Wedlock Engineered Products Cynthia Gao, procurement manager for Wedlock Enginee

Question

Wedlock Engineered Products

Cynthia Gao, procurement manager for Wedlock Engineered
Products in Buffalo, New York, was reviewing a
proposal recommending that the company change suppliers
for a critical raw material. It was June the 3rd, and
Cynthia needed to decide before the end of the day how
she would respond to the proposal.
WEDLOCK ENGINEERED PRODUCTS
Wedlock Engineered Products (Wedlock) manufactured
and distributed hydraulic, power-assisted, air-powered,
and standard mechanical dock levelers, and dock seals
and shelters, and vehicle restraints. Wedlock had profits
294 Purchasing and Supply Management
of $50 million on sales of $450 million in the most recent
fiscal year ending December 31. The company had enjoyed
double-digit growth over the previous decade, supported
mainly through an aggressive acquisition strategy.
Wedlock’s growth masked cost pressures the company
was facing in its key markets. The company’s annual report
indicated that financial results were lower than expected
due to price erosion. In February, the CEO, Dmitry
Barsukov, announced a corporate cost-reduction initiative
aimed at improving the company’s competitive position.
As part of the announcement, Barsukov specifically mentioned
“opportunities for supply chain savings through
coordination of purchasing between operating units and
divisions.”
The Buffalo plant manufactured hydraulic dock levelers
that were installed in shipping and receiving areas
in manufacturing facilities, distribution centers, retail
operations, and other facilities required to accommodate
loading and unloading of highway transport trailers. It
produced a standard product that was sold in the replacement
and new construction markets under the Sloan Leveler
brand. The Wedlock plant in Cleveland, Ohio, also
manufactured hydraulic levelers, under the brand name
Cole Dock Levelers. The Cole line of levelers targeted the
customized market, for customers with unique material
handling requirements.
PURCHASING AT THE BUFFALO PLANT
Cynthia Gao, along with Garett MacDonald, buyer, and
Adam McEniry, materials planner, comprised the procurement
group at the Wedlock plant in Buffalo. Total
purchases were $23 million.
Cynthia worked closely with Robert Scobie, her counterpart
at the Cleveland plant, to coordinate purchases and
identify opportunities for costs savings. The Cleveland
plant was similar in size to the Buffalo plant, with approximately
$25 million in annual purchases. Cynthia and
Robert had committed to savings of $1.5 million in the
current fiscal year as part of the corporate cost-reduction
initiative. They had documented approximately $500,000
so far, measured by year-over-year price reductions from
suppliers and based on forecasted annual usage.
STEEL TUBING
The Buffalo and Cleveland plants purchased 3-inch steel
tube with a combined total value of $1.1 million annually.
The tubing was used on the loading dock platform
to support the hinge connected to the lip of the platform
that allowed it to lay flat or unfold, in order to connect
or disconnect from the transport trailer. The tubing was
required to meet specific metallurgical standards or else
the tubing would warp or crack, causing the loading dock
to malfunction.
The current supplier for 3-inch tubing was Marandi
Steel (Marandi). Located near Buffalo, Marandi distributed
a wide range of carbon, stainless, alloy, and aluminum
tubing; pipe products in round, square, and rectangular
shapes; and steel plate to manufacturing companies in the
eastern United States and Canada. Marandi had been a
supplier to the Wedlock Buffalo plant for approximately
15 years and provided excellent service. Cynthia had a
strong working relationship with the general manager at
Marandi and could recount several occasions when they
reacted quickly to material shortages at the Buffalo plant
that helped keep production going. Marandi currently supplied
several products, including tubular steel, shapes, and
plate, to both the Wedlock Buffalo and Cleveland plants.
The supply arrangement with Marandi to the Buffalo
plant included just-in-time delivery arrangements, which
helped to keep inventory levels at a minimum. Total
annual purchases from the supplier were approximately
$3 million for the Buffalo plant and $2.5 million for the
Cleveland plant.
In order to test the pricing for 3-inch tubing, Robert
Scobie issued a request for quotations (RFQ) the previous
month from several steel tubing distributors, including
Marandi. The RFQ indicated the expected term of
the contract would be two years and include 100 percent
of the requirements for both the Buffalo and Cleveland
plants. The two lowest quotes were from Vergis Tubing
(Vergis), located in Erie Pennsylvania, and Marandi. The
quote submitted by Vergis represented an annual cost savings
of approximately $24,000 compared to the incumbent
supplier.
REVIEWING OPTIONS
Robert felt that Vergis should be awarded the contract to
supply 3-inch tubing for the Buffalo and Cleveland plants
and was urging Cynthia to accept the proposal. However,
Cynthia had concerns. Vergis had attempted unsuccessfully
on several other occasions to secure business from
Wedlock, and she was worried that Vergis did not have
any history with either the Buffalo or Cleveland plants.
Delivery and quality performance for 3-inch tube was
critical for the Buffalo plant, and the performance of
Marandi in these areas had been outstanding. A check of
Chapter 10 Price 295
Vergis’s references found that they had a good reputation
and there were no problems uncovered.
Cynthia was also concerned about the effect of abandoning
a long-standing relationship, which might have
other cost implications and jeopardize service provided
by Marandi. Marandi supplied a number of other products
to the Buffalo plant, and Cynthia wondered how awarding
the 3-inch tube contract to Vergis would affect the relationship
with Marandi.
Robert was expecting a decision from Cynthia the following
morning regarding which supplier she felt should
be awarded the contract for 3-inch tubing. Cynthia knew
that she would need strong arguments if she decided not to
support his recommendation to switch to Vergis.

