Ceiling Stars, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarter's purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter $(90$ working days$).$

To make its bulb products, Ceiling Stars requires $57,600$ pounds of glass per quarter. Bright Night recelved two glass bids for the third quarter, as follows:

Provo Glass Company: $$28\mathrm{.}00$ per pound of glass. Delivery schedule: $57,600(640\mathrm{????}\mathrm{????}\mathrm{????}\times 90$ days$)$ pounds at the beginning of July to last for $3$ months.

Orem Glass Company: $$28\mathrm{.}15$ per pound of glass. Delivery schedule: $640$ pounds per working day $(90$ days in the quarter$).$

Ceiling Stars accepted Provo Glass Company's bid because it was the low$-$cost bid.

A manufacturing company gets quotes from each supplier and allocates the purchase order to the company which quotes the lowest price with the expected quality. Is this process effective in long run? Identify reason that supports the answer.

a$.$ Yes

b$.$ No

Reason:

a$.$ The policy is effective as it lowers the cost of purchase.

b$.$ The policy considers the quoted price and the quality of the product is ignored.

c$.$ The policy of the company is not practically viable as it is not bullding long$-$term relationships with its suppliers. The reputation of the company may be affected.

d$.$ Supplier relationships are not required as the products are purchased for the quarter alone.

Answer rating: 100% (QA)

No this process may not be effective in the long run While selecting suppliers solely based on the lowest price may seem costeffective in the short te... View the full answer