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 1.1What can True Value (TV) do to address this problem?.......................................................................................1 1.2What other possible options could TV management undertake to improve the situation? Must TV accept the cost increase?.......................................................................................................................................................................2 2.Minimum Order Quantity.......................................................................................................................................2 2.1Consider 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 2.2Could TV negotiate a better arrangement?..........................................................................................................3 2.3If so, what other arrangements could be negotiated and how would TV negotiate a change?................................4 3.Impact on Warehouse Storage and Shelf Space........................................................................................................5 3.1Based 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 3.2How 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. 1.1What can True Value (TV) do to address this problem? ThesolutionforthecurrentproblematTruevaluethefollowingstepsmust be undertaken (Blood-Rojas, 2017): Step1:Theinternalneedsmustbeanalyzedforbenchmarkingthecurrent performance. Step 2:Then, the needs and targets must be identified to develop a procurement strategy. Step 3:Thesupplier’s market must be assessed. Step 4:The information of the supplier must be collected. Step 5:Sourcing strategy must be developed. 1
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. 1.2What 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. 2
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2.Minimum Order Quantity 2.1ConsiderandrecommendotherapproachesorstrategiesthatTrueValue 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. 2.2Could 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. 3
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. 2.3What 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. 4
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 3.1Based 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 5
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3.2How 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 safestorageoftheproductmustbemaintainedeffectively,followedbymaintaininga 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 followingchangeswillberequired("10WaysToImproveYourWarehouseInventory 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. 6
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 purchasingdepartment can improve your business", 2019). Simultaneously, competitive advantage can be achieved by establishing good relationships with the suppliers. 7
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 8
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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 9