Managing performance & suppliers relation
SABIC Practitioner Corporate Award – Integrative assignment
Introduction
This assignment requires you to answer all the following questions. Your assignment must be approximately 6500 words in length.
This assignment tests your ability to undertake an in-depth analysis of a business situation and develop both proposals and opportunities reflecting the sales and supply market conditions of a fictitious business.
The integrative assignment is a significant piece of work that is intended to develop your understanding of markets and business strategies as a whole. Whilst this case is focussed on a fictitious organisation, it is typical that as professional buyers in the real world, you will be faced with incomplete information or at best historic detail when you are required to develop business opportunities. This case therefore requires you to carry out research and demonstrate an understanding of the market within which this organisation would operate, undertake a range of analyses and make some presumptions in the development and refining of proposals relating to both the business as a whole and the purchases it must make.
The business situation
SABIC’s strategic business unit, Innovative Plastics, has its main European office in Bergen Op Zoom (The Netherlands).
The Bergen op Zoom Global Application Technology Centre (GApT), opened in 1978. The mission of the GApT is to support the growth of the Innovative Plastics product portfolio through advanced application and process development, and dedicated customer support around the world. The GApT invents, validates, and translates applications and processes. A virtual laboratory connects with SABIC’s application technology centres around the globe to share and translate knowledge worldwide.
Within the Bergen op Zoom (BoZ) centre is an expansion of Innovative Plastics’ existing Fluid Engineering Centre of Excellence. It aims to help customers use lightweight, high-performance thermoplastics to replace heavy and increasingly costly copper, aluminium, steel, and glass in thermal and photovoltaic solar panels. The centre is equipped with leading edge design, moulding, and testing equipment, and is staffed by engineers, materials scientists, and application development experts, to help customers utilise the latest in advanced thermoplastic technologies for the mass production of solar panels. Innovative Plastics’ goal is to be a major contributor in making solar energy for heating and electricity a practical and continuously more affordable option.
All of the above information relates to the situation within GApT at SABIC Europe. Now for the fiction:
To secure its supply chain the directors working at Bergen op Zoom(BoZ) have worked with colleagues in the SABIC Head Office to complete the takeover of a UK company, Barnes and Wallace Ltd (B&W), previously one of its suppliers and the owner of a patented process which is now owned by SABIC through BoZ. The process developed by B&W will now be used worldwide to great advantage by BoZ/SABIC. B&W has previously been run by Albert Barnes, a no nonsense New Yorker who moved to the UK when his Uncle Tom, the original founder with John Wallace, retired in 1999. John looked after finance and administration and he retired in 2009. Albert has now sold the business to BoZ/SABIC and has moved to the West Coast of the USA.
You are AabanMaroun and your colleague LyzanBazzi is now running B&W and he has discovered to his horror that the Purchasing function he has inherited is almost non-existent and that Albert made all the major deals with “his” suppliers himself. B&W has always been a good quality supplier to BoZ/SABIC and has a great team of engineers, materials scientists, and application development experts.Previously, Albert was very resistant to opening his books to BoZ and was known as a fierce negotiator.
You have been moved on secondment to B&W as Purchasing Manager.At the end of your first week you meet with Lyzan and report that you have discovered the following:
1. Albert was as hard on suppliers as it was possible to be, he insisted on open books from them (though he would never do it for us!) and on squeezing every last cent out of them. You spoke to the MD of a key supplier who said, “Albert squeezed and squeezed us, but it didn’t get him any more than he was prepared to pay for.We could have done a lot more for him but he would never listen and I know for a fact that he stole an idea from another supplier”
2. The records of purchasing activity are almost non-existent, other than invoices
3. The engineers, materials scientists, and application development expertsat B&W feel that Purchasing is a paper pushing department and one of them has indicated that, “it is only my very close relationships with key people in the top 10 suppliers that have kept the show on the road”. There is no code of ethics at B&W!
4. Your researches tell you that it is obvious that Albert was hiding cost from BoZ/SABIC by applying the overheads twice to some things he sold BoZ.
5. B&W has lost three other major customers in the last year, probably due to its inflexible attitude and there are some state of the art assets not being “sweated” at all down there in the factory.
6. People all over the business are placing low value orders with 16,000 different suppliers worldwide; this apparently was their way of getting around Albert’s control mechanism. The items being purchased are literally everything needed to run the business and usually the first document received is the invoice.All of the items appear to be treated in the same way by this group of maverick buyers!
7. You have met some very motivated people in engineering and production at B&W, who said that they wanted to offer BoZ/SABIC a new range of lightweight components to replace the existing designs 6 months ago. Albert however, refused to disclose this to BoZ and said that he could, “milk BoZ for a considerable amount more before needing to offer anything new”. The new designs have however been patented and according to Jenny Prince the design team leader, “they are ready to roll”
8. The stores and re-ordering is managed by the Production Manager and his team. Stock turn is not good, this is impacting working capital and there is also the threat of legal action from three B&W important suppliers over non-payment. You asked to meet people from one of these organisations but they said they were “too busy”.
9. The credit control clerk is part time.
10. There is little use of electronic processes within B&W
Questions
Lyzan is meeting Boy Litjens(CEO SABIC Europe) and Mosaed Al Ohali (COO SABIC Europe) next week and he has asked you to draft a report on B&Wto present to them covering the following points:
a. A brief summary of the current position and any risks for SABIC/B&W as you see them
b. How will prioritisation within the process and function of Purchasing help B&W?
c. How may people working for B&W’s suppliers view B&W as a potential customer? Examine the situation as it was and as it could be.
d. How you will develop better relationships with the people at B&W’s suppliers?
e. Recommendations for improvements to process and governance within B&W
f. A brief explanation of how costing methods can be/should be applied by B&W to the things that they make for BoZ/SABIC
g. What can be done to improve the working capital situation at B&W?
h. Who does B&W need to talk to about what it can do for other parts of SABIC?
i. Provide a time phased plan for action at B&W