PLEASE ACTUALLY ANSWER THE QUESTION. I'VE POSTED THIS ONCE BEFORE AND THE EXPERT ANSWER JUST COPY PASTED FROM ANOTHER QU
Posted: Sun May 08, 2022 4:17 pm
PLEASE ACTUALLY ANSWER THE QUESTION. I'VE POSTED THIS
ONCE BEFORE AND THE EXPERT ANSWER JUST COPY PASTED FROM ANOTHER
QUESTION.
Total Cost of Ownership and Strategic Sourcing
Mini-Case Alpha Paper Case
Background:
Prior to being acquired by Big Paper Co several years ago, Alpha
Paper was one of the world’s
largest producers of paper, with 20 plants in nearly 20 countries.
The papermaking process
requires that wet pulp slurry be deposited uniformly on a
continuously moving fabric belt. The
fabric belt (known as “fabric” in the industry) is approximately 12
feet wide and the belt is about
60 feet in circumference. Fabrics are woven to enable the water in
the pulp to be drawn out
through the fabric, so that when the pulp leaves the end of the
belt, it is in a semi-solid, rather
gelatinous form. Once leaving the fabric belt, the pulp goes onto
other machines, which further
dry and then press the pulp into paper. Fabrics cost approximately
$25,000 each.
For years, each plant’s procurement team had negotiated with fabric
vendors. Knowing that the
sales price was about $25,000 (a simple “component cost” to Alpha),
the procurement directors
were always rewarded for driving costs down. Every buyer was
trained in being a tough
negotiator; they all knew that there was 5–10 percent that should
be driven out of the sales price.
Each year the procurement group aimed to push prices down, thereby
driving down the profit for
the fabric manufacturers. This was usually done through fierce
annual competitive bidding
events and negotiations. At the end of the year, rewards were
allocated to those buyers who got
the most favorable pricing. Moreover, for years, Alpha’s
procurement department patted itself on
the back for doing a wonderful job at keeping both the supplier’s
profits and Alpha’s prices low.
Despite having the lowest profitability in the industry, Alpha’s
purchasing managers were all
confident that they were doing their part to get costs down to the
lowest level possible. New
Procurement Leadership:
You’ve been brought in by a new CPO, who is trying to transform how
the company does
procurement. She is in the process of establishing a global
sourcing organization and
transforming to a hybrid (center-led) procurement structure.
You are one of four recent college graduates who are part of the
new Procurement Leadership
Development program. Since there are still several more senior
positions to be filled, the CPO
has asked you to take the lead on a special “stretch” assignment.
It’s a tough project for a recent
college grad to lead, but you’re thankful for the opportunity. You
will be leading a project team
that includes the other recent college graduates.
Your “Stretch” Assignment:
The CPO has asked you to review the existing sourcing strategy for
the fabric and make a
recommendation for a new strategy. You have developed a project
plan and conducted some
initial discovery, data gathering, and analysis.
Total Cost of Ownership and Strategic Sourcing
Mini-Case Alpha Paper Case
FOR CLASSROOM USE ONLY. MATERIAL FOR 799:305 GLOBAL PROC AND
STRATEGIC SOURCING. ALL RIGHTS RESERVED.
The initial discovery workstream includes ten (10) internal
interviews, data gathering, secondary
research, and fifteen (15) interviews with suppliers and industry
experts. The findings are
summarized below: Findings from Internal Interview and Data
Gathering:
• While replacing fabrics, the paper machine must be shut down, at
a cost of nearly $100,000/day
to the paper company (because paper manufacturing requires a
continuous process, and the
machine is considered efficient only when it runs 24 hours a day).
Each plant operates 365 days a
year.
• It takes about 8 hours to put fabric on a paper machine. It takes
two men 8 hours to change a
fabric at a burdened labor rate of $45/hour.
• In Alpha’s plants, Fabrics lasted an average of 40 days.
• Most fabrics broke on the machines.
• When a fabric broke, it normally had less than 10 percent
wear.
• Carrying costs are usual calculated at 20%
• Seventeen companies supplied fabrics to Alpha around the world.
Each plant manager had a
“favorite” supplier, but there was no compelling reason for using
one supplier over another.
Procurement assumed it could use the large number of suppliers in a
competitive manner to keep
the purchase prices low.
• Cost of Goods Sold (COGS) for most suppliers was about 35 percent
and R&D was 3–5
percent.
• Most plants had 4–6 fabrics in inventory.
Insights from Supplier Interviews and Secondary Research:
• The industry average fabric life span was 60 days.
• The industry benchmark fabric life span for one paper producer
was 470 days.
• Only three suppliers were interested in helping Alpha increase
fabric longevity.
• None of the suppliers believed their fabrics were at fault for
Alpha’s low life span, all blamed
either the operators or the machinery manufacturers.
Total Cost of Ownership and Strategic Sourcing
Mini-Case Alpha Paper Case
Presentation to Management:
You must present your initial findings and draft
recommendations.
