Please thoroughly study Chapter 12 and carefully read the case, Plastic Cable Clips, in your book (pp. 361-364) . You are required to answer the following discussion questions. In addition, each student must comment on at least four other students initial post and/or other student comments.

a. If you were in the position of Robyn Pemberton, would you use a single source for plastic cable clips?

b. What supplier(s) would you choose for plastic cable clips and why?

c. How does the Deming philosophy apply to this particular decision?

364 Purchasing and Supply Management situations, it could supply within six weeks by airfreight- ing the stock Robyn Pemberton was also conscious of the ad- vantage of Australian sourcing due to the Closer Eco- nomic Relations Agreement between New Zealand and Australia. She knew that a higher New Zealand and Aus- tralian content in the new washing machine would permit F&P free or minimum daty access to the Australian mar- ket. Although she had to inform the costing department of the country of origin of each part purchased, she did not know at what level some price reduction on a part would offset a duty increase. She had tried to find out more information on this subject, but no one had been very explicit. With the labour government in power, a considerable amount of uncertainty existed. All she knew was that the group purchasing department of F&P was pushing for as much New Zealand and Australian content as possible PLASTIC DISTRIBUTING Plastic Distributing was a local agent with annual sales under $1 million that imported plastic products from a number of countries. This young company was eager to obtain onders but offered little technical backup. In the past, Robyn had given it the odd order, especially when supply was tigh. She had asked this agent to quote on the new plastic clips mostly for comparison purposes SELECTION DECISION Quotes started arriving on July 10 with Barry Cleaver's response. But it was not until September 12 that she obtained Olson's prices (see Exhibit 3 for a summary of quotes). In mid-September Robyn called Barry Cleaver and asked for a meeting. Barry Cleaver came with a tech- nical expert to meet with Robyn and her supervisor, John Wardrop. Barry made clear that the recent problem en countered with the supply of rivets and cable ties was in the process of being solved, because they had been able to regain their importing license from Trade and Industry by proving that Olson did not have sufficient capacity to meet the demand, Barry Cleaver assured Robyn and John that he felt there would be no problem to import all the new plastic clips required for the new washing machines Robyn was wondering what to do. In light of Deming's philosophy adopted by Fisher & Paykel as a whole, she I felt some pressure toward single sourcing. However, she was not convinced of the soundness of single sourcing in the context of this purchase. She was also wondering to what extent Olson Plastics realized what their situation would be once the old washing machine was phased out, should she choose to go with Barry Cleaver. She was dehating whether she should call on Olson for further consultation. In any event, she knew a decision had to be reached quickly in view of the lead time involved, with the first production run scheduled for next April. EXHIBIT 3 Summary of Quotes/Prices per 1.000 Part No 816549 Barry deaver 76.00 Rollman Olson 54.00 Plastic Dist. 99.95 816553 76.00 119.80 99.95 817709 Description Clip snap 1.25M X 5 Clip Snap 250M X 75 Clip-tie HM FT Clip-lock HBX Clip-tie HM FT:55) Clip-tie HM RS2 25 20 36.80 28 26 817803 817923 39.20 23.06 13440 61.82 20.40 28.12 817975 38.40 50.00 63.22 Chapter 12 Supplier Selection 363 Olson's prices for certain parts were twice as high as prices for imported parts. But deliveries were Robyn's major area of concem with this supplier. Even with a six to eight- month lead time, deliveries were unreliable and Robyn had to chase every order. She believed Olson had capacity problems although they did not wish to admit it However, Olson enjoyed government protection in the sense that, under normal circumstances, a New Zealand agent could not import products that could be made domestically BARRY CLEAVER AND SONS Barry Cleaver and Sons, a New Zealand agent for three generations with an excellent reputation, was receiving about $2 million a year worth of orders from F&P. Its prices and service were normally excellent Delivery was good. providing adequate load time of six to eight months was given. Barry Cleaver was getting F&P plastic parts from Japan and during seller's markets, would have difficulty obtaining supply becase of the relative low importance of its orders However, Robyn was concerned about the long-term availability of the imported parts because the agent's license could be revoked if