a) As Andrew Baines, what action would you take to solve the problems in the purchasing-marketing relationship? Case 4-2Eastern Pharmaceuticals Ltd.In the afternoon of September 12, Andrew Baines, assis-tant purchasing manager at Eastern PharmaceuticalsLtd. (Eastern), was discussing the purchase of packag-ing materials and contract filling of tablet samples witha supplier's representative. When the details of the pack-aging purchase order were finalized, Andrew told thesales representative, John Cao, of Lucas Paper & BoxCompany (Lucas), that he would send him the purchaseorder for the packaging components and 25 percent of thecontract filling. John replied that Shannon Baily, of themarketing department, had promised him 100 percent ofthe contract filling. "This is the first I've heard of that,"snapped Andrew. "It's not marketing's responsibility," hecontinued, controlling his temper, "to decide what per-centages of contract filling a particular supplier will get.Purchasing arranges the contract filling with the suppliersthat can give the best quality, delivery, and price."John Cao, an experienced sales representative,remained unperturbed. He replied that he had always dealtwith both marketing and purchasing and that sometimespurchasing was not involved at all in the projects. He saidthat in this case where both marketing and purchasingwere involved, he was just keeping purchasing informedof what marketing wanted. Andrew closed the meeting bypolitely telling John that he would have to clear up thesituation between the two departments. He told John thathe would let him know how much of the contract packag-ing Lucas would be getting.Andrew Baines, his boss Matt Roberts, and a seniorbuyer made up the total purchasing staff at Eastern. Oneof Andrew's responsibilities was to handle the purchase ofthe marketing department's requirements. He also actedas liaison between the department and the productionplanning, manufacturing, and packaging departments. Inrecent weeks, Andrew was finding the job more and morefrustrating.EASTERN PHARMACEUTICALSLocated in Seattle, Washington, Eastern carried an exten-sive line of prescription and nonprescription items thatwere mostly manufactured in its own plant. The companyhad approximately 15,000 drugstore customers plus hos-pital and government accounts. Annual sales of close to$150 million were handled by 50 sales representativesfrom coast to coast. Although the nonprescription items,known as over-the-counter (OTC) products, were pro-moted directly to the drugstores, most business was gen-erated by convincing the doctors to prescribe Eastern'sproducts for their patients. No selling or advertising wasdirected at the consumer.The company's sales strategy was that Eastern salesrepresentatives would give samples to a doctor after get-ting a verbal promise to prescribe. These samples wouldbe used to start the patient on an Eastern product, and thedoctor would write a prescription for the patient to pick upat the drugstore. With a large number of similar productson the market, it was a difficult marketing problem to keepEastern's brand name in the doctor's mind days or weeksafter the sales representative's visit. To help solve this 116 Purchasing and Supply Managementproblem, sales representatives asked the doctors to signforms requesting additional samples at specific intervals.The sales and marketing department had been recentlyreorganized, and the two new people. Shannon Bailey,sales promotion manager, and John Slaughter, advertisingmanager, were understandably anxious to do a good job.Both had made a lot of progress in working with JohnCao, standardizing the samples to be used for sales pro-motions and advertising mailings. Essentially, both sam-ples were now the same: the only difference was that theadvertising sample was enclosed in an outer mailer to besent to the doctor.THE FILLING CONTRACTThe packaging contract under discussion totaled $88,000.In the past year, Lucas had sold $80,000 worth ofmaterials annually to Eastern. Lucas's annual sales were$32 million.John Cao had designed an attractive new style of sam-ple. Basically, it was a folded card holding strips of tabletsthat could be pushed through one at a time, as requiredby the patient. This one idea was to be used in the nearfuture to sample several other tablet products. John haddeveloped the idea for marketing, expecting that he wouldget both the printing and contract filling.Although Eastern did 90 percent of their manufac-turing and packaging, they did not have the equipmentto heat-seal the strip into the folded cards. When goodscame in from a contract packager such as Lucas, theywere held in inventory until required by marketing.THE RELATIONSHIP BETWEENMARKETING AND PURCHASING"every time marketing wanted something in a rush." Thefeeling expressed by the production planner was typical ofmost department managers: "It is fine to get out the sam-ples but rather pointless if we are running out of finishedproduct in the meantime. Some of those unusual samplecartons slow down production up to 50 percent."Purchasing, manufacturing, and information systemspointed out that they could not drop their usual workWhile it was part of Andrew's job to coordinate mar-keting's sample requirements, he was not making muchprogress.His attempts to get each department to cooper-ate were met with the usual arguments that marketing wasonly one department and had to wait its turn. Shannon andJohn at times grew impatient with Andrew's efforts, andthey started to go directly to each department manager.Andrew felt that the action taken by Shannon tellingthe supplier how much contract filling business he wouldget was the last straw. With this in mind, he went to seeMatt Roberts to try to get a policy statement on the mat-ter. Andrew wanted to know where the line was drawnbetween purchasing's and marketing's responsibility inmatters dealing with company suppliers.hile Shannon and John had been able to work wellgether, they were having their difficulties in gettingne cooperation of other departments involved. Frequentinstances of sample mailings being late or sales represen-tatives being out of stock continued to plague the successof their program. Delays had been caused by late order-ing of components from outside suppliers, shortages oftablets, and mailing lists being incorrectly printed. In theirattempts to remedy the situation, Shannon and John hadtrampled on a few toes. During attempts to investigate thecauses for these delays, the vice president of operationsdiscovered that there were usually good reasons offeredby the departments involved.Matt explained that, because the marketing promotionexpenditure totaled $34 million or 22 percent of sales.Eastern, like most other companies in the industry, facedsimilar purchasing-marketing problems. If marketingmanagers were responsible for their budgets, they had theright to spend $1 each for 10,000 items, or if they wanted,they could buy 5,000 items for $2 each and still staywithin their budget. It was a marketing decision whetherthey were getting better results from the $1 or $2 item.For these items, purchasing merely produced a purchaseorder to confirm the deal already made by marketing withthe supplier. The policy applied to nonproduction items,such as calendars, letter openers, diet sheets, patient his-tory cards for doctors, or displays and posters for drug-stores. In contrast, production and inventory purchaseshad last year reached 20 percent of sales revenues.However, Matt pointed out that final selection ofsources for any purchased items that had to be pack-aged by the plant had always been the responsibility ofthe purchasing department. In this particular case, therewas still a significant inventory of old-style samples inthe building, which marketing had not considered whenthey promised John Cao 100 percent of the contract fill-ing. Andrew felt that placing all the contract filling rightaway would build up the stock of samples unnecessarily.Besides this, he had negotiated a better price from anotherreliable supplier, Sheppard Packaging, and felt that hewould give the balance of 75 percent to them.for samples as they were shipped to sales representativesMarketing, Matt Roberts explained, was only charged

