Thomas Manufacturing CompanyMr. Thomas, president of Thomas Manufacturing Company, and Mr. McDonnell, the vice president, were discussing how future economic conditions would affect their product, home air purifiers. They were particularly concerned about cost increases. They increased selling prices last year and thought another price increase would have an adverse affect on sales. They wondered if there was some way to reduce costs in order tomaintain the existing price structure.McDonnell had attended a purchasing association meeting the previous night and heard a presentation by the president of a tool company on how his firm was approaching cost reduction. The tool company had just hired a purchasing agent with a business degree who was reducing costs by 15%. McDonnell thought some of the ideas might be applicable to Thomas Manufacturing. The present purchasing agent, Mr. Older, had been with Thomas Manufacturing for 25 years, and management had no complaints. Production never stopped for lack of material. Yet a 15% cost reduction was something that could not be ignored. Thomas suggested that McDonnell look into this area and come up with a recommendation.McDonnell contacted several business schools in the area. He said he would be interested in hiring a new graduate. One of the requirements for applicants was a paper on how to improve the companys purchasing function. Several applicants visited the plant and analyzed the purchasing department before they wrote their papers. The most dynamic paper was submitted by Tim Younger. He recommended the following:1.Lower stock-reorder levels (from 60 days to 45 days) for many items, thus reducing inventory.2.Analyze specifications on many parts.3.Standardize many of the parts to reduce the variety of items.4.Analyze items to see whether more products can be purchased by blanket purchase orders, with the ultimate goal of reducing the purchasing staff.5.Look for new and lower-cost sources of supply.6.Increase the number of requests for bids, to get still lower prices.7.Be more aggressive in negotiations. Make fewer concessions.8.Make sure that all trade, quantity, and cash discounts are taken.9.Buy from the lowest-price source, disregarding local public relations.10.Stop showing favoritism to suppliers who also buy from the company. Reciprocity comes second to price.11.Purchase to current requirements rather than to market conditions; too much money is tied up in inventory.After reading all the papers, McDonnell was debating with himself what he should recommend to Thomas. Just the previous week at the department meeting, Older was recommending many of the opposite actions. In particular, he recommended an increase in inventory levels in anticipation of future rising prices. Older also stressed the good relations that the company had with all its suppliers, who could be relied upon for good service and possible extensions of credit. Most of Thomass suppliers bought their home air purifiers from Thomas Manufacturing. Yet Younger said that the practice of favoring them was wrong and should be eliminated. McDonnell was hesitant about what action he should recommend. Mr. Thomas wanted a decision in the morning.

1.What recommendation would you make if you were McDonnell? Why?