Premium Essay

Supplier Selection

In: Business and Management

Submitted By sarbesh
Words 503
Pages 3
Sarbesh Rath

1. Consider the different suppliers – which one would you select? What type of agreement would you use?

According to market study and proper strategies presented by supplier A the agreements would be
- A pricing schedule which is dependent on the building’s load factor
- A “Net 30 days” payment term with a 0.3% discount if payment is made within 10 days
- Access to a diverse group of energy service companies
Also we can negotiate according to our needs. Purchase order specifications:
• Contract Purchase order
• Payment terms net 30 days and different taxes
• Terms and conditions regarding unavailability of power, uncalled power cuts.
• Including Indemnification, right to audit, limitation of liability, changes according to market price(or fixed)

2. What are the risks and rewards to consider in this case? How can the team balance these risks and rewards?

In this case we have different suppliers but the best suited is Company A. We will consider the rewards and risks of considering single sourcing.
Rewards:
• Having a single source A means less work to qualify the source and probably less administrative effort in dealing with them.
• Since all of their volume is given to source A, the buyer has maximized his leverage based on total volume of energy. The buyer should make sure that this point is emphasized during the negotiations concerning price, etc.
• The energy supplier A feels special obligation to help the manufacturer in terms of availability, etc.
• Easier to track down the source of problems as well as affected products in the event of a quality investigation/recall

Risks:
• Risk can be defined as the magnitude of exposure to financial loss or operational disruption and stems from uncertainty. What if the single source A goes on strike or has a fire at its facility, disrupting its energy process...

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