Case Study: Value Analysis in Supply Management

Background: You are the leader of a value analysis team at a large manufacturing company, XYZ Corp, located in Toronto, Ontario. The company specializes in the production of automotive parts. Recently, the company has been facing challenges with increasing costs and decreasing profits.

Situation: XYZ Corp has been using the same supplier for raw materials for the past $10$ years. However, the cost of these materials has been steadily increasing, which is impacting the company$$s profitability. The supplier has cited various reasons for the price increase, including inflation, increased labor costs, and increased transportation costs. Despite these explanations, you suspect that there might be opportunities for value analysis.

Objective: Your task is to identify opportunities for value analysis with this supplier to improve the company$$s profitability.

Approach:

$1.$ Supplier Evaluation: You would start by evaluating the supplier$$s pricing structure and comparing it with other suppliers in the market. This would help you identify if the supplier$$s prices are competitive or if there are other suppliers who offer better prices.

$2.$ Negotiation: If you find that the supplier$$s prices are not competitive, you will negotiate with the supplier for better prices. This could involve discussing the reasons for the price increase and exploring possible solutions.

$3.$ Alternative Suppliers: If negotiation does not result in better prices, you would consider looking for alternative suppliers. This would involve conducting a market survey to identify potential suppliers and evaluating them based on their prices, quality, and reliability.

$4.$ Implementation: Once you have identified a suitable supplier, you will implement the change. This would involve transitioning from the current supplier to the new supplier, which could involve challenges such as ensuring the quality of the new supplier$$s materials and managing the logistics of the transition.

Discussion Question $(15$ marks$)$:

How would you manage the transition from the current supplier to a new supplier to ensure minimal disruption to XYZ Corp$$s operations?