READ THE CASE STUDY BEFORE ANSWERING QUESTION:

Sourcing and procurement staff frequently complain of being the last to learn about significant changes in production volumes. They are often 'caught on the wrong foot' and struggle to respond to changing production plans. This may result in expedited orders, which cause significant cost increases but may frequently be achieved by flexible, local suppliers. Changes in product designs require extensive documentation by the procurement team as they update the information management system to accommodate any changes in supply to reflect this. Furthermore, any changes made by suppliers must also be reflected in documentation within the information management system, enabling an auditable record to be maintained by MedCom. These regulatory requirements add significant additional costs to MedCom each time a new vendor is used, or a vendor changes their products slightly. Local suppliers are extremely flexible and are usually able to exceed specifications for expedited deliveries. Many of these are SMEs that have grown with MedCom over the last twenty years, with their own success linked to MedCom's success; MedCom remains a significant customer for many key suppliers. However, with rising labour costs, the materials and services provided by these suppliers have been increasing at a rate much faster than inflation. The CSO has pressured the procurement team to investigate options for reducing the procurement spend. Careful sourcing has identified several suppliers in South East Asia that can supply three key compo- nents/materials that account for 25% of the cost of the capital-intensive unit, and two suppliers of compo- nents/materials that account for 40% of the cost of the accessories. Preliminary investigations indicate that deliveries would be unreliable. Samples ordered also had widely varying levels of quality and careful analysis turned up some dangerous chemical compounds in the plastics from one vendor. These concerns have led to the retention of the local suppliers, although the procurement team believes that the materials costs may be reduced by 17% if sourcing the five components/materials from the South East Asian suppliers.

QUESTION: From the procurement manager perspective, What are the problems and recommendations you suggest for the company to undergo to achieve competitive advantage and optimal performance in the supply chain.

Reference: David Alan Collier and James R. Evans (2016). OM6. Cengage Learning (6th Edition)