ISC 205 Project: Sourcing and Procurement for Refrigerators

This project explores the sourcing and procurement strategies for a Canadian company, Windsor Distributors, importing refrigerators. The assignment begins with a mission statement focused on providing quality refrigerators to the Canadian market and identifies both individual and commercial customers as the target audience. It then outlines the product (refrigerators) and its features, differentiating them from competitors through variety. The project identifies the company's competitive advantages and analyzes customer needs, emphasizing the demand for diverse refrigerator sizes and features. Three potential suppliers (Apex, Homesun, and LG) are evaluated, with LG being the most suitable due to its size, global presence, and specialized focus on refrigerators. Key Performance Indicators (KPIs) are established to measure supplier performance, including customer satisfaction, supplier size, and recent trends. A Request for Quotation (RFQ) is drafted and the likely costs of the products from the suppliers are analyzed, along with a price negotiation strategy. The project concludes with a justification for the chosen supplier, LG, based on its transparency, production capacity, and reliability. The project adheres to the guidelines of the ISC 205 Capstone Project, focusing on building an effective supply chain for the Canadian market.

Running head: SOURCING AND PROCUREMENT 1
Sourcing and Procurement
Student’s Name
Institution
Date

SOURCING AND PROCUREMENT 2
Question 1
The company’s mission statement
The company has a mission of making sure that the Canadians are provided with quality
refrigerators for home and commercial use. Many organizations have invested in the
manufacturing industry in Canada and other parts of the world. As a result, there are many types
of goods that are circulating in the markets. One of the biggest challenges is the ability to control
the circulation of goods in the market (Noe, Hollenbeck, Gerhart, & Wright, 2017). The quality
of refrigerators has been affected negatively. The reason behind it is because some of the
companies that are in the global market do not manufacture goods that are of high quality.
Customers need to get value for their money, and they need to be provided with goods that are of
high quality. The mission of the company is to make sure that customers get value for their
money by providing goods that are competitive in both price and quality.
Company’s customers
The company targets individual and commercial users. Individual users are customers
who buy the refrigerators for the purpose of using them in their homes. In most cases, these are
people who buy small and medium-sized refrigerators (Noe et al. 2017). When it comes to
commercial users, the list is long. These are organizations that deal with fresh foods and drinks.
The organizations can be restaurants, supermarkets, hotels, sports clubs, and night clubs.
Target market and the market segment
The company has different phases of reaching its customers. The overall goal is to sell to
the entire Canadian market before moving to the regional market. Currently, Windsor is the

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targeted market. The organization is engaging in this business for the first time, and it is
advisable for the organization to focus on a smaller market before extending to other markets.
Question 2
The product that company management is responsible for importing into Canada
The products that the company is looking forward to import are refrigerators. Currently,
the organization has focused on five models of refrigerators with the main aim of understanding
the tastes and preferences of the customers (Bouchard, Loeper, Soner, & Zhou, 2018). The
company has specialized in refrigerators, and this is because it has noticed that there is a gap in
the market, and the gap needs to be closed to increase the satisfaction rate of the customers.
Explanation of its features and characteristics along with any aspects that differentiate the
product from that of your competitors
The refrigerators that will be imported are different in sizes. The company has focused on
one-day, two-door, and four-door refrigerators. Some of the refrigerators are purely refrigerators
while some of them have freezers. Some of the refrigerators are Smart Refrigerators, and they
are Wi-Fi enabled. The difference between these products and the products that are present in the
market is variety (LG Electronics, 2019). Some of the refrigerators that are present in the market
do not give the customers much choice because they come in one design.
The company’s competitive advantage by purchasing this item
The competitive advantage of the company, in this case, is associated with the brand and
the price. The brand that will be promoted in this case is trusted by the customers, and that means
that most customers will opt to buy the refrigerators as opposed to buying from other

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organizations (Aghdaie & Alimardani, 2015). At the same time, the supplier has considered
negotiating prices, and this is because of the units that will be ordered. Therefore, it means that
the company will be making more profits than its competitors in the market, and that is a
competitive advantage.
Question 3
Customer’s specific needs and wants
The customers that are targeted in this case are numerous, and that means that one of the
needs of the customers is variety. A single man or woman needs a refrigerator but considering
his or her consumption of foods and drinks; this is a person who is in need of a small refrigerator
(Aghdaie & Alimardani, 2015). A restaurant that attends to hundreds of customers in one day is
in need of a refrigerator, but it needs a bigger one. In this case, it is evident that customers in the
market want variety, and that is what the company is providing. Apart from the sizes of the
refrigerators, there are other specifications such as smart refrigerators and refrigerators with
freezers. The company is importing such products with the aim of meeting the diverse needs of
the customers in the market.
Question 4
Two (preferably three) possible suppliers and their locations
The possible suppliers are Apex, Homesun, and LG. Apex is located in Rockville, but it
has a lot of branches all over the United States. The company deals with other products and
services apart from being manufacturers of refrigerators. Homesun is an organization that deals
with different products and services, and the manufacturing of refrigerators is one of its