You decide to prepare:
1. An estimate of your current Total Cost of Ownership
(TCO) for fabrics across all plants
2. Estimate of TCO and savings if you can get the plants to the
industry average life of Fabrics
3. A draft sourcing strategy – be as specific as possible
4. An outline of a request for proposal including:
a. Purpose and desired outcomes
b. Requirements
c. Key contract terms and conditions
d. Award criteria
ONCE BEFORE AND THE EXPERT ANSWER JUST COPY PASTED FROM ANOTHER
QUESTION.
Total Cost of Ownership and Strategic Sourcing
Mini-Case Alpha Paper Case
Background:
Prior to being acquired by Big Paper Co several years ago, Alpha
Paper was one of the world’s
largest producers of paper, with 20 plants in nearly 20 countries.
The papermaking process
requires that wet pulp slurry be deposited uniformly on a
continuously moving fabric belt. The
fabric belt (known as “fabric” in the industry) is approximately 12
feet wide and the belt is about
60 feet in circumference. Fabrics are woven to enable the water in
the pulp to be drawn out
through the fabric, so that when the pulp leaves the end of the
belt, it is in a semi-solid, rather
gelatinous form. Once leaving the fabric belt, the pulp goes onto
other machines, which further
dry and then press the pulp into paper. Fabrics cost approximately
$25,000 each.
For years, each plant’s procurement team had negotiated with fabric
vendors. Knowing that the
sales price was about $25,000 (a simple “component cost” to Alpha),
the procurement directors
were always rewarded for driving costs down. Every buyer was
trained in being a tough
negotiator; they all knew that there was 5–10 percent that should
be driven out of the sales price.
Each year the procurement group aimed to push prices down, thereby
driving down the profit for
the fabric manufacturers. This was usually done through fierce
annual competitive bidding
events and negotiations. At the end of the year, rewards were
allocated to those buyers who got
the most favorable pricing. Moreover, for years, Alpha’s
procurement department patted itself on
the back for doing a wonderful job at keeping both the supplier’s
profits and Alpha’s prices low.
Despite having the lowest profitability in the industry, Alpha’s
purchasing managers were all
confident that they were doing their part to get costs down to the
lowest level possible. New
Procurement Leadership:
You’ve been brought in by a new CPO, who is trying to transform how
the company does
procurement. She is in the process of establishing a global
sourcing organization and
transforming to a hybrid (center-led) procurement structure.
You are one of four recent college graduates who are part of the
new Procurement Leadership
Development program. Since there are still several more senior
positions to be filled, the CPO
has asked you to take the lead on a special “stretch” assignment.
It’s a tough project for a recent
college grad to lead, but you’re thankful for the opportunity. You
will be leading a project team
that includes the other recent college graduates.
Your “Stretch” Assignment:
The CPO has asked you to review the existing sourcing strategy for
the fabric and make a
recommendation for a new strategy. You have developed a project
plan and conducted some
initial discovery, data gathering, and analysis.
Total Cost of Ownership and Strategic Sourcing
Mini-Case Alpha Paper Case
FOR CLASSROOM USE ONLY. MATERIAL FOR 799:305 GLOBAL PROC AND
STRATEGIC SOURCING. ALL RIGHTS RESERVED.
The initial discovery workstream includes ten (10) internal
interviews, data gathering, secondary
research, and fifteen (15) interviews with suppliers and industry
experts. The findings are
summarized below: Findings from Internal Interview and Data
Gathering:
• While replacing fabrics, the paper machine must be shut down, at
a cost of nearly $100,000/day
to the paper company (because paper manufacturing requires a
continuous process, and the
machine is considered efficient only when it runs 24 hours a day).
Each plant operates 365 days a
year.
• It takes about 8 hours to put fabric on a paper machine. It takes
two men 8 hours to change a
fabric at a burdened labor rate of $45/hour.
• In Alpha’s plants, Fabrics lasted an average of 40 days.
• Most fabrics broke on the machines.
• When a fabric broke, it normally had less than 10 percent
wear.
• Carrying costs are usual calculated at 20%
• Seventeen companies supplied fabrics to Alpha around the world.
Each plant manager had a
“favorite” supplier, but there was no compelling reason for using
one supplier over another.
Procurement assumed it could use the large number of suppliers in a
competitive manner to keep
the purchase prices low.
• Cost of Goods Sold (COGS) for most suppliers was about 35 percent
and R&D was 3–5
percent.
• Most plants had 4–6 fabrics in inventory.
Insights from Supplier Interviews and Secondary Research:
• The industry average fabric life span was 60 days.
• The industry benchmark fabric life span for one paper producer
was 470 days.
• Only three suppliers were interested in helping Alpha increase
fabric longevity.
• None of the suppliers believed their fabrics were at fault for
Alpha’s low life span, all blamed
either the operators or the machinery manufacturers.
Total Cost of Ownership and Strategic Sourcing
Mini-Case Alpha Paper Case
Presentation to Management:
You must present your initial findings and draft
recommendations.
You decide to prepare:
1. An estimate of your current Total Cost of Ownership
(TCO) for fabrics across all plants
2. Estimate of TCO and savings if you can get the plants to the
industry average life of Fabrics
3. A draft sourcing strategy – be as specific as possible
4. An outline of a request for proposal including:
a. Purpose and desired outcomes
b. Requirements
c. Key contract terms and conditions
d. Award criteria