on previous supplier performance when selecting a supplier? ................................................ 3 2. Is $24,000 in savings worth the trouble of switching suppliers? ........ 4 3. What will the response be from Vergis if you stay with Marandi, after they provided a lower bid? ...................................................................... 5 4. Do you want to split the business between the two suppliers? ......... 6 5. If you switch to Vergis for the 3-inch tubes, how will that affect your relationship with Marandi for the rest of your business with them? ........ 6 6. Is using an RFQ the right approach in this situation? ....................... 7 C ONCLUSION : .............................................................................................. 8 R ECOMMENDATION : ................................................................................... 10 REFERENCES: ....................................................................................... 11

Case 10-1: Wedlock Engineered Products Introduction Wedlock Engineered Products (WEP) is facing a critical decision regarding the supply of 3-inch tubes. Cynthia Gao, the procurement manager for the company branch in Buffalo, New York, has two supplier options: Marandi Steel (Marandi) and Vergis Tubing (Vergis). In this report, strategic recommendations will be provided to guide the company in making an informed decision. This report will address key scenario questions concerning supplier selection, cost analysis, supplier response considerations, business split options, relationship management, and procurement strategy. By thoroughly examining these aspects, the report aims to offer actionable insights to facilitate effective decision-making and ensure the long-term success of WEP. Major Issues: ● Cost Savings: Vergis offers $24,000 in annual savings compared to Marandi. ● Supplier Performance: Marandi already has a proven track record of reliability and quality. ● Relationship Management: Switching to Vergis might strain the relationship with Marandi, the current and long-standing supplier. ● Risk of New Supplier: Vergis is unknown and can potentially have quality or delivery issues. ● RFQ Effectiveness: The RFQ process might not capture all relevant factors beyond price. Scenario questions 1. How much weight should be placed on previous supplier performance when selecting a supplier?  Strengths of Marandi: Proven reliability, on-time delivery, just-in-time system reducing inventory costs. These translate to operational efficiency and potentially outweigh the price difference.  Unfamiliarity with Vergis: Quality consistency, lead times, and reliability are unknowns. Switching could introduce disruption and unforeseen possible costs.  Analysis: While cost is an important driving factor in supplier selection, relying solely on it can possibly be risky. A cheaper supplier can compromise quality which can lead to delays or lack the expertise to meet your needs. Conversely, a more expensive supplier with a proven track record of reliability, quality, and responsiveness can possibly save

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

the company money in the long term in terms of reducing defects, delays, and downtimes (Stanton, D. 2021).  Other possible options:  WEP can also be open to the possibility of negotiating with Marandi, using Vergis’ bid as leverage to be able to aim for a price closer to Vergis’ offer while still emphasizing the value of their existing relationship and performance history.  It is also possible to have trial runs with Vergis for a limited quantity to assess quality and delivery before committing to a larger switch.  The option of multi-sourcing can also be checked, considering the division of the order between Mirandi and Vergis based on agreed upon criteria like price or product type.  Ultimately, choosing a supplier involves balancing cost, performance, and relationship considerations. Through careful analysis of the options, and through effective negotiations, WEP can make an informed decision that benefits the business in the long run. 2. Is $24,000 in savings worth the trouble of switching suppliers? ● Direct Savings: ○ $24,000 is attractive, but potential hidden costs (integration, logistics, quality issues) may negate it. The $24,000 in potential savings offered by Vergis presents an enticing immediate financial benefit. ○ For instance, a manufacturing company decided to switch suppliers in order to save money in a case study covered by Smith (2019). Even while they initially noticed cost savings, they quickly found that the new supplier had problems with quality control and delivery reliability. As a result, there were more product delays and defects, which impacted sales and harmed relationships with customers. The initial cost savings were ultimately negated by the additional resources the corporation had to invest to address these concerns. ○ Furthermore, disruptions in established processes and relationships stemming from supplier changes can have significant consequences. In an article by Lee and Carter (2017), a company experienced operational disruptions and longer lead times when transitioning to a new supplier. These production delays resulted in missed delivery deadlines and unhappy customers. Additionally, strained relationships with the former supplier made it challenging to resolve outstanding issues and negotiate favorable terms for future collaborations. ● Operational Impact: ○ Switching may lead to disruptions in established processes and relationships (Johnson, 2023). WEP needs to evaluate potential losses in efficiency and productivity if it switches to Vergis.

