• Author / Uploaded
• Keshav Chaudhari

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Case 1-2: Erica Carson Name: ________________ Group: ___A or B________ Date: ________________

Situation:  Erica Carson is PM for Wesbank, a financial institution (note: You are Erica) o Reports to VP Supply  Unsolicited bid from Art Evans, Sales Rep. Killoran Inc. o 10% reduction on printing and mailing of checks o not current supplier  Westbank provides free checks at a cost of $8M per year  Current situation – 50% split suppliers, last 5 years o Supplier A prints and mails 50% checks, renewed contract 8 months ago o Supplier B prints and mails 50% checks, contract expires in 4 months o Each 2 year contract, good quality and service o Costs studied one year ago, determined pricing was fair BASIC ISSUES; (note - tie to elements from textbook) 1. 2. 3. 4. 5.

Purchasing for a service organization. The price, quality, delivery, service trade-off. Supplier selection and splitting of business. The purchase of services. Treatment of unsolicited proposals from suppliers

Tasks:  What does Erica do? o Does Erica consider the bid? 10% savings = $800M o Status quo  What are alternatives? Need to weigh alternatives. o Complete cost-benefit analysis o Are checks really needed? o What is core competency of bank? o What is business imperative with checks?  What is company / VP Supply policy on unsolicited bids?  Does this bid and subsequent action fit business goals and objectives? SUGGESTED QUESTIONS FOR DISCUSSION; 1. 2. 3. 4. 5.

What importance is the check printing to the bank? How would you do a cost analysis on a check printing order? How would you evaluate a supplier of check printing for this bank? How many suppliers are desirable for check printing? What alternatives are open to Erica Carson here?

6.

What action will you take? Why?

Actions:  Talk to VP Supply, review proposal  Review cost – benefit analysis?  Present case to upper management  Determine if Killoran is viable supplier? o Supplier audit – process capability o Supplier trial run – service, quality, cycle time, order entry, responsiveness o Have joint meeting  Make recommendation with implementation plan o Select Killoran proposal – define phase in/phase out strategy, determine cancellation costs, risk management o Or, not accept Killoran proposal  Stay course with current suppliers o Or, rebid current suppliers, economics can change in 1 year Results:  If accept Killoran proposal; o $800k savings o manage risk (reputation) o new contract terms, maybe 1 year, (due to emergence of internet banking) o additional revenue, open new markets (share new business margin of scenic checks)  If not accept Killoran proposal; o No savings, no increase revenue o No customer risk in quality, service, reputation o Clarify business policy  If rebid current suppliers; o Leverage 10% reduction bid o Solicit new proposals with new information o Renegotiate contract – cancellation or exit clause? Provisions for continuous improvement o Negotiate new contract – costs, payment terms, cancellation Priorities: (note - be sure and discuss assumptions and implications of decisions) 1. Maintain uninterrupted flow of check with high quality to customers a. Avoid delays b. Avoid misspelled name/address and other errors on checks 2. Maintain Bank’s reputation and image for reliability 3. Maintain speed to market, quick turn custom jobs a. Attention to detail b. Courier services Best Conclusion = I recommend not making a change now. There is too much risk involved due to unknown supplier. Ask current suppliers to review potential for cost reduction and opportunity for increased revenue and cost reduction of scenic checks.