3. Reconsider Figure 2.3. Suppose Supplier B improves its conformance quality so that the chemicals it produces are now 99.9% pure. The figure at the middle of this page shows the new competitive situation:

a. (*) Will this be enough to make Supplier B competitive?

Which supplier do you think will win the business?

b. (**) Managers at Supplier A have determined that if they increase the minimum order size to 80 liters, they can decrease their costs to $18 per liter. Should they do it? Explain your logic. (Hint: There is no single right answer to this problem.) 

Transcribed Image Text:

99.9% Performance pure 2 days $20 per liter Qualifier level (minimum requirements) 99% pure 3 days Minimum order size of 50 liters Minimum order size of 100 liters $30 per liter Order qualifiers Conformance quality Are the chemicals pure? Delivery speed How quickly can the chemicals be delivered? Order winners Cost How much do the chemicals cost? Flexibility Can we place small orders for the chemicals? = Supplier A = Supplier B