Marketing and purchasing people maintain relationships between them as they need to constantly act…

Answered: a) As Andrew Baines, what action would…

Understanding Business

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ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

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a) As Andrew Baines, what action would you take to solve the problems in the purchasing-marketing relationship?

Transcribed Image Text:Case 4-2 Eastern Pharmaceuticals Ltd. In the afternoon of September 12, Andrew Baines, assis- tant purchasing manager at Eastern Pharmaceuticals Ltd. (Eastern), was discussing the purchase of packag- ing materials and contract filling of tablet samples with a supplier's representative. When the details of the pack- aging purchase order were finalized, Andrew told the sales representative, John Cao, of Lucas Paper & Box Company (Lucas), that he would send him the purchase order for the packaging components and 25 percent of the contract filling. John replied that Shannon Baily, of the marketing department, had promised him 100 percent of the contract filling. "This is the first I've heard of that," snapped Andrew. "It's not marketing's responsibility," he continued, controlling his temper, "to decide what per- centages of contract filling a particular supplier will get. Purchasing arranges the contract filling with the suppliers that can give the best quality, delivery, and price." John Cao, an experienced sales representative, remained unperturbed. He replied that he had always dealt with both marketing and purchasing and that sometimes purchasing was not involved at all in the projects. He said that in this case where both marketing and purchasing were involved, he was just keeping purchasing informed of what marketing wanted. Andrew closed the meeting by politely telling John that he would have to clear up the situation between the two departments. He told John that he would let him know how much of the contract packag- ing Lucas would be getting. Andrew Baines, his boss Matt Roberts, and a senior buyer made up the total purchasing staff at Eastern. One of Andrew's responsibilities was to handle the purchase of the marketing department's requirements. He also acted as liaison between the department and the production planning, manufacturing, and packaging departments. In recent weeks, Andrew was finding the job more and more frustrating. EASTERN PHARMACEUTICALS Located in Seattle, Washington, Eastern carried an exten- sive line of prescription and nonprescription items that were mostly manufactured in its own plant. The company had approximately 15,000 drugstore customers plus hos- pital and government accounts. Annual sales of close to $150 million were handled by 50 sales representatives from coast to coast. Although the nonprescription items, known as over-the-counter (OTC) products, were pro- moted directly to the drugstores, most business was gen- erated by convincing the doctors to prescribe Eastern's products for their patients. No selling or advertising was directed at the consumer. The company's sales strategy was that Eastern sales representatives would give samples to a doctor after get- ting a verbal promise to prescribe. These samples would be used to start the patient on an Eastern product, and the doctor would write a prescription for the patient to pick up at the drugstore. With a large number of similar products on the market, it was a difficult marketing problem to keep Eastern's brand name in the doctor's mind days or weeks after the sales representative's visit. To help solve this

