Case Study 1: Metal Degreaser Chemical for Casa

Mr. Ricardo, the supply manager for Casa Hose Company based in Mexico
City, has just learned that a chemical metal degreaser
tetrachlorethylene is urgently needed for a current special hose
contract. It is imperative that the chemical be in stock in ten days to
assure delivery of their hose order on time.
Ricardo had never purchased this particular tetrachlorethylene before.
Included in his negotiation objectives and plan were appropriate cost of
the chemical, rental of shipping containers, removal of empty containers,
possibly a factor covering damage to the containers, and appropriate
continuity of supply over the next year. Ricardo learned that the price of
tetrachlorethylene fluctuates during the year. After receiving several
quotations and considering the many contract elements at stake, Ricardo
wondered whether they could get the best overall contract. He knew that
he couldnt reach a negotiated deadline to meet the designated ship and
receipt time.
Ricardo has called a supply team meeting for later today to discuss this
pending supply crisis. What should he be prepared to tell and ask his team
concerning this issue? How do they get out of this situation?
Discussion Questions:
1. What should Ricardo do to cover short term requirements?
2. Given that the chemical price fluctuates a good deal during the year,
would an economic price adjustment or escalation/de-escalation clause be
a good concept to employ?
3. How should the clause be written?
4. Where should Ricardo look for market information on this material?
5. What objectives should be established for this negotiation?
6. What would be the best negotiation strategy to use?

Case Study #2: Vangarrd Processes, Inc.

Jerry Peters has been hired as Vice President of Supply Management for Vangarrd
Processes, Inc. Peters was told by the CEO that he had been selected specifically
to quickly initiate a supply management strategy and process.
Vangarrd is an old and well established supplier to the plumbing industry
that manufactures finished cast brass plumbing fittings. Their customers are
wholesale plumbing resuppliers and discount homeowner superstores i.e.,
Home Depot, Lowes, etc. The company operations as well as their supply process
appear to be quite fragmented. One of Vangarrd's supply managers told Peters
that, Supply had evolved haphazardly to meet purchase requirements."
Peters has discovered that no single person or function seems to be
responsible for any particular supply function. As far as he can determine, there
are over 85 suppliers just for the raw brass castings, and many of them provide
the same casting. The reason for this large quantity of active suppliers cannot be
accurately determined but seems related to a mentality of "more suppliers equal
lower prices. It appears that other purchased materials or commodities are
managed through multiple suppliers with fragmented processes.
The Finance and Accounting office told him that even though supplier lists exist,
it would require several weeks to provide a current spend analysis. Similarly,
there is not a systematic process in place to evaluate or track supplier
performances. Peters was also told that the records that do exist are old and
unorganized.
Peters has to develop an initial supply management strategy for the CEO
of Vangarrd. Peters is meeting with the CEO in two weeks. The CEO does not
expect a completed plan but does expect an overview of what the current
process is and an initial plan to accomplish at least two goals 1) reduce costs,
and 2) understand who the suppliers should be. Peters has two weeks to prepare
for the meeting.
What must Peters be prepared to present and recommend to the CEO
during the scheduled briefing?
Discussion Questions:
1. What does Peters have to understand in the next two weeks?
2. What challenges will Peters face in revising the supply management
function?