Economics 9.odt - A commodity manager for manufacturer XYZ...

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A commodity manager for manufacturer XYZ Inc. is conducting negotiations on a long-term contract with DEF, a key strategic supplier. DEF’s delivery performance is rated at 73%, which is below the divisional goal of 98%. For this reason, XYZ’s operations manager wants to drop DEF and find a new supplier. The commodity manager, however, is not in agreement with the operations manager, and notes that as part of the long-term agreement, DEF will provide a 15% cost reduction, which is critical to achieving the cost-reduction goal for the division for the current year. D. Postpone contract negotiations to review the contract with the operations manager to ensure improved performance. Justification : Purchasers usually review contracts to evaluate potential suppliers across multiple categories using their own selection criteria with assigned weights. Purchasers that need consistent delivery performance with short lead times to support a just-in-time production system might emphasize a supplier s scheduling and production systems.

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