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A Problem with Price

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A Problem of Price

This vignette is characteristic of what happens when buyers are asleep at the wheel. Sue Jones is a newly promoted buyer that is paying close attention to details of her new job. Sue finds that the companies that have bided in this process are all within about $50 of one another. The strange thing about thus is not the fact that the bids are so close but that the winning bid is not low enough. How does she get her cost down even lower?
Sue should focus on the startup costs associated with the chemicals. Based upon her discussions with other companies, sue should see a reduction of at least between $750k-$850 dollars in the overall costs that is paid to Chicago Chemical. Chicago Chemical has already been producing the chemical for the past 5 years; therefore, there isn’t any startup costs associated with their production of the chemical. Because of this Sue should be able to reopen negotiations with them.
The overall cost should be about $2.1M or $210 per barrel. The other bidders have already said that the startup costs re added into their bids. Chicago Chemical has been reaping too much profit at the expense of Prestige Plastic. One method that Sue could deploy would be to take the business away from Chicago Chemical or threaten to do so. Chicago Chemical would have to react to this demand from Prestige. Chicago would not be able to offer up huge disdain to this idea because this bid process is commercial in nature and not governmental. Because of this, the

Bid doesn’t have to go to the lowest bidder; it simply has to go to the company that has Prestige’s best interest in mind.
Prestige should also think about diversifying its purchases between competitors. Instead of buying all of the chemicals from Chicago, purchase only half from them and the remaining portion from Greater Sandusky. Chicago will not be very happy with losing...

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