116 Purchasing and Supply Management
problem, sales representatives asked the doctors to sign
forms requesting additional samples at specific intervals.
The sales and marketing department had been recently
reorganized, and the two new people. Shannon Bailey,
sales promotion manager, and John Slaughter, advertising
manager, were understandably anxious to do a good job.
Both had made a lot of progress in working with John
Cao, standardizing the samples to be used for sales pro-
motions and advertising mailings. Essentially, both sam-
ples were now the same: the only difference was that the
advertising sample was enclosed in an outer mailer to be
sent to the doctor.
THE FILLING CONTRACT
The packaging contract under discussion totaled $88,000.
In the past year, Lucas had sold $80,000 worth of
materials annually to Eastern. Lucas's annual sales were
$32 million.
John Cao had designed an attractive new style of sam-
ple. Basically, it was a folded card holding strips of tablets
that could be pushed through one at a time, as required
by the patient. This one idea was to be used in the near
future to sample several other tablet products. John had
developed the idea for marketing, expecting that he would
get both the printing and contract filling.
Although Eastern did 90 percent of their manufac-
turing and packaging, they did not have the equipment
to heat-seal the strip into the folded cards. When goods
came in from a contract packager such as Lucas, they
were held in inventory until required by marketing.
THE RELATIONSHIP BETWEEN
MARKETING AND PURCHASING
"every time marketing wanted something in a rush." The
feeling expressed by the production planner was typical of
most department managers: "It is fine to get out the sam-
ples but rather pointless if we are running out of finished
product in the meantime. Some of those unusual sample
cartons slow down production up to 50 percent."
Purchasing, manufacturing, and information systems
pointed out that they could not drop their usual work
While it was part of Andrew's job to coordinate mar-
keting's sample requirements, he was not making much
progress.
His attempts to get each department to cooper-
ate were met with the usual arguments that marketing was
only one department and had to wait its turn. Shannon and
John at times grew impatient with Andrew's efforts, and
they started to go directly to each department manager.
Andrew felt that the action taken by Shannon telling
the supplier how much contract filling business he would
get was the last straw. With this in mind, he went to see
Matt Roberts to try to get a policy statement on the mat-
ter. Andrew wanted to know where the line was drawn
between purchasing's and marketing's responsibility in
matters dealing with company suppliers.
hile Shannon and John had been able to work well
gether, they were having their difficulties in getting
ne cooperation of other departments involved. Frequent
instances of sample mailings being late or sales represen-
tatives being out of stock continued to plague the success
of their program. Delays had been caused by late order-
ing of components from outside suppliers, shortages of
tablets, and mailing lists being incorrectly printed. In their
attempts to remedy the situation, Shannon and John had
trampled on a few toes. During attempts to investigate the
causes for these delays, the vice president of operations
discovered that there were usually good reasons offered
by the departments involved.
Matt explained that, because the marketing promotion
expenditure totaled $34 million or 22 percent of sales.
Eastern, like most other companies in the industry, faced
similar purchasing-marketing problems. If marketing
managers were responsible for their budgets, they had the
right to spend $1 each for 10,000 items, or if they wanted,
they could buy 5,000 items for $2 each and still stay
within their budget. It was a marketing decision whether
they were getting better results from the $1 or $2 item.
For these items, purchasing merely produced a purchase
order to confirm the deal already made by marketing with
the supplier. The policy applied to nonproduction items,
such as calendars, letter openers, diet sheets, patient his-
tory cards for doctors, or displays and posters for drug-
stores. In contrast, production and inventory purchases
had last year reached 20 percent of sales revenues.
However, Matt pointed out that final selection of
sources for any purchased items that had to be pack-
aged by the plant had always been the responsibility of
the purchasing department. In this particular case, there
was still a significant inventory of old-style samples in
the building, which marketing had not considered when
they promised John Cao 100 percent of the contract fill-
ing. Andrew felt that placing all the contract filling right
away would build up the stock of samples unnecessarily.
Besides this, he had negotiated a better price from another
reliable supplier, Sheppard Packaging, and felt that he
would give the balance of 75 percent to them.
for samples as they were shipped to sales representatives
Marketing, Matt Roberts explained, was only charged

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