Introduction In this case study, we review Sabor’s current position with regards to its supply source of Macronil, the main component for its air filtration units. We evaluate this using the Karljic matrix and his 4-phase methodology (Kraljic, 1983) as our theoretical framework and analyze the options available to Sabor Inc. using the case information and data provided. We then conclude with our goal of offering viable recommendations to Sabor, given the constraints, to better Sabor’s purchasing position in this situation.
Sabor has been informed by all 3 of its suppliers of a potential supply shortages in the market for Macronil, a critical component for Sabor’s air filtration units.
Sabor’s products are air…show more content…
Purchasing volume versus capacity of main units Sabor’s purchases currently account for 23% of the total capacity of it’s 3 suppliers and 25% of Bilt Chemical’s total output. See appendix.
2. Market growth versus capacity growth Increases in capacity are expensive. Demand growth versus capacity growth Demand is being forecasted to grow at an annual rate of 20% for the next 3 years.
3. Capacity utilization or bottleneck risk Unknown Capacity utilization of main units Expected to increase
4. Competitive structure Monopolistic in structure. Bilt Chemical holds the patents to Macronil. Market share vis-a’-vis main competition 100% - Sabor holds the patents to Macronil filters
5. ROI and/or ROC Unknown. Assumed high for Bilt Chemical due to patents. Profitability of main end products High
6. Cost and price structure Unknown Cost and price structure Cost of Macronil averages at about 20% of selling price. See appendix.
7. Break-even stability Unknown Cost of non-delivery Very high. Macronil filters account for more than 9% of annual sales volume. Could potentially affect sales of Sabor’s primary product
8. Uniqueness of product and technological stability New, high-tech product. Could be destabilized by introduction of much lower cost alternative in a few years. Own production capability or integration depth Possibly none. Barriers to entry include high start-up costs, licensing
9. Entry barrier (capital and know-how