"Confidential" Roleplay for Jewitt Production Personnel (Buyer) Overview Taylor Stamping Inc. runs a high speed stamping and casting plant. They supply stamps, casts or finished pieces to many high volume manufacturers. They focus on customers who wish to operate in a JIT environment. Jewitt Production is a high volume assembly shop producing finished and assembled parts for the automotive industry. They current buy part x from Indonesia. To improve efficiencies of the overall company, Jewitt has been implementing JIT/Lean processes. They are exploring suppliers close to home as they believe implementing JIT with suppliers halfway around the world will be a large challenge. The companies are only about 80 kilometres apart. Taylor Stamping and Jewitt Production have scheduled a meeting to attempt to negotiate an actual contract. Taylor Stamping will be represented by the senior sales person and their operations manager. Jewitt Production will be represented by their purchasing manager and their operations manager. Role: Jewitt Production - Operations Manager You need 1 million pieces of part X per year. Along with keeping costs down and customer service up, you have been charged with implementing JIT/Lean initiatives over the coming year. The Finance group has been quite excited about the opportunity for reducing inventories and associated costs. You believe you need to get the quality of incoming materials to less than 0.1% defective in order for JIT to work. The current supplier of part X is a problem. The overall quality is pretty good but the units come packed in cardboard boxes with pieces of paper between each nested part. Your production line is completely automated and most parts are fed onto the line by robots. To handle part x, you must schedule people to unpack each part, discard the paper, and place the part in a reusable metal tray, which is suitable for robotic handling of trays and parts. Additionally the oily paper and cardboard boxes need to be sent to a landfill, costing the company money and impacting your company environmental rating (ISO14000, etc). Your staff can unpack about 200 pieces per hour, but if you add inspection (to get the quality level of the Indonesian product delivered to the production line to less than 0.1% defective) this is expected to drop to 100 per hour. Additional Data from Jewitt Finance Department Cost of unpacking goods, inspecting well enough to achieve 0.1% quality, and loading into robot ready trays is about 25 cents per unit labour, and about 20 cents per unit to dispose of the cardboard and paper in a landfill. Cost of ten weeks of inventory (needed because of the Indonesian supplier) based on a current $25 unit price and 1 million units per year would be about 4.7 million. At a carrying cost of 30% this would cost you about $1.4 million per year. Shipping costs would add a further $2 million per year. Your total cost would be $25 million purchase price plus the two costs above for a total of $28.4 million. Additionally, if you could achieve 30 days payables (improving from the current FOB Indonesia terms) you would save about $50,000.00 per year. Moving to 45 or 60 days would save you $75,000 or $100,000 respectively. Changing to a local supplier would reduce your days of inventory to about one and a half days with a minimal carrying cost of approximately $40,000.00. The value of no per-shipment invoices, and electronic matching of shipments, and monthly invoice processing is about 33% of transaction value or 10 cents per unit at a $30.00 price. Role: Jewitt Production - Purchasing Manager Current payment terms are FOB Indonesia. This means you take ownership and pay for the goods at the port, so you have paid for them 6 weeks before you even see the goods. Delivery takes about six weeks after parts leave the port in Indonesia. Due to the uncertainty in delivery times you also keep about 4 weeks of stock in a rented off-site warehouse. This means you take ownership and pay for the goods at the port, pay for them 6 weeks before you see the goods, and ten weeks before you use them. You currently pay $25.00 per part, and by carefully packing the goods you have held shipping costs from Indonesia to about $2.00 per part. The Indonesian company provides reasonable quality (0.5% defect rate), and very good on-time shipment performance. The uncertainty of sea shipment and West Coast port congestion has caused some fluctuations in delivery time. Your finance group has been on your case about the payment terms and the amount of inventory held. They say this is costing the company way too much money. Your normal payment terms are either Net 30 days for individual shipments, or payment by the fifteenth of each money for all JIT shipments received the previous month. The latter terms, preferred by finance, are approximately equal to Net 30 days but avoid the necessity of processing individual invoices and payment checks. Finance has also expressed an interest in extended payment terms. Your normal contract terms with suppliers include non-disclosure agreements on the technical content of your parts. You also ask for nondisclosure that you are a customer of theirs. This includes banning suppliers from advertising your relationship on their web sites and marketing materials. Your personal performance review and annual raise is based on a combination of: Service to your production department: providing good quality products and not shutting them down because of part shortages Savings in cost of goods purchased Support of corporate initiatives such as JIT and improving environmental compliance You have heard that Taylor produces very high quality pieces, and has extensive experience in providing parts in a JIT environment. You also heard that their business is down so they are looking for work. Your order could be important to them. You believe you may be able to get price concessions or extended payment terms from them. You do not have time to waste. You want to get a deal cut or you want to start looking for other North American based vendors. You only have one month left to decide whether to renew the contract with your Indonesian supplier or buy locally.

Negotiation Plan

1. What are the issues to be negotiated?
2. What are the priorities among the issues in the bargaining mix?
3. What are the primary underlying interests?
4. What are my limits on each issue - walkaway points and BATNAs? Show how you arrived at these points.
5. What are my target points and opening requests on these issues? Show how you arrived at these points.