Case Study #2: Global Supply Chain Management and Planning

Signed, sealed and delivered?

Plexet is a mid-sized manufacturing firm located in Auckland, New Zealand. The
company produces a range of plastic containers that includes their flagship product
range, Goodseal. The Goodseal brand includes a range of plastic food storage
containers, designed to be sold to retailers and grocery stores for home use. The
containers are sold in 3 and 6 packs, in three different sizes: 0.25L, 0.5L and 1L. They
are typically marketed to consumers for food storage in the refrigerator or freezer.
Currently, Plexet has achieved a 9 percent annual sales growth over the past five years.
Within the manufacturing plant, the company is running three shifts at full capacity,
although the plastic molding equipment is running at only 58 percent of its optimal
production capacity. Production levels fluctuate frequently, and Plexet adjusts its labour
schedule around their forecasted sales demands. The sales manager is concerned
about sluggish sales over the past six months, and is aware that manufacturing targets
are based on the recent sales forecasts. Having an excess of product is of concern with
Plexet management. Therefore, increasing production is not a strategy considered to
help boost quarterly sales targets. Instead, Plexet is considering offering a discount to
their suppliers, as well as adopting a new marketing strategy that will offer consumers
coupons to buy one Goodseal product and receive a 3 pack of 1L containers free.
Plexet do not receive as many orders for the 1L Goodseal container from their suppliers
as they do for other container sizes. As a result, Plexet has decided to discontinue the
1L product and focus manufacturing efforts on the more popular sizes. This will enable
the manufacturing plant to replace the 1L molds with 0.25L and .05L components. This
is may help alleviate the low 58 percent rate of production because there will be more
equipment to handle the production of the two remaining product lines. Managers
believe this will increase their production levels. The coupon strategy is designed to
help move some of the obsolete 1L product from their inventory, in addition to retaining
consumer loyalty with the smaller sized products. The manufacturer will implement the
sales and production strategies over the next fiscal year.
What is promising for Plexet is a recent order from Chinex, an exporting agent that sells
to China. The agreement stipulates that Plexet will ship 25,000 cases of the entire
Goodseal line to Chinex. This could not have come at a better time, because the order
will be placed in time to meet Plexets quarterly sales target. To expedite the sale,
Chinex has been offered a significant discount. Chinex has agreed to send payment
within seven business days, and pay by letter of credit from a reputable Australian bank.
Meanwhile, back at the retail store
Plexet has a reliable supplier relationship with a large retail chain, KiwiMart (KM). The
head of purchasing at KM acquired 4000 cases of containers this quarter at a 4 percent
discount from Plexet, but has sold only 1800 over the last two quarters. She decided
that KMs in regions outside of Auckland would also benefit from the discounted price,
and has sold 1800 to them. In addition, she has sold 400 cases to a wholesaler at cost,
with a negotiated deal to buy them back at a 3 percent premium within 90 days if KM

needed the supply. This has helped the other KMs throughout the country, as well as
solved any inventory issues with the Auckland KM. The plan is for the Auckland KM to
discount 1000 cases for a special in-store promotion.
Soon after the deal with Plexet had been negotiated, Chinex contacted the head of
KMs purchasing department. They offered a significant 7 percent discount on 5000
cases of assorted Goodseal products. The deal was far too good to be ignored and KM
accepted the deal. The sales department contacted Plexet and cancelled their next
three orders. KM received the Chinex products over a month late.
Unfortunately, the purchasing manager was unaware of the situation on the ground in
the local KM. The shelves holding the Goodseal line had an ample supply of the 1L six
packs, but no other size was on the shelf. Worse yet, Plexets competitors were stocked
next to the Goodseal line, and had a full line of product sizes and quantities per pack.
Whats the problem?
Plexet is under the assumption that they have a sales crisis. Forecasted demands are
higher than their current rate of sales. They have decided to help resolve this by
adjusting their product line, and adapting their production line to manufacture more
products that sell faster. Offering coupons would help boost sales and consumer loyalty.
The purchasing department at KM believes they have addressed a potential inventory
crisis, are secure in the amount of supply they have acquired, and have perhaps even
boosted their bottom line through the recent acquisition of the cheaper Goodseal
product from Chinex.
Case Study Discussion Questions
1. Explain how conducting an organized and systematic sourcing process would
benefit the purchasing department at KiwiMart (KM).
2. What form of partnership would help improve both KM and Plexets supply
chains? Why?
3. How would Plexet benefit from adopting a JIT (Just in Time) approach to
production?
4. Explain the advantages KM and Plexet would receive from implementing an
inventory management system.
Using material from the text and in-class discussions, provide clear and concise
answers that include some (4+/-) important and/or supporting points (for EACH
question) that have been developed by your group. A Microsoft word document
is to be submitted via the elearn DROPBOX by 9pm Wednesday August 5 th, 2015.
A printed hard copy is to be delivered in-class on Thursday August 6 th at 10am.
Each group member should be prepared to answer 1 or more questions regarding
the assignment in the final class.