The Profit Leverage Effect is a key value add that Purchasing people can provide to their company. (As mentioned in class when going for interviews in Purchasing, knowledge of this concept will be a key differentiator for you to outline the merits with examples as to the Profit Leverage benefits).

Scenario: You are in purchasing at an after-market auto parts supply company. Your role is to source-purchase parts which will be sold both in retail and online (e-commerce). One of your products is a mobile phone holder that fits into a car cup holder, purchase price is $4.00 each and the company sells for $8.00 each. Sales are ramping up as you are this unique product supplier in the marketplace. Sales are currently running at 3,000 a month. The future forecast is for each month to grow by plus 500 a month (3,500 new monthly total) for the next 12 months at least.

You have decided to confirm with your supplier (s) as to their ability to meet new demand increases. (plus 500 units a month, starting in 3 months (day 1 month 4) for at least a year's supply).

Question 1 (12 Marks)Outline Purchasing steps you would take in terms of adding value to the Profit Leverage Effect on behalf of your company. Add who would you reach out to.

Question 2 (8 marks) Outline your assumptions and show your mathematics calculations with your financial projections.