Question 1: What alternatives should Barney Rubble consider when addressing the problem?
The process of selecting a supplier is crucial for any business because the final decision has a direct and substantial impact on quality and expenditure (Cheraghi et al., 2011). As such, Mr. Rubble should consider each supplier critically to ensure that Pacific Healthcare gets the best deal regarding quality and price. According to Cheraghi et al. (2011), the most important factors to consider when selecting a supplier are quality, delivery, price, and repair service respectively.
However, the Pacific Healthcare supply strategy emphasizes on quality and services more than the cost implications of the supplier choice. Therefore, Mr. Rubble should primarily consider the quality and service options offered by each company before taking into account the cost implications resulting from selecting each of the five companies.
Quality evaluation of the companies reveals that purchasers have used Kodak as a standard for quality in the past. Two companies, Agfa and DuPont, have a reputation for producing the same quality films as Kodak. Although 3M and Fuji supply films that meet minimum specialization, their films are of low quality. Therefore, the supply management should not consider the two companies as suppliers despite their low prices. The selection of any of the three companies (Kodak, Agfa, and DuPont) would meet the quality requirement stipulated in the supply strategy of the organization.
Kodak offers a discount on servicing and maintenance of X-ray machines to the organization on the condition that Pacific Healthcare purchases all its films from Kodak. This offer substantially reduces the overall cost significantly. However, Mr. Rubble should consider what Agfa and DuPont are willing to offer as far as serving is concerned. The final decision should be a company that offers quality films and superior servicing at the lowest price possible.
Question 2: Should Pacific’s supply policies allow for any medical staff personnel to control sourcing decisions?
No. The decision to select a supplier for medical equipment should not lie on medical staff only neither should the supply management alone handle it. According to the American Society for Quality (n.d), supplier selection should be the responsibility of a team that is comprised of the members from the purchasing and quality departments as well as the technical department that uses the item in question. Therefore, the supply policies at Pacific should allow for the formation of a purchasing team with representatives from the supply management and the various medical departments.
In this case, for instance, Mr. Rubble should not reach the supplier decision on his own. It would be prudent to work with a representative from the Imaging Department who would offer technical advice. Staff members from the X-ray department have reliable information and technology expertise on identifying quality products and evaluating the quality of maintenance services provided by the various companies. This teamwork in supplier selection would ensure that the requirements of quality, services, and price as outlined in Pacific’s supply strategy are not compromised.
Question 3: What are the advantages of staying with Kodak or changing suppliers? How would you evaluate this?
Maintaining Kodak as the supplier of X-ray films has two advantages for Pacific healthcare. Kodak has a reputation for producing quality films such that their films are used as a standard for quality in the market. Continued purchase of Kodak films would ensure that Pacific Healthcare uses high-quality films consistently.
The second advantage would be the discount that comes with using Kodak as the sole supplier of X-ray films. Currently, the film company supplies X-ray equipment and provides maintenance services to Pacific Healthcare at a discounted rate. The organization can continue enjoying this discount if it continues to purchase films from Kodak. The significant disadvantage that comes using Kodak films is the high purchasing films. Compared to other companies of similar quality standards, Kodak sells its films at the highest price of $1.80, which translates to an approximate annual cost of $ 985,500.
Changing the film supplier to one of the two companies that produce quality films would reduce Pacific’s expenditure on X-ray films. For instance, selecting Agfa as a provider would reduce the annual cost from $985,500 to $ 865,050 (a difference of $ 120, 450). Alternatively, purchasing X-rays from DuPont would translate to an annual expense of $ 821,250, which is $ 164,250 less the current yearly X-ray films costs. Despite the reduction of costs, changing the film supplier would result in Pacific Healthcare losing the discount deal offered by Kodak on servicing and supply of equipment. It is not a guarantee that the alternative firms would offer a similar deal.
Question 4: What action could Mr. Rubble have taken prior to Mr. Howell’s death to obtain reduced film prices?
Being the corporate director of supply management, Mr. Rubble had a role to play in determining the film supplier for X-ray department even before the demise of the radiology director, Mr. Howell. To begin with, Mr. Rubble should have appointed a vendor selection team with representatives from various departments in the organization. These appointments should be in accordance with the recommendations of the ASQ (n.d). The director would have included, Mr. Howell in the team as a representative of the radiology division. The team would then carry out an evaluation of the current film supplier as well as other supplies regarding factors such as quality, servicing, and price. If a different company offered a similar discount deal to that of Kodak at a reduced film price, then the team would decide to change the film supplier.
References
American Society for Quality. (n.d). Supplier quality- tutorial. Retrieved 6 May, 2016, from http://asq.org/learn-about-quality/supplier-quality/overview/tutorial.html
Cheraghi, S. H., Dadashzadeh, M., & Subramanian, M. (2011). Critical success factors for supplier selection: An update. Journal of Applied Business Research (JABR), 20(2).
