Nationwide Telephones
The basic objective of the paper is the identification of reason for the price increase of the plastic components. The intention of Steve is also to help Bill in understanding the possibilities of reduction for the present inflated prices.
Discussion
The main offering of Nationwide Telephone is low-cost and high quality telephone from 2001. Their reliance is mainly on the local suppliers such that maximum lead times can be observed even when the suppliers are limited. The travel costs are minimized by the combination of prompt delivery times and lesser lead times.
The supply manager at Nationwide is Steve Young. He is a leader with small team and the team consists of a couple of supply analysts, Bill, a price analyst and Jan. Bill brings in a lot of experience into the Company team. Bill has his focus on the procurement of plastics and hardware whereas Jan has focus on the purchase of wire harnesses and electronics.
Given the previous six months, Roger Stoga, the founder and president of Nationwide, has observed sales decrease.
When the review is continued, he was able to identify the problem of rise in the prices of plastic components. ABC plastics, is the supplier for the components. Additionally, they are the singular source of all plastic components; partly since the bid that they submit is the lowest at the time of supply of delivery times and quality components.
Question 1: What analytical tools can be used by the supply group to determine the right price?
The history of pricing between the two firms should date back a long time back as both parties; ABC plastics and Nationwide have been involved in a long business. Jan can return back for the determination of the historical pricing and reflection to the pricing given the previous six months. There may not be specific detail as to the reasons for price rise, however; they can be used for discussions for seeing the cause of the increase (Burt, Petcavage, Pinkerton, 2010).
After the retrieval of historical pricing, the attainment of pricing should be focus of Jan from the competitors of ABC Plastics and also the market prices at general. After the comparison of these numbers with that of ABC plastics and with assumption of price inflation, the competitive bidding process is started to analyze whether ABC plastics could be persuaded for price decrease. If there is proper execution of the competitive bidding process, pressure can sometimes be given to the suppliers for price decrease. The offset of the same could create poor quality in the components prepared to mollify the firm involved in bidding (Burt et al., 2010).
Question 2: How could Nationwide’s supply department have prevented the price escalations?
Entry into the fixed-price contract could be one of the ways for the prevention of increase in prices. Since, Bill deals with plastic procurement; this would have been his responsibility. This contract would have deterred ABC plastic from the price increase in the previous six months irrespective of their personal circumstances. Even in case, ABC as a Company was undergoing trouble, they would need to arrange and fulfill their part even if it resulted in profit loss. If there is continuous following of the low-cost model, the Company may be able to prevent sales decrease (Burt et al., 2010).
Question 3: How does the competitive condition of the plastic component industry impact the use of price analysis?
If Nationwide decides to follow the route of competitive bidding, there should be assurance that the competition is at least modest. In the absence of high competition, there is advantage to ABC to gain market control. Nevertheless, in case there is local competition, the market would be a buyer’s market, letting Nationwide build credibility for their proposal of competitive bidding (Burt et al., 2010).
Since the relationship between Nationwide and ABC is from the time that they started making telephone, competition would still be scarce. When we consider competitive bidding, one surety that Jan and Bill need to consider is the desire of competitors to work with Nationwide. The delivery of quality services and products is the foundation for the conduction of competitive bidding (Burt et al., 2010).
Question 4: What kind of resistance might Jan encounter from Bill? How can Bill help facilitate the pricing analysis process?
The in charge of procurement of plastics is Bill, and working with Jan, he might feel that the relationship may have intrusive effects given the association with ABC Plastics. However, when pricing is to be considered, Jan is the expert and Bill has the most experience. Because of his experience he may feel that no assistance is needed in a long maintained relationship. Since the retirement of Bill is on the way, he will want to have a relationship set between Jan and ABC Plastics. This can be the way for the maintenance of present business model which is based on low prices and high quality, while maintaining good corporate relationship.
Question 5: What are some of the costs/benefits of continuing to source from the same local suppliers?
Since the business is local, the costs of transportation should be minimal. However, if new source is to be found, there would be increase in costs. The lead time for Nationwide would still be almost minimal for all orders and no profit loss would be realized from wait times. A robust relationship is the most beneficial for the supplier as a major part of business will be intact. Since the internal issues seem to be rising; relationship maintenance would be feasible for ABC Plastics in the economical way. A free trade agreement is functional with local suppliers for keeping the costs minimal (Burt et al., 2010).
References
Burt, D.N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply management (8th ed.) New York, NY: McGraw-Hill/Irwin.
First American Plastic. (n.d.). Retrieved October 4, 2015, from http://www.firstamericanplastic.com/blog/10-facts-about-us-plastics-industry
What is competitive bidding? definition and meaning. (2016). BusinessDictionary.com. Retrieved 5 June 2016, from http://www.businessdictionary.com/definition/competitive-bidding.html