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businesses (Homesun, 2019). The headquarters of Homesun are in China. LG is an organization
that is globally recognized. The company is similar to the rest because it is also diverse, and it
deals with a wide variety of products. The supplier targeted in this case, is in South Korea. The
three organizations are huge in terms of production capacity, but their popularity and
acceptability levels are different. LG stands to be one of the most embraced and respected
organizations among the three. Apex has 209 employees, homesun has 465 employees, and LG
has 82,000 employees. LG manufactures mobile phones and televisions (Homesun Electrical
Appliance Co., LTD, 2019). Apex is a manufacturer of refrigerators, and it is still in the oil and
gas industry (Apex Systems, 2019). Homesun manufactures large size commercial refrigerators.
Looking at the diversity of each of the organization, it is evident that each of the organizations is
in the best position to offer quality products. However, LG has specialized more on refrigerators,
and that is what makes the company stand out among the rest (LG Electronics, 2019). LG has a
lot of employees, and that means that it has a capable workforce to take care of the production
processes.
Question 5
A list of KPI’s that will be used to measure supplier performance
Considering the evolution that has been taking place in technology, the supplier that will
be selected must be subscribed to modern technology. The information of the supplier will be
essential in this case, and this is because it will help the company to know the performance of the
supplier (Inderfurth, Kelle, & Kleber, 2018). The KPIs that will be focused on in this case are
customer satisfaction rate, the size of the supplier, and the recent trends. Customer satisfaction
rate will help to know if the supplier meets the needs of its customers in terms of delivery time,

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quality, and price. The company is sourcing products that it does not intend to add value.
Therefore, the quality will be essential in this case because customers are only attracted by goods
that have the best quality (Vitasek, 2016). The time of delivery is essential because it assures an
organization that it will never run out of stock due to delayed deliveries. The price is also critical,
and this is because the profit margin is dictated by the buying and the selling price. In this
respect, it would be important for the organization to focus on the price of the products that come
from the suppliers.
The size of the supplier can be used to know if the supplier will be able to deliver in line
with the needs of the organization or not. LG is an organization that is globally known, and this
is because it has products in almost every part of the world. Therefore, in this case, the size of the
company demonstrates that this is an organization that has what it takes to meet the needs of the
company in terms of the quantity that needs to be delivered (Jensen, 2017). The recent trends
help to know if a supplier is up to the task of meeting the needs of the organization. For example,
if a supplier has been failing to meet deadlines or delivering goods that are defective, there is
cause for alarm. Therefore, it is essential to find out how an organization has been performing in
the recent past.
Request for Quotation
To:
Distribution Manager
LG South Korea
24th May 2019

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From:
Chief Executive Officer
Windsor Distributors
Sub: Request for Quotation
Dear Sir/Madam
This is to kindly bring to your attention that we are running refrigerators selling and
distributing company in Windsor, Canada. The company is aimed at meeting the needs of the
customers not only in Windsor but in the country. Considering the units that we need, we would
be grateful to work with you as our supplier.
We would be pleased if you provided us with the quotation of 1000 units which have to
be shipped within one year. Some of the details that will be of great essence are the price, costs
of shipping, units that can be shipped at a time, the description of the products that are present in
your organization, and the time that it will take for the products to reach the Canadian market.
We would be pleased to ship the products in three different shipments which must not
exceed the duration of the year. Given the quality of your products and the reliability of your
company, we believe that you will make a good partner. We expect to hear from you soon.
Yours Sincerely
Question 6
The likely cost of the product if purchased from the named suppliers