Assessing the sustainability of Vergis' cost advantage over time necessitates a thorough analysis of market trends and supplier performance. Supplier costs can be impacted by changes in market demand and fluctuations in the price of raw materials (Johnson, 2023). Short-term cost savings alone could have unfavorable long-term consequences if these factors are not fully understood. ○ ● Long-Term Cost: ○ Consider whether Vergis can maintain the cost advantage over time. The sustainability of Vergis' cost advantage hinges on various external factors, including market trends, economic conditions, and supplier performance. For instance, fluctuations in raw material prices or changes in trade policies could impact Vergis' pricing structure and erode the initial cost savings over time. Additionally, disruptions in Vergis' operations, such as capacity constraints or supply chain disruptions, could lead to increased lead times or product shortages, resulting in additional costs for WEP. ○ Furthermore, the potential costs associated with reestablishing relationships with Marandi or finding alternative suppliers in the event of dissatisfaction with Vergis must be considered. Building trust and rapport with a new supplier takes time and resources, and any disruptions in supplier relationships could have cascading effects on WEP’s operations and competitiveness in the market. Therefore, even though the corporation may find the $24,000 in immediate financial gain to be alluring, it must take into account the long-term economic effects of switching suppliers. WEP can ensure sustainable value creation in its supply chain and make informed decisions that are in line with its long-term business objectives by considering variables like quality assurance, supplier reliability, market dynamics, and relationship management. 3. What will the response be from Vergis if you stay with Marandi, after they provided a lower bid?  Potentially, Vergis might have a negative reaction if WEP stays with Marandi. However, it is still important to maintain open communication and inform Vergis of negotiations with Marandi with a commitment to fair competition. Dawson (2011) highlights how losing a bid can possibly trigger disappointment and potentially lead to frustration, especially if Vergis invested significant effort in the process.  Possible Negative Reactions:  It is possible for Vergis to be disappointed and possibly frustrated and can potentially affect their willingness to bid in the future for the business.  Vergis might perceive the situation as WEP being unreliable or having biases, and potentially impacting future partnerships. Perceived unfairness in supplier selection can lead to decreased trust and lower supplier performance (Matopoulos, Didonet, Tsanasidis, & Fearne, 2019).

 Vergis' response to the decision to stay with Marandi after providing a lower bid must be managed carefully. Open communication with Vergis regarding the decision-making process and commitment to fair competition is essential. Emphasizing the value of the partnership and potential future opportunities can help maintain a positive relationship with Vergis, facilitating future collaborations and bids. 4. Do you want to split the business between the two suppliers?  Benefits of Diversifying Suppliers:  Diversification and risk management are key strategies for businesses to enhance resilience and reduce dependency risk. Having more suppliers provides you a safety net against situations like supplier insolvency or geopolitical conflicts, and expanding your supplier base helps you better manage unanticipated supply chain interruptions (Johnson, 2023).  Challenges of Engaging Multiple Suppliers:  Logistical Complexity: Balancing relationships, orders, and deliveries with several suppliers introduces logistical intricacies. Coordinating production schedules and maintaining optimal inventory levels have become more demanding tasks (Johnson, 2023).  Quality Assurance: Ensuring consistent quality standards across various suppliers poses a notable challenge. Each supplier may employ distinct processes, potentially affecting product quality and uniformity.  Relationship Management: Cultivating positive relationships with multiple suppliers necessitates dedicated resources and effective communication. Prompt issue resolution and fostering collaboration become indispensable.  Assessment of Vergis' Capacity and Reliability:  Capacity Evaluation: Conducting a thorough assessment of Vergis' production capacity is imperative. Can they accommodate our volume demands while maintaining quality standards and meeting agreed-upon lead times?  Reliability Assessment: Evaluating Vergis' track record for reliability, encompassing on-time delivery performance and responsiveness to inquiries or issues, is crucial. WEP must verify their capability to consistently meet our requirements.  In this case, it would be best not to split between two suppliers. Risk management is basically a non-factor in this case, as Marandi is a top-tier supplier that historically made on-time deliveries to WEP. Splitting the business may prove to be detrimental rather than beneficial, as the business dynamics may change and may cause procurement problems in the future. However, as a last resort WEP can opt for a 90-10 split in favor of Marandi just to test Vergis’ capabilities as a supplier and reduce WEP’s heavy reliance on Marandi, but only if Marandi agrees. WEP still does not want to lose the trust of its top supplier.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

