Carolyn Brimley, Strategic Sourcing Manager at Krisko Foods in Penticton, British Columbia, Canada wondered what she should do, if anything, about the most recent quote submitted by a supplier related to the acquisition of programmable logic controllers (PLC's). It was Friday, July 17 and she had just received a second unsolicited offer from Simon Wiseman of McClain Automation (McClain) to reduce his prices.

The Programmable Logic Controller Contract

Krisko Foods was a global manufacturer and marketer of branded consumer foods, primarily in the snack, cereal and baking goods segments. Sales in the last fiscal year were about twelve billion dollars. Krisko manufactured products in 49 plants of which 36 were in the United States, 3 in Canada and 10 in the Asia/Pacific region.

Corporate purchasing was located at the company's head office in Penticton, British Columbia and was responsible for the acquisition of

• Raw Materials
• Ingredients
• Packaging
• Contract manufacturing
• Capital Equipment
• Information Technology (hardware and software)

Brimley managed the team responsible for the acquisition of capital equipment.

Programmable Logic Controllers (PLC's) are industrial computers used to control manufacturing processes, such as assembly line equipment and robotic devices. Their rugged design allows a PLC to withstand the operating conditions in an industrial environment including fluctuations in temperature, dust and moisture.

The Krisko facility in Springfield, Missouri, United States of America was undergoing changes to its manufacturing operations which included the instillation of new automatic filling lines. Carolyn was assigned to a cross-functional team responsible for sourcing the capital equipment for the project. Two other people, both from the Springfield facility, Kevin Rowland the engineering manager and Jessica Summers, the plant manager were also assigned to the team.

On Tuesday, June 12^th, Carolyn issued a Request for Quotation (RFQ) to three suppliers of PLC equipment that would be installed on the new automatic filling line equipment. Although the Springfield facility had a history of using PLC equipment from McClain Automation exclusively, Carolyn pressed Summers and Rowland to consider other suppliers. Based on Brimley's previous experience purchasing similar products, she included Highview-King Group (HKG) and Easton Controllers (EC) on the bid list. Both suppliers were large, well established firms with proven technologies capable of supplying product that met or exceeded the specifications. Both HKG and EC PLC's were in use at other Krisko facilities so Carolyn did not expect any switching costs if either company was selected to provide controllers at the Springfield facility.

The three companies on the list submitted their bids on June 30 RFQ deadline with the following results:

Bidder	Price
Easton Controllers	$400,000.00
Highview-King Group	$430,000.00
McClain Automation	$420,000.00

Carolyn had a conference call with Jessica and Kevin on Friday, July 8^th to review the bids received. Both Jessica and Kevin were clearly disappointed that McClain Automation was not the lowest bid, with Kevin commenting "McClain controllers have been reliable and worked well. Our technicians and operators are used to working with this equipment. With the millions of dollars we are spending on new automation equipment, does it make sense to switch PLC suppliers for $20,000.00?"Caroline, however stood her ground during the call and reminded both Kevin and Jessicathat all three suppliers were qualified to supply controllers and also that the process established at the outset of the bid process was to accept the bid with the lowest price, which in this case was Easton Controllers.

The following Monday morning, July 11, Simon Wiseman called Brimley to discuss his bid; "I have spoken with my manager, and we do not want to lose this business. So, I wanted to speak to you before any final decisions were made. We are prepared to reduce our prices by 15%, which represents a price of $355,500.00 for the entire package. I am sure that you will find this an attractive proposal. I will send you a revised quote in an e-mail later today."

As Brimley had not yet communicated the outcome of the bid evaluation to Easton or Highview-King, she decided to contact her representative at Easton Controllers, James Lyons, with whom she had a good working relationship. During their conversation on July 12, she explained to James that she had received a revised bid from the incumbent supplier, which was she stated "considerably lower" than his bid. Carolyn indicated that under the circumstances she felt was fair to allow Easton Controllers the opportunity to amend their price if they wished to. Brimley did not divulge specifics of McClain's pricing during their conversation. Lyons thanked Brimley for the opportunity to review their bid and responded the next day in an email offering a revised price of $350,000.00.

Carolyn called Jessica and Kevin later that afternoon to update them on the developments and confirmed she was willing and prepared to award the contract to Easton Controllers for $350,000.00 the following week.

Is it fair to accept amended bids? Justify your answer.

Why is Simon Wiseman so anxious to win this bid?

Why has Simon Wiseman reduced his price twice within the last week?