As a Purchasing officer, you have been working for the city police department for the last 6 years and recently have been promoted to the role of Sourcing and Procurement Manager.

Since the Police department is public procurement and spends taxpayer money, all purchasing decisions are done through a request for quote (RFQ) process. Although the quotes could come from anywhere, preference was given to local suppliers. If a local supplier was within 5%, they would be given the contract. To help with cash flow, the police department requested payment terms of 2% 15, net 30 days as a minimum.

Medical use nitrile gloves are suitable in work environments where there is possible contact with bodily fluids, microorganisms, and chemicals. They do not contain natural rubber latex which provides an alternative for anyone suffering from Type I allergies. The specifications of the gloves you order are: 100% latex free, tested using medical standard ASTM D6319, minimum 3 mil thickness and powder free (preferred by the police officers). They need to fit good, have no odor, do no dry out their hands or cause rashes.

Last week, it was brought to your attention, the recent supply of gloves was been depleted much faster than previously. Alarmed by this you consulted with the police officers, and found that they were not happy with the current stock. The officers said that the gloves were tearing easily when they put them on and were causing excessive dryness and irritating rashes. The procurement team was buying from the current supplier and this was the first time there were any issues.

Sunrise Distributors, had for over the past three years supplied nitrile gloves to the police department and was in your opinion, one of the top suppliers. There had never been any issues and always shipped on time, complete orders, with no errors. They had always been upfront in keeping you informed and worked closely with your department to understand upcoming demand. Communication was something that you valued in them. This current order was completely out of character for them. You call your Sunrise sales rep, Gina Davison to find out what has been going on. Gina proceeds to tell you that Sunrise had run out of stock and had bought from an alternate supplier at a better cost however in the panic to get stock, did not do proper validation of their new supplier’s product or reach out to their customers about the change. She proceeded to apologize for all the problems it had caused. Concerned and disappointed with the performance of Sunrise on the last order, you close off the call by telling Gina that you would be opening the glove procurement up for review since Sunrise breached the contract by changing the glove standards. Gina apologized again and indicated they had already gone back to their original source and would no longer buy from the alternate however there would be a cost increase. She would submit a new quotation to keep the glove business with the police department.

The current blue gloves came in boxes of 50 (25 pairs) and the police department consumed around 130,000 pairs on an annual basis. The police department had 173 officers and averaged one box of gloves every two weeks but recently they were going through an average of one per week. The small boxes were convenient for the officers, but the police force has been mandated to be more environmentally friendly and reduce waste. Not only were the disposal of gloves themselves a concern but also the boxes they came in.

The request for quotation included four potential suppliers.

Supplier Quotes:

Sunrise Distributors located in Calgary, supplied many police departments across Canada. The old cost was $3.67 for a case, and Gina was now proposing a new cost of $4.71 for a case of 25 pairs. Freight is collect and you would be shipping less than truckloads which would work out to 3% of the cost per case. Gina promised the gloves would be the original gloves that the police department had been receiving and met all the specifications. Until the recent issues, the officers have preferred Sunrise’s gloves. Payment terms were 2% 15 net 30 days. Sunrise’s order lead time is 2 weeks. You contemplate what to do, should consider their quote. How could you ever trust them again? If you did what would they need to do to rebuild the relationship?

Destric Medical Supplies was also located in Calgary and supplied many police departments across Canada. You were familiar with them and knew they had a good reputation. They had been the supplier prior to Sunrise. Destric’s quote was $6.80 for a box of 100 blue gloves (50 pairs). The only difference in specifications is that Destric gloves were 4 mil thickness making them stronger which would help with the tearing however you recall that the police officers use to complain that Destric’s gloves dried their skin and had a strong odor. Payment terms are Net 15 days and freight is prepaid to your warehouse. Their order lead time is 1 week which will allow you to carry less inventory. This appeals to you from an inventory investment and would free up space in the warehouse.

Swanson Industries, located in Winnipeg, quoted $7.80 for a box of 100 (50 pairs). Freight would be at the police departments expense and would be picked up by a local courier for a nominal fee, 1% of the cost of a case. Swan industries was new in the market and had only recently began to ship to a couple police departments and you don’t know anything about their reputation. Their gloves were 4 mil thickness, odorless, and included a lanolin and vitamin coating to minimize skin irritations, all of which would make it attractive to the police officers. The other difference is their gloves were a lime green which the officers probably would not like; they were familiar with the standard nitrile blue gloves. Swanson’s payment terms were net 45 days. Their order lead time is next day.

Dynocare was located in Detroit, Michigan. They offered 200 blue glove space saver boxes (100 pairs) which is attractive for a couple reasons, the space saver would produce less garbage which was a bonus from an environmental perspective and the compact boxes would help with warehouse space. The sample box of 3 mil blue gloves you received did have a slight odor and did not seem to cause dryness or arash however you only had them on for an hour. You did however notice that your hands were very sweaty after which increased the odour. Your initial thought is the police officers would not like them. Dynocare’s price was 3.80 USD per box. Freight terms are FOB Detroit (8% of the cost per box) and their payment terms are Net 45 days. The current exchange rate is 1 USD = 1.35 CDN. Their order lead time is 3 weeks. Although you are not familiar with them, Dynocare provided Canadian references. When you called the references, you got glowing recommendations for Dynocare.

As you sit in your office you need to decide which supplier to source from.

1. Calculate the total cost for a pair of gloves and the total annual cost for all four potential suppliers. Which one is the best price?

2. Compare the qualitative differences between the suppliers. Does this change your assessment?

3. How important is reliable communication and trust with your suppliers and how can you achieve it? Explain.

4. Who do you decide to buy from and what will your implementation plan be to ensure you and the supplier are in alignment?

Answer rating: 100% (QA)

1 Calculation of cost i Sunrise Distributors Price of per case 471 total amount of gloves 50 Actual price 471 x 50 2355 or 236 The freight price will be 7 Total cost 243 per case ii Destric Medical Pr... View the full answer