Cost Increase for a case of Wheat Thins Crackers

This document discusses the problem of cost increase for a case of Wheat Thins Crackers faced by True Value and explores possible solutions and strategies that the management can undertake. It also examines the impact of these decisions on warehouse storage, shelf space, and other recommended actions.

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Table of Contents
1. Cost Increase for a case of Wheat Thins Crackers....................................................................................................1
1.1 What can True Value (TV) do to address this problem?.......................................................................................1
1.2 What other possible options could TV management undertake to improve the situation? Must TV accept the cost
increase?....................................................................................................................................................................... 2
2. Minimum Order Quantity....................................................................................................................................... 2
2.1 Consider and recommend other approaches or strategies that True Value management could take to deal with
this issue. Does TV have any room to negotiate on this matter?.....................................................................................2
2.2 Could TV negotiate a better arrangement?..........................................................................................................3
2.3 If so, what other arrangements could be negotiated and how would TV negotiate a change?................................4
3. Impact on Warehouse Storage and Shelf Space........................................................................................................5
3.1 Based upon the recommended approach and strategies that your team has made in 1 and 2, what effect will these
decisions have on the management of space at the warehouse, holding costs, turnover, shipment quantities and timing?5
3.2 How will the possible changes required regarding warehousing and shipping affect the management of (costs and
turnover) regarding shelf space at the store level?.........................................................................................................5
4. Other Recommended Actions................................................................................................................................... 6

