Question 4: Managing suppliers (25 marks) Electronic Toy Industries is undertaking an analysis of supplier costs in order to evaluate the relative costs and performance of each supplier. Currently, they are focusing attention on two suppliers of a small electric switch used in the manufacture of toys. The suppliers are Rockers Ltd and Toggle Ltd. Electronic Toy Industries has been dealing with these suppliers for several years. Rockers Ltd is used for a higher number of orders and charges only $4.00 per switch, whereas Toggle Ltd charges $4.20 per switch. In the past year, Electronic Toy Industries purchased 15,000 switches from Rockers Ltd and 5,000 switches from Toggle Ltd. For the most recent year, the following supplier-related activities and total costs have been identified for all suppliers of small electric switches: Activity Place purchase order Receive & inspect delivery Store inventory Rework product due to poor quality material Production downtime due to poor quality material Receive and inspect late deliveries Total cost Number of activities $25,000 100 orders $40,000 200 deliveries $8,000 100 units stored per year $28,000 80 units reworked $15,000 100 hours downtime $12,500 50 late deliveries An analysis revealed that last year the following activities related to the two suppliers: Activity Rockers Ltd Toggle Ltd Place purchase order 50 orders 20 orders Receive & Inspect delivery 100 deliveries 40 deliveries Store inventory 50 units per year 15 units per year Rework product due to poor quality material 60 units 10 units Production downtime due to poor quality material 40 hours 4 hours Receive and inspect late deliveries 30 late deliveries 6 late deliveries Required: Question 4.1 Calculate the supplier performance index for each supplier. Show your detail workings. (10 marks) Your Answer: Rockers Ltd Toggle Ltd Supplier performance index Show your workings here (expand the space as required): Question 4.2 Based on your calculations above, discuss the relative performance of each supplier, and what if anything the company should do. Explain. [Word limit: 200 words. Note the word count at the end of your answer] (7 marks) Your Answer (expand the space as required): Question 4.3 Maintaining good relationships with suppliers help to run business smoothly. It is very important for thi manufacturers to keep their suppliers afloat although some argue that being very close to suppliers would reduce their bargaining opportunities. Explain. (8 marks) [Word limit: 250 words. Note the word count at the end of your answer] Your Answer (expand the space as required)
