ARCITURB CASE STUDY

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PURCHASING NEGOTIATION - STUDY CASE

SUBJECT OF FINAL EVALUATION

ALAIN GEORGE

This study file brings together the call for tenders launched by your ARCITURB company and the proposals of 6 potential suppliers.

To provide you with the information you would have obtained at the various meetings, you have details about each company.

1. You must determine or confirm the criteria and their coefficients.
2. Make the comparison table of the different offers considering all the parameters that you can collect.

1. Confirm the very short list of 4 potential suppliers with whom you will schedule meetings.
2. Explain why you excluded some and not others.

1. Plan your negotiation strategy and the process of negotiation meeting with each supplier. That implies:

1. Design the chess game with an argument for each point
2. and the concessions you plan to make to get the best offer with each supplier from the very short list.

1. This point concerns the differences between the method of negotiating "chess game" and others, such as salami, BATNA (or MESORE in French). You will clearly explain the differences between this negotiation technics.

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ARCITURB STUDY CASE 2020

This is a real case where only the names have been changed.

You are responsible for the purchase of ARCITURB, an SME with 100 employees, specializing in the manufacture of turbines. Located near Fos-sur Mer, ARCITURB specializes in the Kaplan 1 type turbine used for electricity from hydroelectric production.

ARCITURB is well known for your very popular product manager in the United States, Europe, the Middle East and the Far East.

You recently launched a tender for a component used in the manufacture of this leading product. These are the parts (blades) of the rotor that weigh 46.5 kg. Its sales forecasts for Year + 1 (next year) are as follows (these forecasts are based on an order book):

• 1st quarter: 400 units per month (same as last year)
• T3: 600 units per month (August = 0 unit)
• T2: 400 units per month
• T4: 1000 units per month

Your purchasing strategy consists of working with a single supplier, within the framework of an annual open market, and providing you with monthly amounts corresponding to sales forecasts.

This new collaboration will start in next January. Delivery will be made to your business address:

Port Autonome de Marseille, Route du Mat de Ricca, 13230 Port-Saint-Louis-du-Rhône, France.

Your company wants to have only one supplier for this contract.

You have received an information explaining that TURBUNEX already works with France Fonte. The relationships between you both are clear and efficient, since the last 3 years.

Six companies responded to this call for tenders and the proposals are detailed below. All the departments concerned and the stakeholders have defined a grid of 3 criteria and their coefficients with your purchasing department:

FRANCE FONTE – SAS

Proposal:

This is the current provider of ARCITURB. He has worked for many years with your company, and furthermore, it has just obtained its ISO certification.

• Unit Price: 498 €
• Payment term: 30 days on 10th
• Lead-time Delivery: l month
• Delivery once a month (the first days) for the quantities ordered
• Transport cost: 375 € per carriage (600 items maximum per truck) Trade relations are excellent.

The administrative system is certified, notes and documents and invoices are processed timely and accurately

The non-quality (production waste) represents 2% of turnover.

As France Fonte Already works with ARCITURB, it doesn't need to produce sample and prototype before the mass production

Characteristics of FRANCE FONTE:

France Fonte is 250 employees’ size. Its turnover is about 10,300,000€. France Fonte has been created on 1972 and has 3 Subsidiary Company located in Spain (near of Barcelona), in France (Dunkerque) and in Africa (near of Gaborone in Botswana) for the iron metal extraction.

France Fonte implements many projects, as:

• ISO certification
• An accounting system managed with a new ERP, permitting to work directly with the most other accounting systems of its clients.
• Concerning the delivery lead-time, a logistics department has been implemented in the same time that a WMS and TMS. This system will communicate with those of its clients to optimize the response to order. The direct effect is to reduce the global lead-time delivery between -1 to -5 days according the case.
• If ARCITURB requests for an improvement of quality, France Fonte will be able to reach it under the following terms:

• Action: Establishment of a Quality management department and clearly structured.
• Results: Gain of 1% on the non-quality - ex: 5% of non-quality - 1% minus = 4% of non- quality)
• Cost and explanations: 60000€ / year (recruitment of a quality manager, 5 years’ experience)
• In case of implementation of this option, the cost should impact the cost of the item produced for this client proportionally to the turnover realized with this client.

France Fonte works essentially with boilermaker industry and the most important European manufacturers (Saintronic, Ste Lyonnaise de Construction de Matériel d’Ascenseurs, Metalform Europe, Werkzeug Brandl Gmbh, Kleusberg Holding Gmbh & Co. KG).

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