1. Cost Increase for a case of Wheat Thins Crackers
The problem faced by True Value include, $2.00 increased cost price of Christie’s parent
company on each case of Wheat Thin crackers to the wholesaler and established a minimum
purchase (per order) of 100 cases. It is necessary for Boris and Sergi to address this problem and
make sure to put Wheat Thins on the shelves of their grocery chain. But, earlier the wholesale
price of a case of 10 crackers to True Value was $18.00, along with the delivery to the
warehouse in Kitchener.
On the other hand, the purchasing department is required to find what goods and services
are crucial to the company and respectively appropriate steps must be taken for securing their
supply chains. The investigation on current purchasing process of True Value for the Wheat
Thins product shows that, this product is the major snack foods which the consumers purchase
and this product should always made available for sale, particularly during the holiday seasons,
as the sales of this item increases drastically.
1.1 What can True Value (TV) do to address this problem?
The solution for the current problem at True value the following steps must be
undertaken (Blood-Rojas, 2017):
Step 1: The internal needs must be analyzed for benchmarking the current
performance.
Step 2: Then, the needs and targets must be identified to develop a procurement
strategy.
Step 3: The supplier’s market must be assessed.
Step 4: The information of the supplier must be collected.
Step 5: Sourcing strategy must be developed.
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Step 6: Sourcing strategy must be implemented.
Step 7: A winning bid must be selected to negotiate with the suppliers.
Step 8: Necessary transition plans must be implemented or the predetermined supply
chain must be improved.
1.2 What other possible options could TV management undertake to improve the
situation? Must TV accept the cost increase?
No, True Value should not accept the increased cost, because it is a serious risk and it
will be difficult for it to reach the profit margins. In general, the businesses rely on the suppliers
for decreasing the cost. If, TV accepts the cost increase it will have to face various inventory and
sales challenges. For instance, with the possible price break in the negotiation of 120 cases per
order can consequently require True Value to expand its inventory storage space. This shows that
it is an economic decision, where lower prices can be achieved at higher risks.
Thus, the other possible options which True Value management can undertake to respond
to Nabisco and for improving the current situation is to decrease the risks, and make sure to
secure the supply. Further, during negotiation a realistic bid can be presented. Thus, True value
must take efforts to interest the supplier (i.e., Christie’s parent company (Nabisco)) to work with
True Value, which could attract the company to have a long-term relationship by agreeing to
their negotiation bids.
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2. Minimum Order Quantity
2.1 Consider and recommend other approaches or strategies that True Value
management could take to deal with this issue. Does TV have any room to
negotiate on this matter?
Negotiation and starting a valuable relationship is the only strategy that True Value is
recommended to work on. At present, True Value can possibly negotiate a price break of 120
cases per order, but it will give way for other risks and problems. Thus, TV must opt negotiation
as an option.
However, negotiating an appropriate deal with the supplier does not actually mean to get
what is desired at the cheapest possible price, because it can also refer to negotiating the other
factors like payment terms and conditions, delivery times or quality of goods and so on
("Negotiate the right deal with suppliers", 2019). Make a point that, the agreement must make
both the parties happy.
2.2 Could TV negotiate a better arrangement?
Yes, it is possible for True Value to negotiate better arrangement by undertaking the
following steps (Haden, 2018) (Pancik, 2019):
1) Forget your fears.
2) Don't set any estimated range, until you are sure.
3) Collecting supplier intelligence.
4) Gathering the feedback of the client.
5) Set objective for the negotiation.
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6) Understand the supplier.
7) Draw a contract for the purchase and both the parties must sign it.
8) Next, sit down with the stakeholders to review the results, then develop a
negotiation plan.
9) Utilize the gather data and determine what you want to ask, for supporting your
requests to decrease the cost.
10) Make sure to have a supplier push-back plan.
11) Talk with the stakeholders on how much you can possibly push and determine the
walk away points (Law, 2017).
12) Always remember, that the suppliers will find it difficult to arguing against you if
you have a well-constructed position depending on the verifiable data.
2.3 What other arrangements could be negotiated and how would TV negotiate a
change?
True Value can negotiate a change with competitive bids, as it can allow to have robust
solutions. However, True Value must also negotiate the minimum orders so that it can avoid the
inventory challenges and risks.
The negotiation strategy must be carefully planned to deliver better results without
risking the relationship with the stakeholders, distributors or the supplier. As a matter of fact, the
collaboration with the stakeholders can help to elevate your reputation to a new level, as you
share thoughtful approaches for the business and relationships with the buyer, distributors and
supplier.
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Additionally, True Value can negotiate a change by involving some kind of trade-off,
because each reduction in price or increase in value must involve trade-off. If not, it means that
the initial price was expanded. Simultaneously, ensure that the negotiation leaves both the people
profitable, with a feeling that they have received something of value (Haden, 2018). Therefore,
here the deal can be that the 100 cases can be delivered on a scheduled time interval instead of
delivering all at a time, so that the storage problem can be resolved.
3. Impact on Warehouse Storage and Shelf Space
3.1 Based upon the recommended approach and strategies that your team has made
in 1 and 2, what effect will these decisions have on the management of space at
the warehouse, holding costs, turnover, shipment quantities and timing?
Depending on the recommended approach and strategies of the procurement team in 1
and 2, the management of space at the warehouse, holding costs, turnover, shipment quantities
and timing can be impacted as follows:
1) If, Christie’s parent company (Nabisco) agrees to decrease the minimum order of
100 cases and schedule a time interval instead of delivering all at a time, then
True Value will not have any warehouse problem.
2) This will allow True value to plan and manage their holding cost.
3) However, necessary discounts need to be advertised to increase the turnover
("How to Find and Work With Suppliers", 2019).
4) The shipment quantities and timing must be planned well.
5) Improve service
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3.2 How will the possible changes required regarding warehousing and shipping
affect the management of (costs and turnover) regarding shelf space at the store
level?
The logic applied here include, making the product highly available, with decreased
waste and markdowns. The high availability can decrease the goods handling costs.
The possible changes required in warehousing and shipping which can affect the
management of (costs and turnover) regarding shelf space at the store level can be managed by
calculating the maximum inventory volumes, including the net storage capacity required. The
safe storage of the product must be maintained effectively, followed by maintaining a
sophisticated shelves/racks system, for increasing the efficiency of picking the product.
However, it might need to change the size of the shipping container. Further, the
following changes will be required ("10 Ways To Improve Your Warehouse Inventory
Management", 2017):
1) Decrease the inventory holding costs.
2) Inventory budgets need to be prepared (Fritsch, 2015).
3) Maximize the operational efficiency.
4) Improvise the order fulfilment.
5) Decrease order picking errors.
6) Increase sales.
7) Implement Just In Time (JIT) inventory management method, where the inventory
will be purchased just few days prior to its time of sale or distribution.
8) Ensuring the stock level is very important.
9) Efficient demand forecasting is required.
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10) Utilize the analytics of warehouse racking layout reconfiguration.
11) The inventory turnover ratio need to be determined.
12) Utilize real-time shipment tracking to help the warehouse operations.
4. Other Recommended Actions
The procurement and purchasing team recommends True value that, apart from taking
purchasing risks, relationships between the supplier and the purchaser must be managed as well.
Additional supply chain management is recommended too.
Along with being prepared and understanding the supplier, it is essential to understand
the dynamics of deal and ensure professional negotiation (Harroch, 2016). However, along with
managing relationships True Value is suggested to collaborate with the internal stakeholders like,
finance, marketing, logistics and distribution, for improving its position with respect to its
competitors. It is necessary to decrease the cost, decrease the lead time, improve its quality, and
implement technology solutions for addressing the supply chain related problems and to manage
the shipment quantities and timing of the product ("How your purchasing department can
improve your business", 2019). Simultaneously, competitive advantage can be achieved by
establishing good relationships with the suppliers.
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References
10 Ways To Improve Your Warehouse Inventory Management. (2017). Retrieved from
https://blog.silverliningstorage.in/10-ways-to-improve-your-warehouse-inventory-
management
Blood-Rojas, C. (2017). The 7 steps of a strategic procurement process. Retrieved from
http://www.tradeready.ca/2017/fittskills-refresher/7-steps-of-a-strategic-procurement-
process/
Fritsch, D. (2015). 6 Inventory Control Techniques for Stock Optimization. Retrieved from
https://www.eazystock.com/blog/2015/08/03/6-inventory-control-techniques-for-stock-
optimization/
Haden, J. (2018). 11 Ways to Negotiate Better With Anyone (Especially if You Hate to
Negotiate). Retrieved from https://www.inc.com/jeff-haden/11-ways-to-negotiate-better-
with-anyone-even-if-you-don-t-like-to-negotiate.html
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Harroch, R. (2016). 15 Tactics For Successful Business Negotiations. Retrieved from
https://www.forbes.com/sites/allbusiness/2016/09/16/15-tactics-for-successful-business-
negotiations/#1b6738222528
How to Find and Work With Suppliers. (2019). Retrieved from
https://www.entrepreneur.com/article/66028
How your purchasing department can improve your business. (2019). Retrieved from
https://www.bdc.ca/en/articles-tools/operations/purchasing/pages/purchasing-department-
objectives.aspx
Law, V. (2017). Negotiating the Best Deal from Your Vendors and Suppliers. Retrieved from
https://info.vethanlaw.com/blog/negotiating-best-deal-vendors-suppliers
Negotiate the right deal with suppliers. (2019). Retrieved from
https://www.infoentrepreneurs.org/en/guides/negotiate-the-right-deal-with-suppliers/
Pancik, E. (2019). Blog : 3 Tips to Build a Negotiation Strategy for Incumbent Suppliers.
Retrieved from https://www.wns.com/insights/blogs/blogdetail/500/3-tips-to-build-a-
negotiation-strategy-for-incumbent-suppliers
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