SCM 115 Final Assignment - Negotiation BuyerRole Play Overview¹

Overview

This SCM 115 Final Assignment - Negotiation Buyer Role Play Overview outlines the role of the Buyer for the SCM 115 Final Assignment - Negotiation as outlined in theSCM 115 Module 9 Lesson & Learning Activities page. For said assignment, the course instructor assigns you the role of Buyerand your peer partner the role of Seller. Together, the two of you will negotiate the sale (peer partner) and the purchase (you) of a component called New Prod.

Instructions

Begin this assignment by reviewing the Final Assignment - Negotiation requirements outlined in the SCM 115 Module 9 Lesson & Learning Activities page.Then complete the following:

1. Review the Role, Employer& Product Informationsection below.
2. When complete, answer the negotiation questions listed in the Pre-Negotiation PreparationQuestions section below.

Role, Employer, & ProductInformation

Note: This Role, Employer, & Product Informationsection outlines your role, employer, product to negotiate the purchaseprice of, and product financial information needed to complete the negotiation component of the Final Assignment - Negotiation as Buyer. Your peer partner or Seller is not privy to this information. (S)he will receive a similar Seller Role Play Overviewthat outlines his/her role and product financial information that remains unknown to you as well during negotiations.

Your Role, Job Title, & Name: Buyer - Sam Smith

Employer:Porto

Product to Negotiate Manufacturing Price:New Prod

Product Information:

You (Sam Smith) are a buyer for the engineering firm, Porto. You are responsible for the development of a negotiating plan, strategy, and negotiations in general for the manufacturing of Portos newly engineered component called New Prod from a manufacturing supplier.

Portos component, New Prod was designed and developed by Porto engineers for a product currently under development. Prototypes of the component were produced for Porto by a small and specialized firm without production volume capacity.

The high tech industry includes between five and eight potentially qualified suppliers who are familiar with the complex manufacturing process required to produce New Prod. Seven of said suppliers received a request for quotation from Porto. The Request for Quote (RFQ) included a 12 month delivery schedule for 200 000 units plus a possible follow-on order for up to 200 000 units. The quotes also included payment terms and shipping (F.O.B. point) information as outlined in Table 1B - Expected New Prod Delivery Schedule.

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2. What do you believe is the lowest price that Technutronics is willing to accept? What is the highest price you are willing to pay for New Prod? (This defines your negotiating range on the price issue).

Answer for Q2 is:

His lowest price that Technutronics will be willing to accept will be 4.50.

The highest worth for brand new prod that purchaser is willing to pay is 5.50, so the negotiation range will be 4.50 to 5.50. If Technutronics wants to keep a good business relationship with Sysco they would probably be willing to accept the price where they would break even plus a profit percentage of 10 to 15%. That would be approximately 153,846 units (break-even point) or $ 4.74 plus 10% profit on the first batch. The highest price I would pay would be ($4.74x20%) $5.45 which is the breakeven point ($4.74) plus 20%.

Break-even formula: Total Revenue = Variable Cost + Fixed Cost $6.16 (x) = $5.90(x) + 40,000 $0.26 (x) = $40,000 X = 153,846 units (Break-even point)

I can't understand where these numbers(4.50, lowest price and 5.50 as price to pay) are coming from