CHAPTER 13* - CASE STUDY Chinn-Wagg Equipment Ltd (CWEL) You are the new Purchas
ID: 433335 • Letter: C
Question
CHAPTER 13* - CASE STUDY Chinn-Wagg Equipment Ltd (CWEL) You are the new Purchasing Manager for Chinn-Wagg Equipment Ltd (CWEL). You have been in post for four months and currently have unease with goods procured overseas. You have reviewed three items purchased from Korea. There are no formal quotations and the items have been purchased through ain Australian agent. They have purchased on an Ex Works basis (Incoterms). Matters have got worse last week when you discovered that a Casting, supplied by an Australian company, is now three months overdue. You decided that you would conduct a 'spot check' and call unannounced on Green Ltd who supplies the Casting They were embarrassed by having to disclose that they were purchasing the Casting from a Chinese Foundry and they, in turn, were sub-contracting the machining of the Casting to a Chinese sub-contractor! You insisted on a full set of quality control plans. These were delivered to your Office today - all in the Chinese language. You are still waiting for a definite delivery date. Meantime, your company is paying liquidated damages of 1% a week on a contract for an off-shore oil development company. Their contract is worth $2m The Casting has a value of $150,000. There is no damages provision in the contract with Green Ltd You have had a brief meeting with the Engineering Director and Quality Manager of CWEL. You were pleasantly surprised when both said that in principle they have nothing against buying from overseas. You have agreed to produce a report at tomorrow's Management Meeting. It will address four matters 1. 2. 3. 4. Proposed actions to obtain delivery of the Casting The future use of Incoterms A procurement process for overseas buying How to select 'candidates' for overseas buying Task In respect of each facet of your report - list the bullet points you will need to address and be ready to discuss them at the Management MeetingExplanation / Answer
Report
1. Proposed actions to obtain delivery of the casting:
a. Set clear expectations and consequences
b. Understand the route cause
c. Provide feedback on performance
d. Follow up
2. The future use of Incoterms:
FOB: Freight on Board Incoterm can be used for future purchases as, we will be in charge of contracting the international shipping, which gives us absolute control of all related expenses and coordination of delivery to our storage. We can, stay competitive because of this, just like a seller does with the CFR Incoterm, as we choose shipping routes and times and are able to negotiate prices with freight forwarder.
3. A procurement process for overseas buying:
The first task starts with gathering market information and identify potential suppliers. We can obtain the information from various trade journals, trade directories, internet and more importantly from Trade Exhibitions as well as from the competition.
a. Assess the Supplier Capability
b. Visit to Supplier Site & Assessment
c. Sample Submission
d. Commercial Negotiations
e. Trial Procurement & Normal Procurement
4. How to select candidates for overseas buying:
a. Identifying Potential Sources: The identification of potential sources is a key driver of the ultimate success or failure from a performance perspective. Knowledge of source is a primary qualification for a Buyer .
b. The Evaluation of Potential Sources: The evaluation of potential sources, therefore, attempts to answer two key questions: Is this supplier capable of supplying the purchaser’s requirements satisfactorily in both the short and long term ? Is this supplier motivated to supply these requirements in the way the purchaser expects in the short and long term ?
c. Linking sourcing with strategy: The first level of analysis is finding out which suppliers might be able to meet the buying organization’s requirements. The second level of analysis is determining which of these the supply manager or sourcing team is willing to seriously consider as a source.