it was proven that a domestic supply alternative existed. F&P was legally free to buy from any agent in New Zealand. It was up to the agent to justify its stance with the Department of Trade and Indus- try. However, Robyn was well aware of the department's licensing policy (see Exhibit 2), because she remembered vividly a problem cecountered with plastic rivets and a few cable ties in May. Barry Cleaver had been supplying F&P with Japanese rivets and cable ties until Olson complained to Trade and Industry. As a result, Barry Cleaver not only had to stop importing and start purchasing from Olson at three times the former price, but he was also having a terrible time meeting F&P volume requirements and had to deliver some of the parts on a daily basis. After F&P started no ticing that the rivets purchased from Barry Cleaver came in Olson's boxes, Robyn asked Olson for quotes on the rivets, but was subsequently surprised to discover that Olson's prices were higher than Barry Cleaver's. G. T. ROLLMAN G. T. Rollman was a large New Zealand agent import ing from Australia. Although the prices were high, the service was excellent and the delivery was good. The av- erage lead time was three to four months but, in urgent EXHIBIT 2 New Zealand Government Standard Licensing Pulley The following policy applies to all ter codes except those for which specific policies are set on the following pages 1. Goods of Types Not Produced in New Zealand Licenses will generally be granted to meet reasonable requirements for goods of types Licenses will not be issued under this provision unless it is quite clear that the goods to be imported are not substitutable for domestic alternatives The applicants will need to provide adequate evidence that suitable alternatives are not available from New Zealand manufacturers in considering applications Trade and Industry will assess the extent to which estab. lished licensing provisions have been and are being used to import the goods con cerned. The aim of this is to ensure that domestic production is not detrimentally af fected by the consequentialitability of license to import directly competitive goods 2. All Other Goods Les may be granted in social circumstances such as Established trading patterns arising from continuing social licensing provision Shortfalls in normal domestic supply Special provision for the requirements of new manufacturers Applications under general policies and provisions set out in Annex behem Codes which fall understry Development Plans are subject to any special importing provins of the plans 362 Purchasing and Supply Management of production. The first production run was scheduled for the beginning of next April. PLASTIC CABLE CLIPS The old washing machine used about 20 different plas tic cable ties for a total of about 250 ties in cach ma- chine. At the moment, the laundry division bought nearly $1,250,000 a year worth of plastic cable ties: about $500,000 from Olson Plastics, a New Zealand manu- facturer, $500,000 from Barry Cleaver and Sons, a local agent importing mostly from Japan: $200,000 from G.T. Rollman, another local agent importing from Australia; and at most $50,000 from Plastic Distributing, a relatively new and smaller multisource New Zealand agent. The ties to be used in the new machine required new specifications because of the automated production pro- cess. None of the existing ties suppliers actually had in stock the kind of parts required. A year earlier, Robyn Pemberton, who was the pur chasing coordinator for the new washing machine, man aged to convince the planning Committee to draw on the technical expertise of Barry Cleaver, the New Zealand agent currently supplying some of the plastic ties. As a result of Barry Cleaver's input, the number of ties re- quired was reduced to half a dozen new parts for a total of about 45 plastic clips to be used in cach new machine. Robyn Pemberton made it very clear to Barry Cleaver that all current plastic ties suppliers would be asked to sub- mit quotations as soon as all the specifications on the new clips were finalized and that his involvement would not give him any preferential treatment over the others. SUPPLIER SELECTION Because of design changes, the specifications for the new cable clips were not confirmed until early July. Robyn promptly sent letters asking for quotations to the four ex- isting plastic ties suppliers (sce Exhibit 1). OLSON PLASTICS Olson Plastics, the only New Zealand manufacturer of I plastic ties, clips, and rivets, had been supplying F&P for many years. Robyn Pemberton believed that FRP would be among its top five customer. With occasional quality and service problems, Robyn felt the quality of Olson's products was not as high as that of the other ties suppliers . 