LOG 315 - July Semester 2020

Question 4

Peter, a strategic commodity buyer, is tasked to analyse his current spend to optimise his commodity portfolio. He tabulated his purchase over the past 12 months and inserted his observation on the supply-market and product characteristics in the remark column (see below).

Peter would like to apply Portfolio Analysis framework in classifying each item.

(a) Recommend the positioning of each item to the Portfolio Analysis model. Support your choice with reasons. (10 marks)

(b) Based on your answer for (a), appraise the appropriate procurement approaches that Peter can consider for:

Item A when the strength of position within market is very high

Item B when strength of position within market is low

Item C when strength of position within market is good

Item E when strength of position within market is between low and good

(12 marks)

(c) Despite a pre-agreed fee structure for Item D, the supplier wants to charge more than what Peter believes a reasonable adjustment. Assess the option that Peter can take to rebalance the power. (3 marks)

Comments Commodities Quantities Ave Unit (K-units) price Item A 1,750 $32 Limited source, hinges on innovation Item B 2,500 $12 Limited source, needs to ensure supply is not disrupted Focus is on cost Item C 2,240 $25 Item D 3,000 $19 Outsource item and the market for this commodity is easy. However, due to the tight technical specification required, supplier has amassed considerable amount of process know-how thereby placing the supplier in a unique position Potential returns are small, alternative sources available Item E 3,000 $10 Comments Commodities Quantities Ave Unit (K-units) price Item A 1,750 $32 Limited source, hinges on innovation Item B 2,500 $12 Limited source, needs to ensure supply is not disrupted Focus is on cost Item C 2,240 $25 Item D 3,000 $19 Outsource item and the market for this commodity is easy. However, due to the tight technical specification required, supplier has amassed considerable amount of process know-how thereby placing the supplier in a unique position Potential returns are small, alternative sources available Item E 3,000 $10