5. If you switch to Vergis for the 3-inch tubes, how will that affect your relationship with Marandi for the rest of your business with them?  Switching to Vergis may cause a potential strain in WEP’s relationship with Marandi. Since Marandi has a long-standing business relationship with the company and has a proven track record, it may cause a loss of trust that may compromise present and future business collaborations. Communications with Marandi might also become strained that will cause difficulties in future contract negotiation and issue resolutions if any. The worse effect, given Marandi’s performance record, is that WEP may lose Marandi as a business supplier completely, with Marandi focusing on other companies who have complete “faith” in them.  To mitigate the losses due to switching suppliers, WEP may opt to take the following into consideration:  Communication and Transparency:  Clear and transparent communication is paramount in navigating this transition smoothly. By openly discussing the reasons behind the decision to switch suppliers and emphasizing the strategic considerations involved, WEP can demonstrate respect for Marandi's partnership and commitment to maintaining a positive relationship.  An example is a case study from Jones and Smith (2019) where a company decided to diversify its supplier base to mitigate risks. They communicate openly with their present supplier informing them about their decision, and explaining the reasons behind the move, and thanking them for their past collaboration. This approach helped to maintain goodwill and preserve the relationship despite the change.  Alleviating Concerns and Fostering Trust:  Expressing appreciation for Marandi's past support and highlighting the continued value of its partnership can help alleviate concerns and demonstrate our commitment to their business. By offering assurances of continued collaboration and proactive engagement, WEP can foster trust and ensure that its relationship with Marandi remains strong despite the changes in the supply chain dynamics. 6. Is using an RFQ the right approach in this situation?  Utilizing a Request for Quotation (RFQ) represents an important initial step in supplier selection, yet its applicability here warrants further scrutiny. This section will explore deeper due diligence is imperative and how emphasizing negotiation and relationship management can bolster WEP’s procurement strategy.  RFQ as an Initial Exploration Tool:

 RFQ serves as a valuable method to gather pricing data and gauge initial interest from potential suppliers (Johnson, 2023). It establishes a structured framework for soliciting quotes and comparing offerings, laying the groundwork for subsequent procurement activities.  The Need for Deeper Due Diligence:  Although an RFQ provides valuable insights, it should not serve as the sole basis for decision-making. Comprehensive due diligence entails evaluating factors beyond price, including supplier reliability, quality standards, and alignment with organizational goals. Jones and Smith (2019) underscore the significance of considering supplier capabilities and past performance when making supplier selections.  Prioritizing Negotiation and Relationship Management:  To gain favorable terms and develop productive partnerships with suppliers, negotiation is vital. By having meaningful conversations and maintaining open lines of communication, organizations may resolve conflicts, establish expectations, and promote cooperation. According to Johnson (2023), proactive negotiation techniques are crucial to building value and achieving the best results possible in relationships with suppliers.  Situational Analysis:  Consider an actual case where a manufacturing company requested quotes from several suppliers for a vital component. The company reinforced this by performing extra due diligence, such as on-site visits, assessments of production capacities, and quality audits, even though the RFQ made it easier to obtain competitive pricing. The organization was able to acquire affordable pricing through strategic negotiation and relationship-building activities, along with establishing long-lasting relationships built on mutual trust and collaboration.  In summary, while RFQ serves as an invaluable initial exploration tool, its effectiveness hinges on conducting comprehensive due diligence and prioritizing negotiation and relationship management. By adopting a holistic approach that considers multiple factors beyond price, organizations can develop proactive procurement strategies that enhance supplier relationships, drive value, and mitigate risks effectively. This decision presents an opportunity to : ● Strengthen Supplier Relationships: Foster collaboration and trust with key suppliers through open communication and continuous improvement. ● Develop a Proactive Procurement Strategy: Regularly evaluate performance, explore alternatives, and negotiate strategically for optimal value. ● Balance Cost and Performance: Recognize that the cheapest option isn't always the best. Prioritize reliable, high-quality materials while seeking cost- effective solutions.