5 July EXHIBIT 1 Quotation Request Letter Sample avel The following new parts are required, commencing next March. Please advise price, mini- mum quantity, and delivery details Part Description Qty/Annum 816549 Clip snap.125M X 5 30.000 816553 Clip snap 250M X 75 30,000 817709 Clip-tie HM FT 60,000 817803 Clip-lock HBX 165,000 817923 Clip-tie HM FT (SS 650,000 817975 Clip-tie HM RS 2 135,000 cind . and used ically pen e level nie alty in tween Samples would be appreciated when possible. Awaiting your reply with interest Yours faithfully, FISHER PAYKEL LIMITED Robyn Pemberton Purchasing Officer Laundry Division Call your Chapter 12 Supplier Selection 361 glass was S.4389/sq. ft/blk. For low energy glass their quote was $0.6734/sq. ft/blk for 3 mm and $0.9512/sq.ft blk for 4 mm glass. Clear glass made by Ross Industries was also available at a higher price than the clear glass made by West Bend Glass. Their distribution centre was located 135 miles from Dayton. Lead time was two to three days and they could deliver three to four times a week. They were willing to stock inventory for KII. ordered at one time. If quantities of less than 12 blocks were ordered, the delivered price was $.33/sq. ft./blk. The Ross plant was located 150 miles from Dayton and lead time was one week. They had access to an associated sup- plier in Illinois as an alternate source of glass if they were unable to meet KII's demands. Clear View Distributors. Clear View Distributors was a small local glass distributor that had supplied KII for three years. They had provided consistent, on-time delivery of low energy glass. They had also built sealed units for KII but there had been problems with some units. Both clear glass (made by Ross Industries) and low energy glass (made by West Bend Glass) were available on a mixed eight-block truck. Delivery was available daily, if requested, and they were willing to stock inventory for KIL Travers Glass Ad. Travers Glass Ltd. was a glass dis tributor about twice the size of Clear View Distributors They had provided KII with service for 15 years and had been an excellent backup service for Ross Industries, They offered clear glass (made by Jackson Glass Co) at the lowest delivered price of $.3172/sq. ft./blk in a straight or mixed truckload of at least 12 blocks with low energy glass (made by West Bend Glass). The quote for 4 mm clear Jackson Glass Co. Jackson Glass Co. was a glass man ufacturer that had been one of several suppliers to KIt in the past. They were very interested in doing business with KII again. Their glass quality was good and they would supply 3 mm clear glass at a delivered price of $.33/sq. folk for a minimum order of six blocks. Jackson's quote for 4 mm clear glass was 5.44/sq. ft/blk. Their low energy glass would require KII's testing lab's approval. The Jackson distribution center was located about 130 miles from Dayton and lead time was one week. They were aligned with a Canadian supplier that could provide an altemate source of glass if required Now that she had gathered the necessary information, Victoria needed to proceed with her analysis. She knew that she would have to make her recommendation soon, Case 12-3 Plastic Cable Clips In mid-September Robyn Pemberton, purchasing officer in the laundry division of Fisher & Paykel Limited, lo cated in Auckland, New Zealand, was wondering which procurement option made most sense for the plastic cable elips requirements for the new line of washing machines. THE LAUNDRY DIVISION Fisher & Paykel Limited was the largest home appliance manufacturer in New Zealand with sales of its major ap pliances amounting to $135,000,000 and total sales of $270,000 for the fiscal year coding March 31, includ- ing $36.000.000 of export sales and royalty income. It comprised eight operating divisions, one of which was the laundry division employing over 500 people to produce washing machines and dryers. Currently, the only divi- son produced about 50, washing machines, solely for the domestie market THE NEW WASHING MACHINE For the last two years, the laundry division had been devel oping a new line of automatic washing machines. The plan- ning and development of the new machine was conducted by a seven-person committee of engineers, production, and marketing people as well as a purchasing coordinator The new machine, designed entirely by F&P, used electronic controls. It was believed to be technologically advanced by world standards. Iis manufacturing process would be highly automated, featuring considerable part rationalization and cost rodation over the old production line. In fact, maintaining costs at the lowest possible level was one of the key priorities of the planning committee With good opportunities for export and royalty in come, the laundry division hoped to produce between 75,000 and 100,000 w washing machines a year. How eve, 50.000 machines were planned for the first fill year