1. How much weight should be placed on previous supplier performance when selecting a supplier?
2. Is $24,000 in savings worth the trouble of switching suppliers?
3. What will the response be from Vergis if you stay with Marandi, after they provided a lower bid?
4. Do you want to split the business between the two suppliers?
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. Is using an RFQ the right approach in this situation?
7. As Cynthia Gao, what recommendation would you make to Robert Scobie regarding supply for the 3-inch tubes?

of $.5) nili n at sala 49) milioa inte m st reaent bo Pf rt de hiage enstected t the lip af de platí r n verde s r terenes found hat they had a good reptetce the 3 inch tute sontroct to vens would affect te rela Robat was apating a claision frem Cyathia tbe fol Wedlock's sow th ked cos pressures the company abing woud warkcaing e loading dock othe co inplctios and eopndiee vavice prvidd be awardal the contract for 3-inch tuing, Cnthis Leew Case 10-1 honshp wth Marandt Wedlock Engineered Products joyed double-digit gcwth over te previous decade, sup 1 discou ect from he unspot Eiler The tublag wai Cyrdhia wna·dso artermed tt tte efect of aha 1- Cynhin Gan, procarcacngr for Welck Ergi WEDLOCK ENGINEERED PRODUCTS ueered Pruduuts in Bullalo, Ne Yorl, a eviewinag a propasd reccmeding the coany change sp ty Nararch Marach nFFinai a manter of atherpratncts thet she would tem strong guments if she decided int in Wedlock Enginsered Producs (Wedloct) manafecoured pon hat fnoacial resals w were lower taa e The cume sopplies for 3-lach uing ws Murandi ote Bulflo plant and Cywndeew prt hs naliotswic to Vaxi peoted due to pcise enoelom. In Pebnusry, he CEO, Dmtry Sooel(aad Locatnd oear Btao, Marandl disaibot Berulowanoounoed a corporace coat-redc dion iaidarie eda wide range af cubon, stines alloy, od uminum uimed at tmproving he oompany'scompoative positionubne pipe prodoots in round, square, and roctargular As part of the aaeouncemers, Berulow specifclly men shape and steel ple to ufacourng corparies in the doned appotunios or supply chaim ings trough eastem Uned Staies ard Conada. Maranci had boen a ccordinatios of purchasing hetucrn orerating units andplier to the Wallock efaln plent for sproximnicly Cyohia aseded to decide before de end of e day ow und sundard mechancul dock levelers, and dock seals he would iopcad lode peopoa and sbelters, and vehie restreliats. Wedlock had protirs The B falo plent maufac hucd hydric dock k- tongworking rdatioeship with the general massger elors that were nalled in shigpirg and eivig operstios, anl other faildic required lo acom produced a adad product thal ws old in Marana ard coald rocunt severel ocerions when hey hal belpal krep peoduction guniag. Muadi curently sup plal, lo bth hWedlock Bulfalo and Ckvelaad plaats rpla Eaufactared lydeaulic levelers, uder te baad name Cole DulLe velas. The Cule line of leveleilagelcd Ile gusiomized muket, for ousomas wkh unique naedal handling seq.reueutu helped keep inweauey levels at a minimaL Total aausal pundilici fam die supplies were pruniuaely S3 llioa for e Buralo plaat uad S2.5 milion for the Cleveland plan Ia ooder o tet the pciciag for 3-rcb ubing. Robent Scobie issued a regoost for quotations (RF prevt ous moath froe everal steel ubiag stributors, Srdlud ing Marodi. The RPO intcaxed the eapected tem of buyer, and thecxt woud be two yeers and indtude 100 peroea Adim McEairy, teris plur, comprsed e p ot the roqurements Bar both the Butfalo and Cleveand are neot groep ' te we look plan h Bumala Tocal plans The two lanes' gnto were frm" Very, Thing (Vorgis).locnzd in Erie Peasy hana, and Marandi. Tte PURCHASING AT THE BUFFALO PLANT Cythia Geo, log with Garet MacDenald, nd purchres were 523 million Cymhia woked ctosely Robent Soobie, ber coun qtod by Vergis rgcxned anansual cd ideomry opportun des tar costs savings The Cleveland bent #uprir. plant was similar in dze to the Buftab plant, wih ap- prosimalcly 125 millinno purchases Cyathid REVIEWING OPTIONS Robert had conmitted o swings of $1.3 milion in the cament fical yoa a poat of the copo cot-iRobeelt tha Verps shoold to awanced teconct to nitiatve They had doeunendimatzly $503,000uppty3ich ubing for the Balo and Cleveland plaxs r, mcaured by ye-ovr-ycar price ra tices fromand wos urging Cymihia to aooet the proposal. However, Cyathis had conceras. Vergis bad attemgted unsucoess fully on vcrel other ocsions to secure busaness trom Wedlock, nd she wn womad that Vgs did net havE aay hisory with cater the Burftalo er Cleveland plas The Buffaio and Clevcland plant perchaard 3-isch ilay and qusley perfomince for inch tuhe wa uppliers and basad on forecalel sa STEEL TUBING ally. The tihiag wa sd en c oding dack platform Mara in thox are a hed bea outandias. A check of

Explanation / Answer

Answer:

1. How much weight should be placed on previous supplier performance when selecting a supplier?

2. Is $24,000 in savings worth the trouble of switching suppliers?

3. What will the response be from Vergis if you stay with Marandi, after they provided a lower bid?

4.Do you want to split the business between the two suppliers?

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.