As Rob Pincombe, what action(s) would you recommend and why?
The current value string of Unified appears like above. Rob is within a unique situation of where he must choose 2 aspects of sourcing. Firstly, he must determine which honey is he heading to source and second is he going to involve a 3rd party to buy honey or is he heading to source straight due to government regulations on quality standards.
These are the options Rob has regarding honey purchase
- The current chinese canadian honey
- Canadian Argentine combine honey
- Pure Canadian honey
- Pure US honey
Every situation has advantages and disadvantages
Chinese Canadian honey
Advantages
- Cost is $1. 08 per pound which is cost effective when compared to all the options available.
- It is an established taste and hence it might be easy to keep with current customers
- China is the largest manufacturer of honey and hence can ensure availableness.
Disadvantages
- If Rob persists with the same supplier, Unifine Richardson might be produced liable for low quality product
- If there's a product recall, there will be a short of honey because Harrington honey would be running out of inventory
- All these would lead to the client not being satisfied and loss of customers to its competition. Taking into consideration the economics of the problem there is a potential loss of sales if they continue with the same company.
Canadian Argentine blend
Advantages
- Cost is $1. 42 per pound which is reasonably high priced when compared to the other options
- The biggest advantages is that a Canadian supplier bottom part already is present. Canada is the 10th greatest Honey producer on the globe.
Disadvantages
- The flavour differs from the standard honey which creates a risk of this honey not being accepted by customers.
- There is a threat of product recall scheduled to work with of veterinary drugs. As the truth mentions the CFIA is monitoring food, animal and flower health that includes honey from countries which includes Argentina
Pure Canadian Honey
Advantages
- It is comparable to the united states honey market and the neighborhood suppliers ensure the quality of honey produced
- Canada has a big supply base and is also also the 10th greatest producer
Pure US honey
Advantages
- The tastes would satisfy the need of customers
- It is safe and would be approved by CFIA and hence there's a low probability of product recall. This also ensures a frequent supply of honey.
Disadvantages
- This option costs $1. 79 per pound which is the best listed among all the options
- US might have a capacity constraint. Among the reasons of imports is to ensure product availability but making within US there's a probability that there might arise a capacity constraint
Understanding the above mentioned benefits and drawbacks of various options available, honey selection must be in way that satisfies the eye of the major customers of Unifine. However, the final use of honey by customer is in dips and other side products hence the focus may also be to control costs, although flavour and product availableness are obviously concerns.
Sourcing strategy:
After deciding on what metric Rob will base his purchase, the next step to choose whether Rob is going for a direct sourcing strategy or a 3rd party source strategy.
There are several advantages of 3rd party strategy
- Better marriage and communication,
- Higher bargaining electric power because the 3rd party company has a quantity discount
- low complexity in controlling multiple suppliers
However, depending on one supplier might cause danger of resource disruptions if distributor has troubles in the business. This raise a question of whether Unified should continue with its decision of using an arrangement with Harrington Honey must be revisited.
These will be the following sourcing possibilities and following are the advantages and disadvantages
Indirect sourcing with third party involvement
Advantages
- 3rd party has international experts for purchase, delivery, and financial transactions
- The third party buys larger amount hence they can spread the quantity discount to Unified
- Unified should maintain low inventories and will have a shorter lead time
- All these would help Unified to just concentrate on their core competency i. e. food market
Disadvantages:
- The problem of having a 3rd party there's a communication wait. Changes in the resource base might not be conveyed to Unified
- The third party always adds a premium to the purchase and therefore there's a higher cost
Sourcing straight from suppliers and concerning in 2nd tier suppliers
Advantages
- No 3rd party hence no high quality and hence lower costs
- More awareness. Can have immediate control over the grade of the merchandise for example the chloramphenicol ppm level in honey
- Can develop permanent romance with suppliers and can make a deal with for costs through much larger volume of business
Disadvantages
- Shift in main competency concentration. Sourcing directly would involve much larger costs and larger efforts in determining suppliers.
- The delivery costs may need to be borne by Unified
- Currently pasteurization is performed by Harrington. In case they straight source from 2nd tier suppliers they need to pasteurize which would improve the costs.
Considering the pros and negative aspects of the many options available Unified should continue steadily to pursue with third party suppliers. However, Unified can own an audit regularly with suppliers to Harrington (2nd Tier suppliers) to ensure that they adhere to the legislation.