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From the website of LG, there are different prices for different types of refrigerators. The
following are the prices; LG Signature 23 cu; $ 3,000, LG Signature 31 cu; $ 3,800, 23 cu; $500,
24 cu French Door Counter-Depth; $2999, 28 cu Door-in-Door; $2999 (LG, 2019). The variety
of the refrigerators that has been provided is wide in this case, and this means that the company
has already identified most of the used refrigerators in Canada (Hawkins, Gravier, & Randall,
2018). Therefore, it is evident that the company has already identified some of the best
quotations. The price can be relied upon, and this is because the details have been sourced from
the website of LG.
Price negotiation strategy
The company will use two strategies to negotiate the price. The first strategy is associated
with B2B terms. When an organization is dealing with another organization, the selling terms
change. The reason behind it is associated with the fact that the buying company is also planning
to make profits from the products that it will purchase. In this case, the goodwill of the supplier
is expected with the aim of creating a good working relationship. The supplier is not likely to
turn down an offer from a company that plans to buy 1000 units, and therefore, this negotiation
strategy will work. The next negotiation strategy would be from the perspective of the units that
the company is planning to purchase (Sheu, 2016). The supplier has stated the wholesale price
per unit. When an organization buys in bulk from the supplier, the supplier gains because the
stock is automatically reduced. In this case, it will be likely for the supplier to accept the
negotiation because of the benefits that will come with selling a thousand units to only one
buyer. Considering the nature of the transaction, the buying company will need to have a quality
auditor in place during shipment so that he can make sure that the quality has not been
compromised before payments are made.

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Question 7
Supplier of choice
The reason why the supplier is the most suitable in this case is associated with two facts.
The first fact is associated with the transparency of the supplier when it comes to products that
the supplier deals with. When a supplier is ready to share information about the quality,
specifications, and price of a product, it is proof that the supplier can be relied upon (Kim,
Suresh, & Kocabasoglu-Hillmer, 2015). The second fact is associated with the type of products
that the supplier deals with. LG is an international company that is well known for the quality of
its products. The company is careful and cannot compromise the quality of its products. In the
case of any defect, the company assumes the responsibility, and that means that it is hard to incur
losses after buying the products of the company (Mahapatra, Levental, & Narasimhan, 2017). At
the same time, customers from Canada are sensitive when it comes to brands. Buying a product
from an established brand means that it is likely to sell in the local markets.
Purchase Order/Order acceptance documentation
Company
Windsor Distributors
Windsor City
Phone:
Fax:
Website:

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Vendor
South Korea LG Distributors
Contact
Street Address
City
Phone
Fax:
Ship to:
Windsor Distributors
Windsor City
Phone:
Fax:
Requisitioner ship via F.O.B Shipping Terms
Windsor Distributors Ship (Water) Yes The seller bears the
risks
Item # Description Quantity Unit Price Total
00001 LG Signature 23 200 $ 2,000 $400,000

SOURCING AND PROCUREMENT 11
cu
00002 LG Signature 31
cu
200 $ 3,000 $600,000
00003 23 cu 200 $400 $80,000
00004 24 cu French Door
Counter-Depth
200 $2000 $400,000
00005 28 cu Door-in-
Door
200 $2000 $400,000
Subtotal $1,880,000
Tax $ 169,200
Shipping $ 122,300
Others $ 40,000
Total $2,211,500
References

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Aghdaie, M. H., & Alimardani, M. (2015). Target market selection based on market segment
evaluation: a multiple attribute decision making approach. International Journal of
Operational Research, 24(3), 262-278.
Apex Systems. (2019). Apex Systems’ Competitors, Revenue, Number of Employees, Funding,
and Acquisitions. Retrieved from https://www.owler.com/company/apexsystems.
Bouchard, B., Loeper, G., Soner, H. M., & Zhou, C. (2018). Second order stochastic target
problems with generalized market impact. arXiv preprint arXiv:1806.08533.
Inderfurth, K., Kelle, P., & Kleber, R. (2018). Inventory control in dual sourcing commodity
procurement with price correlation. Central European Journal of Operations
Research, 26(1), 93-119.
Hawkins, T., Gravier, M., & Randall, W. S. (2018). Socio-economic sourcing: benefits of small
business set-asides in public procurement. Journal of Public Procurement, 18(3), 217
239.
Homesun. (2019). Product Show. Retrieved from http://www.minifridgewinecellar.com/?
gclid=Cj0KCQjwz6PnBRCPARIsANOtCw0O
AU8x23394DbzVj0AAcUve6H27UMSyT0eD0YFDnl40LAnaMxzVUaAgBvEALw_
B.
Homesun Electrical Appliance Co., LTD. (2019). Company Profile. Retrieved from
https://homesunproducts.en.made-in-china.com/company-HOMESUN-ELECTRIC
APPLIANCE-CO-LTD-.html.