It has been a phenomenal year at About Face, a new firm that found success in 2020 making fashionable eco-friendly reusable face masks with a hemp fabric. The masks are in demand as the fabric is breathable, holds its shape, does not irritate skin, and does not retain odours. Founder and owner Angela Foley is committed to sustainable principles and has previously negotiated a contract with a local firm (Fab Tex) who produce the masks to her design specification. They source the fabric. The sales forecast for the first 6 months was 25,000 units. The initial order with Fab Tex was for 20,000 units at an ex-works price of 147.00. The details are shown below:

Materials	57.50
Labour	12.00
Production Overheads	16.00 (i)
Engineering and tooling Costs per unit	12.50 (ii)
Margin	49.00 (iii)
Total Price	147.00

(i) charged on the basis of labour cost

(ii) re :250,000 fee covering pattern & die processing and tooling

(iii) based on a margin of 33%

About Face had planned to sell online but interest in the product has surpassed all of Angelas initial hopes and she needs to be able to provide the online retailers with more product and quickly.

Angela has employed you as Supply Chain Manager, and you have full responsibility for managing supply and meeting global demand.

You are to negotiate a repeat order with Fab Tex, this time for 60,000 units, with first deliveries as soon as possible, preferably within two weeks. Your initial contact with Fab Tex resulted in them reporting a 10% increase on the price of the material due to an increase in global demand. If the price can be agreed they can deliver 20,000 units per month with first deliveries in two weeks time. Fab Tex have quoted 152.75 total price per batch of 100 for the next order.

From your research you know that the learning rate in the industry is 90% and are aware that the cost of the material has indeed increased by 10%. Coupled with the fact that you intend to triple what was ordered last time Angela feels there is some room for negotiation. Do you think it is possible to negotiate a better deal? and what way would you approach the supplier?

Circumstances have made you consider the idea of renting a production facility yourself and producing the masks there. You have spoken to the local enterprise board and there are grants available, help with set up costs and investors ready so you could be up and running in 6 months. If all went to plan you could produce the masks for 142 per batch of 100.

Angela is going to join you when you negotiate with Fab Tex for this next contract, her experience within the industry is valuable but you need to brief her about the price movement for fabrics and about the options for producing in the rented facility. Your briefing should take the form of a report. The report should detail the key facts and outline the agenda and strategy for the meeting with the supplier. You should specify and justify your target price, and consideration should be given to your BATNA.