Identify the major issues and problems Generate and evaluate alternative solutions Brainstorm alternatives - include obvious and obscure Asa team you should be able to identify at least 4 potential alternatives for each identified problem. Perform appropriate qualitative and quantitative analysis to understand and compare alternatives When necessary, make and state assumptions Case study Loren Inc Case Study Organization Background Loren Inc was a Canadian subsidiary of larger international chemical company. The company sold both consumer and industrial products and established an excellent reputation for quality products and marketing effectiveness. As a result, they have substantial growth in total sales and financial success. The total Canadian Sales were approximately $800 million and $400 profits after tax. Defining the Issue In Loren Inc purchasing department they have 12 staff and one of them is Brent Miller.The department was headed by a director who reported to the president. It was organized by commodity lines and Brent Miller was appointed as a raw material buyer reporting to the manager of the chemical buying group. His tasked is to select the desired suppliers that would supply Hexonic Acid to the company.Brent is very much aware that Hexonic Acid is a major raw material in most Loren products and this will not be an easy task for him. The company's requirements to this raw material had grown steadily over the years and were expected to remain significant in the years to come. The problem here is that the availability of this material in the marketplace was difficult to predict. There had been shortages of this material two years previously due to European and Japanese demand. Recently, the hexonic acid cycle had turned around. Hexonic acid demand had eased and recent plant expansions by a number of suppliers had been completed. The overall result seemed to be a building of excess hexonic acid inventories. Thus, this would be reflected in a buyer's market in the coming year and looked forward to quotes from all potential suppliers. Brent has to make sure that this task will be aligned with the company's objectives ( assurance of material's availability, best value, an ethical reputation and gathering information). Analyzing Case Data Below is the current 2 suppliers of Loren Inc and its current price volume last year CANCHEM ALFO total cost % split business allocation 2750 tons 60% 40% $3,709,200 delivery/cost $1384/ton $1296/ton While below are the proposal from 4 suppliers and analysis CANCHEM ALFO AMERICAN CHEMICAL CARTER CHEMICAL BIDDING bid 1 $1384/ton bid 2 $ 1192/ton $1296/ton $1204 applied 1050tons annual volume $1192 applied 2250tons annual volume $1268/ton addinfo bid 1->1 yrcontract bid 2->3 yrs contract with freight included same with the existing contract FOB total cost for 3000tons volume $4152000 (forbid 1 in 1 yr) $3576000( for bid 2 in1 yr) $ 3,888,000.00 $2682000 for2250tons + needmore 750tons $ 3,804,000.00 totalcost for750tonsvolume $ 972,000.00 $ 951,000.00 Decision Criteria Criteria to be considered should based on company's objective.( assurance of material's availability, best value, an ethical reputation and gathering information) Delivery cost Company's performance (history for current supplier and reference for potential new supplier) Supplier risk On the above table,considering Loren Inc expected volume of 3000tons /year,it appers American Chemical is a good option with minimum order quantity of 2250tons. Next option is Canchem. Alternative Analysis and Evaluation Other evaluation and analysis to consider CANCHEM ALFO AMERICAN CHEMICAL CARTER CHEMICAL Status current current New(doneexpansion) new performance high quality and service high quality and service excellent quality & service For above 2 table shown, American Chemical will be the best option ->volume ( demand 3k) , minimum orderquantity 2250tons,Loren only needs 750tons to complete order ($2.68k+ 972k ( from Alfo supplier),$ 3.652k total cost .This is lower risk and more reliable and better delivery cost comparing last year cost of ($3.7k) ->second option,Canchem which will cost $3.576k with freight included.Howevercontract is for 3 years. Also as per single bidding policy, Canchem violates on this as they had 2biddingoffered . Bid 1 considered rejected. Action and Implementation Plan Reliable supplier and best delivery cost that can earn saving will be right choice of picking best supplier Assumptions, Presentation & Organization For the contingency plan which was not mention for any supplier it will be better if any back-up plan or recovery plan has been lay-out in case there will be unexpected interruption parts supply