STRATEGIC DECISION MAKING AND

NEGOTIATION
MM-5010
Case : Selecting Supplier

MASTER OF BUSINESS AND ADMINISTRATION

INSTITUTE TECHNOLOGY OF BANDUNG
2016

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SELECTING NEW SUPPLIER

Currently Roberto Donadoni, Director of Engineering and Operations PETROCHEMICAL

INDUSTRIAL LTD, can breathe with relief. In the last 6 months, since the disrupted holiday
vacation in Bali, Donadoni could not sleep. But now he was smiling broadly. The cause of the
problem of Hi-Grade 106 sheet film negative defection is known. From the verification results
through laboratory tests found that, the sulfite acid (SO3) content of the separator paper that is
supplied by a new supplier, even though it fulfill the standards set by the quality, is still 3%
higher than the old supplier and therefore making a shorter expiration period. This makes the
film sheets in the small shops that sold less smooth, have thick and flat results in all negative
surface film after washing.
In accordance with the results of coordination meetings with the marketing and quality control,
has decided to seek new suppliers of paper sheet separator films in order to get a supplier that
really can support the production quality. This opportunity was given publicly for the separation
of paper suppliers, including the old suppliers.
Coordination meeting decide that the location of the suppliers may not too far from the location
of the factory in order to facilitate the delivery and ensure timely supplies. Also management
wants a competitive price, the last purchase price is approximately Rp. 6000, - per sheet for a
box contains 20 sheets of paper separator. The management prefer to associate with a supplier
that has a production capacity of 10,000 boxes / month.
Purchases of more than 200 boxes usually get 10% discount. Management knows the current
prices rose approximately 20% and did not object to the increase, although preferable if the price
remains the same with the previous orders.
Management wants a supplier who is able to fulfill their needs of 20,000 boxes per 3 months.
And each order can be accepted at 2 months after the ordering.
Payment is expected can be paid in 3 termin since the reservation until the goods arrive.
Based on previous experience, management does not tolerate delays in delivery, in such
condition, the supplier should be willing to give discount of 0.0025 for each day of delay. And,
the management wats that any delay occur may not exceed 2 weeks.

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There are 4 suppliers who submit proposals, namely

1. ANNO NUMERO UNO Ltd.
Anno Numero Uno Ltd is the old a supplier, their paper separator product contain Sulfite acid of
approximately 1%. At this moment Anno Numero Uno Ltd is experiencing internal problems,
even though they are recognized by their high quality products.
Sometimes the internal problems causing late delivery often average 15-day delay in any
shipment. Price quotes from Anno Numero Uno Ltd. is interesting because PETROCHEMICAL
INDUSTRIAL LTD considered as existing customers, the price given the fixed price i.e.
Rp.120.000, - per box and for each of ten boxes get a discount of 6%
Anno Numero Uno Ltd. have same location with PETROCHEMICAL INDUSTRIAL LTD in an
integrated industrial bonded zone, currently, their production capacity is 8000 boxes per month

2. BETA FORZA Ltd

Beta Forza Ltd is a new comer in the business of photography equipment suppliers, one of its
divisions produce the separator sheet for negative film for professionals. Their selling price is
Rp. 110.000, - per box with 15% discount every purchase of 20 boxes.
As a new player in this business they try to keep their customer satisfy, their delivery almost
never late, this is due to the support of the production capacity of over 12,000 boxes per month
SO3 content of the paper sheet separator is 2%. Their factory location is far enough from
PETROCHEMICAL INDUSTRIAL LTD araound 60 km to the north.

3. CENTROCAMPISTA Ltd
The price offered is Centrocampista Ltd. Rp. 100.000, - per-box with a discount of 5% per 20
boxes. Production capacity of 10,000 boxes per month
Centrocampista Ltd is a long time supplier of PETROCHEMICAL INDUSTRIAL LTD. which
supplies the negative material. SO3 content of the paper sheet separator is quite high although
still within the tolerance limits given the quality of 2.75%. They agreed and on time delivery and
also attach reference letters from customers stating their satisfaction with the services provided
by Centrocampista Ltd. Location of their plant is about 20 Km from the integrated industrial
zone where PETROCHEMICAL INDUSTRIAL LTD operates.

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4. DON PIRLO Ltd

Don Pirlo Ltd is whithin the same group with PETROCHEMICAL INDUSTRIAL LTD.
Price quoted by Don Pirlo Ltd. is Rp 120,000, - per box with a 10 percent discount for taking a
minimum of 20 boxes, they guarantee delivery on time and prepared to comply with the
provisions provided PETROCHEMICAL INDUSTRIAL LTD about the delay.
Don Pirlo Ltd is located 50 km to the southeast of the plant PETROCHEMICAL INDUSTRIAL
LTD.
SO3 content in their paper separator is 0.75% and their production capacity is 10,500 boxes per
month

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