These actions were considered to be important if they were to reduce the overall cost and stay ahead of thepack on price competitiveness.Juan now realized both the extent and the seriousness of the new position and his responsibility. Thefollowing give a little indication of the current position of the company:●Annual cost of goods sold $14,827,527Direct material cost $8,517,323Inventory (on balance sheet) $2,352,117Supplied parts transportation expense $256,103Number of suppliers 2872● Inventory holding cost 21% per yearAverage total processing cost for products 3 hours, 27 minutesNumber of different designs for end product 72●●●●Assignment1. What additional information should Juan gather to help him develop his plan? Explain how you woulduse the information?2. Once you know the information, develop a plan for Juan! Case #2. PurchasingThe Connery CompanyWhen Juan Hernandez was first given the position of head buyer for the Connery Manufacturing Company,he visualized the job as merely an expansion of his old position as a commodity buyer. He had no formaltraining when he took the position, having been promoted to commodity buyer from his position asinventory clerk, which he had gotten directly out of high school.The lack of formal training was not a problem when he first took the job. The Connery Company was smallbut growing, and the major concern of the purchasing department was to obtain adequate purchasedmaterial to support the production and the growth in sales. There was little done in the way of pricenegotiation. The reason was that there was little competition for their products and all costs could easily bepassed along in the product price, leaving room for the healthy profits that have helped Connery grow sorapidly.As is often the case in these types of situations, the luxury of little competition and flexibility in pricing wasfairly short-lived. The success of the products Connery produced attracted a lot of attention, and soonConnery found itself in a market with several strong competitors.While they still had the advantage of some recognition in the market ("first mover" advantage, meaning thatthe first entrant into the market usually has a competitive advantage), that advantageous position was ingrave danger of erosion. They also had an advantage in being further down the learning curve, and thequality of their product had always been quite good. The problem now was cost. Competition was drivingdown the prices and maintaining their delivery record at a lower price was rapidly becoming an importantfactor in stemming the tide of market share erosion.These factors were one of the key reasons that Juan was promoted. He was recognized as the best and mostexperienced of all the buyers, and Mr. Connery recognized the need to move the procurement activity fromone of passive buying into an active and aggressive supply management group.As a buyer, Juan's primary responsibility was to get the material they needed, when they needed it. Heprimarily was responsible for buying standard components and materials, so he had hundreds of catalogsfrom all possible suppliers of these standard commodities. When he needed to place an order, he wouldtypically use the catalog price or the quoted price from a supplier as long as they could meet the deliverytime he needed. He had little concern for transportation cost or even quality, since for these standardcomponents the quality from all possible suppliers was roughly equivalent.There were a few cases in the past when quality did prove to be a problem, but the supplier could usuallyrespond quickly with an appropriate replacement. Even though the supplier would typically give Connerycredit for any rejected parts, changing schedules around the problem or carrying safety stock to protectagainst problems would both end up costing Connery more money.Soon after the promotion to head buyer, Juan realized the job would be much more than merely anexpansion of his old position. Mr. Connery told Juan he created the position of head buyer to move thecompany into a more cost-competitive condition. He wanted Juan to develop and implement a plan thatwould attempt to accomplish the following:● Reduce purchased raw material inventory levels.Improve delivery speed and reliability of purchased material.Improve the quality performance of suppliers.Reduce the overall cost of purchased materials.●●●

Question

These actions were considered to be important if they were to reduce the overall cost and stay ahead of thepack on price competitiveness.Juan now realized both the extent and the seriousness of the new position and his responsibility. Thefollowing give a little indication of the current position of the company:●Annual cost of goods sold $14,827,527Direct material cost $8,517,323Inventory (on balance sheet) $2,352,117Supplied parts transportation expense $256,103Number of suppliers 2872● Inventory holding cost 21% per yearAverage total processing cost for products 3 hours, 27 minutesNumber of different designs for end product 72●●●●Assignment1. What additional information should Juan gather to help him develop his plan? Explain how you woulduse the information?2. Once you know the information, develop a plan for Juan! Case #2. PurchasingThe Connery CompanyWhen Juan Hernandez was first given the position of head buyer for the Connery Manufacturing Company,he visualized the job as merely an expansion of his old position as a commodity buyer. He had no formaltraining when he took the position, having been promoted to commodity buyer from his position asinventory clerk, which he had gotten directly out of high school.The lack of formal training was not a problem when he first took the job. The Connery Company was smallbut growing, and the major concern of the purchasing department was to obtain adequate purchasedmaterial to support the production and the growth in sales. There was little done in the way of pricenegotiation. The reason was that there was little competition for their products and all costs could easily bepassed along in the product price, leaving room for the healthy profits that have helped Connery grow sorapidly.As is often the case in these types of situations, the luxury of little competition and flexibility in pricing wasfairly short-lived. The success of the products Connery produced attracted a lot of attention, and soonConnery found itself in a market with several strong competitors.While they still had the advantage of some recognition in the market (&#34;first mover&#34; advantage, meaning thatthe first entrant into the market usually has a competitive advantage), that advantageous position was ingrave danger of erosion. They also had an advantage in being further down the learning curve, and thequality of their product had always been quite good. The problem now was cost. Competition was drivingdown the prices and maintaining their delivery record at a lower price was rapidly becoming an importantfactor in stemming the tide of market share erosion.These factors were one of the key reasons that Juan was promoted. He was recognized as the best and mostexperienced of all the buyers, and Mr. Connery recognized the need to move the procurement activity fromone of passive buying into an active and aggressive supply management group.As a buyer, Juan's primary responsibility was to get the material they needed, when they needed it. Heprimarily was responsible for buying standard components and materials, so he had hundreds of catalogsfrom all possible suppliers of these standard commodities. When he needed to place an order, he wouldtypically use the catalog price or the quoted price from a supplier as long as they could meet the deliverytime he needed. He had little concern for transportation cost or even quality, since for these standardcomponents the quality from all possible suppliers was roughly equivalent.There were a few cases in the past when quality did prove to be a problem, but the supplier could usuallyrespond quickly with an appropriate replacement. Even though the supplier would typically give Connerycredit for any rejected parts, changing schedules around the problem or carrying safety stock to protectagainst problems would both end up costing Connery more money.Soon after the promotion to head buyer, Juan realized the job would be much more than merely anexpansion of his old position. Mr. Connery told Juan he created the position of head buyer to move thecompany into a more cost-competitive condition. He wanted Juan to develop and implement a plan thatwould attempt to accomplish the following:● Reduce purchased raw material inventory levels.Improve delivery speed and reliability of purchased material.Improve the quality performance of suppliers.Reduce the overall cost of purchased materials.●●●

Accepted Answer

CASE SUMMARY-
Juan Hernandez, the head buyer of Connery Manufacturing Company, was elevated to the…