1. Under what conditions might a company prefer to negotiate rather than use competitive bidding to select a supplier?
2. Explain the benefits of using a single supplier as opposed to multiple suppliers. What are the risks?
3. Answer the following questions based upon the case described below:
You have been asked to choose a source for a printed circuit boards used in your company's products. These printed circuit boards have a low value potential as they are used in a limited number of products, however they are very complex to build. There are three suppliers who are capable of producing these printed circuit boards and have submitted bids based upon your recent Request for Proposal. The supplier's bids and key performance parameters are below:
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Supplier A
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Suppliers B
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Supplier C
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Price / Unit
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$200
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$215
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$225
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Quality level
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99.25%
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96.00%
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99.95%
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Delivery on-lime
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99.00%
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96.00%
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96.00%
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Order cycle time
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3 weeks
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0.5 weeks
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1 week
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a. Given the information above and referring back to the portfolio analysis model, what type of commodity is this? What type of sourcing strategy should you employ? What actions should you consider?
b. You estimate that it would cost your company $12 million to produce these parts annually. The annual demand for the printed circuit boards is 50,000. Should you consider making these parts or buying it?
c. You've decided to use a weighted point evaluation system to evaluate the suppliers. Using the weights below and a 1-3 scale (3 being the best, 1 the worst), which supplier would you rate the best?
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Price /Unit
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Quality level
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Delivery on-time
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Order cycle time
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0.25
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0.3
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0.3
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0.15
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|
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Supplier A
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Suppliers B
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Supplier C
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0.25
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Price / alit
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3
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2
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1
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0.3
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Quality level
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2
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1
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3
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|
03
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Delivery on-time
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3
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2
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1
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0.15
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Order aide time
|
1
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3
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2
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Score
|
2.4
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1.85
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1.75
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|
|
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|
|
|
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d. Based on the data and your answer above, would you choose a single source or multiple sources? Why? If multiple sourcing, how much business would you give each supplier (be specific)?