Case Study 2

Selecting the Best Vendor

Eun Jin Hwang, Ph.D. Indiana University of Pennsylvania

Elizabeth Oaks, owner of a home dcor boutique, is having trouble with her lamp vendor, Green Lighting. Merchandise is consistently delivered several weeks late and often with the wrong labels. Several lamps have been retumed by customers for being defective. Recently, Elizabeth found that the same merchandise she had ordered from Green Lighting is being sold in the gray market. While the gray market is legal, the merchandise is often sold at a price much lower than the boutique's retail price. Elizabeth recently terminated her contract with Green Lighting and now, she needs to find a new lighting vendor who she can trust and also provide good discounts and terms.

Elizabeth hires a new assistant buyer, Chase Seo, for her lighting accessories department and assigns him to find a vendor. Chase visited the Dallas Total Home Market to shop for a new lamp vendor. After talking with other buyers and meeting with several lighting representatives, Chase was able to narrow the search to three different vendors. All three vendors have been reported to have good reputations, lead times, factory capacity, and product quality. Each vendor provides different discount terms and offers. In order for Elizabeth and Chase to decide which vendor they should select, they need to compare the discount terms and shipping terms that have been offered.

California Lighting offers trade discounts of 5%, 15%, 10% with 2/10, r/30 (verify with answers that this is regular dating), FOB Factory. New York Lighting offers trade discounts of 10%, 5%, with 8/10 EOM, FOB Factory, and also offers a quantity discount of 5% when a buyer orders more than 75 total units. Pennsylvania Lighting offers a $500 rebate to retailers for purchases above $5,000 with 6/10, n/30, FOB Factory. Before an agreement is made and a contract is signed, Chase needs to determine the cost of the lamps from each vendor.

DISCUSSION QUESTIONS FOR CASE STUDY 2 1. Chase decides to order the following items: Items Desk Lamps Table Lamps Floor Lamp Quantity 20 25 30 Cost (S) 46.00 each 68.00 each 89.00 each. How much should be remitted to each vendor, if Chase pays for the merchandise before the discount deadline dates expire?

a. California Lighting

b. New York Lighting

c. Pennsylvania Lighting

2. How much should be remitted to each vendor, if Chase pays for the merchandise after the discount date and, therefore, does not take advantage of the discount date? Would it be beneficial for Chase to seek financial help from a factor so that he can take advantage of the discount date?

a. California Lighting

b. New York Lighting

c. Pennsylvania Lighting

3. Using your answers from question number 1, if you were in Chase's situation, which vendor would you choose and why?

4. What else does the buyer need to consider when selecting vendors?

5. Could Chase negotiate services that would help in reducing the cost of the lamps? If yes, what services?

*Other instructions from the instructor*:

Ensure you fully answer each question. If a question is open ended or asks for your recommendation, provide a detailed and well-thought-out response. A one sentence answer will not get full credit.

Selecting the Best Vendor Eun Jin Hwang, Ph.D. Indiana University of Pennsylvania Eleabeth Oaks, owner of a home decor boutique, is having trouble with her lamp vendor, Green Lighting. Merchandise is consistently defvered several weeks late and often with the wrong labels. Several lamps have been retumed by customers for being defective. Recently, Bizabeth found that the same merchandise she had ordered from Green Lighting is being sold in the gray market. While the gray market is legal, the merchandise is often sold at a price much lower than the boutique's retal price. Elizabeth recently teminated her contract with Green Lighting and now, she needs to find a new lighting vendor who she can trust and also provide good discounts and terms. Elzabeth hires a new assistant buyer, Chase Seo, for her Ighting accessories department and assigns him to find a vendor. Chase visited the Dalas Total Home Market to shop for a new lamp vendor. After taking with other buyers and meeth with several ighting representatives, Chase was able to narrow the search to three different vendors. All three vendors have been reported to have good reputions, lead times, factory capactly, and product quality. Each vendor provides different discount terms and offers. In order for Elzabeth and Chase to deade which vendor they should select, they need to compare the discount terms and shipping terms that have been offered. Calfomia Ughting offers trade discounts of 5%,15%, 10% with 2/10,n30 (verify with answers that this is regular dating). FOB Factory New York Lighting ofters trade discourts of 10%,5%, with 8/10 EOM, FOB Factory, and also offers a quantity discount of 5% when a buyer orders more than 75 total units. Pennoytvaria Lighting ofters a $500 rebate to retalers for purchases above $5,000 with 6/10,n/30. FOB Factory. Betore an agreement is made and a contract is signed, Chase needs to determine the cost of the lamps from each vendor. DISCUSSION QUESTIONS FOR CASE STUDY 2 1. Chase decides to order the following items: How much should be remitted to each vendor, if Chase pays for the merchandise before the discount ceadine dates expire? a. Calfornia Lighting b. New York Lighting c. Pernsyivania Lighting 2. How much should be remitted to each vendor, if Chase pays for the merchandise after the discount date and, therefore, does not take advantage of the discount date? Would it be beneficial for Chase to seek financial heip from a factor so that he can take advantage of the discount date? a. Calfornia Lighting b. New York Lighting c. Pornsyvania Lighting 3. Using your answers from question number 1 , if you were in Chase's stuation, which vendor would you choose and why? 4. What else does the buyer need to consider when selecting vendors? 5. Could Chase negotiate services that would help in reducing the cost of the lamps? If yes, what services