XYZ is a home appliances manufacturing company in Canada. XYZ imports insulation tubes, refrigerant gasses, and rotary compressors from three different Chinese suppliers and ships them to its warehouse in Mississauga through the Vancouver port. The purchased products are summarized as below.

Table 1: Summary of Purchased Products

	Insulation Tubes	Refrigerant Gasses	Rotary Compressors
Number of Containers	500	250	250
Container Type	40ft high cube (HC)	20ft	20ft
Cargo Weight per Container	2,000 kg (approximately)	19,285 kg	19,456 kg

The specific details of each product are as per the attached Proforma Invoices.

XYZ has recently found a supplier in Spain that sells all these products together and they are considering shifting to them. A comparison between the current and new suppliers is summarized below.

Table 2: Comparison between Chinese and Spanish Suppliers

	Chinese Suppliers	Spanish Supplier
Freight Charges	CAD 6,500 per 20ft container; max load 20,000 kg CAD 8,000 per 40ft HC container; max load 23,000 kg	CAD 3,500 per 20ft container, max load 20,000 kg CAD 4,500 per 40ft HC container, max load 23,000 kg Different products can be consolidated in each container to optimize the usage of space and weight limits.
Prices	Not fixed in current purchase contracts May change from time to time	FOB prices are 1% higher than the Chinese suppliers' prices for the same technical specifications. Fixed for at least one year
Transaction Currency	USD	CAD
Payment Method	As per attached Proforma Invoices USD-CAD exchange rate: 1.25	90 days bill of exchange
Import Duty	6.5% for all products	2.5% for all products
Purchase Frequency	4 orders per year with equal quantity for each product	Unlimited orders per year Each order would be a mixture of all three products in one invoice.
Delivery Route	From Shanghai port to Mississauga through Vancouver	From Spanish port to Mississauga through Montreal
Delivery Time (Including lead time and transit time)	85 days from date of order submission	60 days from date of order submission

You are a group of experts from a supply chain solutions company, and you have been assigned to advise XYZ. You will analyze XYZ's current situation, research the effects of purchasing from the Spanish supplier on the company's supply chain, and provide a final practical solution.

ASSIGNMENT QUESTIONS

You are expected to conduct comprehensive research and prepare a proposal answering the following questions.

Question 1

What are the effects of new suppliers on cost reduction? If XYZ buys from Spain, which costs would decrease? Based on the case facts, calculate the amount of cost reduction.

Question 2

Based on your analysis, select the best and comprehensive procurement solution for XYZ. How should they proceed: Should they continue working with current suppliers, shift to the new Spanish supplier, or use another solution? Explain your reasons.

Question 3

Based on your solution, prepare a proposal analyzing the positive and negative effects of your solution on the following functions of the company:

• Global supply chain and operations management
• Purchasing process
• Supply chain risk management
• Finance and profit making
• Production planning
• Inventory and materials management
• Logistics and warehousing
• Ethical and sustainability issues in Supply Chain Management