Conclusion: After carefully considering the scenario and addressing the key questions raised, the recommendation regarding the supply of 3-inch tubes is to negotiate with Marandi to match Vergis' price while emphasizing the value of their existing relationship and just-in-time delivery system. If Marandi refuses, considering switching to Vergis solely for the 3-inch tubes while maintaining the rest of the business with Marandi could be a viable option. Regarding the scenario questions: 1. Previous supplier performance should carry significant weight when selecting a supplier, considering factors such as reliability, on-time delivery, and cost- effectiveness. 2. While $24,000 in savings may seem appealing, the long-term implications and hidden costs associated with switching suppliers must be carefully evaluated. 3. Vergis' response to staying with Marandi after providing a lower bid would depend on open communication, emphasizing the value of the partnership, and expressing potential future opportunities. 4. Splitting the business between two suppliers should be considered as a last resort due to logistical complexities and relationship management challenges. 5. Switching to Vergis for the 3-inch tubes could potentially strain the relationship with Marandi, necessitating clear communication and proactive relationship management. 6. Using an RFQ as an initial exploration tool is beneficial, but deeper due diligence and negotiation should precede price-driven decisions. In summary, the recommendation prioritizes maintaining a balance between cost considerations and supplier relationships, with an emphasis on long-term value and operational efficiency. Recommendation: Based on the analysis and assessment conducted, the following recommendations are proposed to guide WEP’s decision-making process regarding the supply of 3-inch tubes: 1. Negotiate with Marandi : Engage in negotiations with Marandi to match Vergis' price while highlighting the value of their existing relationship and just-in-time delivery system. Emphasize the importance of reliability, on-time delivery, and cost- effectiveness in the negotiation process. 2. Evaluate Long-Term Implications : Prior to making a decision solely based on cost savings, thoroughly assess the long-term implications and hidden costs associated with switching suppliers. Consider factors such as integration challenges, logistical complexities, and potential disruptions to established processes and relationships. 3. Maintain Open Communication : Regardless of the decision made, maintain open communication with both Marandi and Vergis. Inform Vergis of the negotiations with

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Marandi and express a commitment to fair competition. Ensure transparency and honesty in all communications to foster trust and preserve relationships. 4. Consider Supplier Relationship Management : Evaluate the potential impact of switching suppliers on the relationship with Marandi for the rest of the business. Proactively address any concerns and seek solutions to maintain a positive and collaborative relationship with Marandi, emphasizing the value of continued partnership. 5. Explore Alternatives : Consider alternative options, such as splitting the business between two suppliers, only as a last resort. Assess the feasibility and potential challenges associated with managing relationships, logistics, and quality control across multiple suppliers before making a decision. 6. Utilize RFQ as an Initial Step : While RFQ serves as a useful initial exploration tool, it should be followed by deeper due diligence and negotiation. Prioritize relationship- building and strategic negotiation to ensure optimal value and alignment with organizational objectives. By implementing these recommendations, WEP can make a well-informed decision that balances cost considerations with the preservation of supplier relationships and operational efficiency.

REFERENCES: Stanton, D. (2021). Supply Chain Management for Dummies (2nd Ed.). Tantor Media, Inc. https://www.everand.com/audiobook/636647076/Supply-Chain Dawson, R. (2011). Secrets of power negotiating: inside secrets from a master negotiator (15th anniversary ed.). The Career Press. Smith, J. (2019). Case Study: The Hidden Costs of Supplier Switching. Supply Chain Management Review. Lee, A., & Carter, B. (2017). Managing Supplier Transitions: Lessons Learned. Harvard Business Review. Johnson, P. F. (2023). Purchasing and supply management (17th Ed.). McGraw-Hill Education. Matopoulos, A., Didonet, S. R., Tsanasidis, V., & Fearne, A. (2019). The role of perceived justice in buyer-supplier relationships in times of economic crisis. Journal of Purchasing and Supply Management, 25(4), 100554. https://doi.org/10.1016/j.pursup.2019.100554 Jones, A., & Smith, B. (2019). Case Study: Navigating Supplier Transitions with Open Communication. Harvard Business Review. Smith, J. (2018). Case Study: Managing Multiple Supplier Relationships. Harvard Business Review.

WEDLOCK-prefinal (1)

Related Documents